Panera Can't Ignore the Starbucks Threat

Sooner or later, Panera Bread is going to have to realize that it's in Starbucks' crosshairs.

The latest national Google Offers bargain is a half-off deal from the baron of baristas. It's not for the chain's signature brews. It's not even pitching the Starbucks Refreshers line that it rolled out last year and broadened this summer with the addition of a Valencia Orange flavor.

Get any lunch food item for half off any time of day, including sandwiches, panini, salads and Bistro Boxes.

The offer -- good through tomorrow -- is clearly a way for Starbucks to promote its widening non-beverage menu. There's no denying that it's gunning for Panera. Even the graphic accompanying the ad of a gourmet sandwich on a butcher block alongside a tossed salad and a glass of lemonade seems more like the marketing material that one would find pressed against the window outside of that Panera by your local strip mall.


Source: Google Offers.

We knew that this day was coming. Starbucks has always wanted to be about more than just coffee. It may have blown its first crack at this five years ago with stinky breakfast sandwiches, but the eventual acquisition of La Boulange to beef up the pastries and other baked goods turned the wheel in the right direction for another shot to get it right.

Maybe it's just me, but Panera and Starbucks had plenty in common even before the sandwich slicers arrived. They are two concepts that woo tech-savvy loners with their promises of free Wi-Fi and quiet yet cozy environments. The stores seem busy -- even when the queues are short -- because patrons tend to linger. For many, the local Panera or Starbucks is an extension of the home office, school library, or living room.

Now, one can always argue that Panera took the first shot. Folks angling for a bowl of tomato soup or a croissant can order cappuccino or a caramel latte. However, it will be interesting to see if Panera tries to beef up its already reasonably extensive java offerings before Starbucks catches on that it's going to need a lot more of the bigger tables if it truly wants to stand out as a dining destination instead of settling for the takeout traffic.

Both companies are growing briskly. Comps at Panera and Starbucks stores rose 4% and 8%, respectively, this past quarter. However, as the concepts expand, Panera will have to realize that smaller bakery-cafe chains don't pose the biggest threat to the concept. It's the sultry green siren that it has to watch out for.

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Longtime Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Panera Bread and Starbucks. The Motley Fool owns shares of Panera Bread and Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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