While consumers usually associate Panera Bread with their “You Pick Two” lunch deals or bread bowls, the bakery-café chain aims to become a key player in the competitive coffee sector with the announcement of its unlimited coffee and tea subscription program. The program, which costs $8.99 per month, launches today for all MyPanera rewards program users, and allows participants to order unlimited cups of drip coffee, iced coffee and tea orders (and refills) once every two hours at any Panera location.
Consumers can sign up for the program — which pays for itself in less than four visits — via the Panera website and mobile app starting February 27, while in-store signups start March 2. Panera is promoting the coffee subscription service with the tagline “your cup is always full” through a robust advertising strategy.
Although coffee sales currently account for 3% of Panera’s total revenue, the chain believes it has a competitive edge because these are uncharted waters for the coffee sector: no other major chain has come up with a similar unlimited coffee subscription program.
“Our research shows that consumers are enthusiastic about coffee, but they are conflicted because of the cost. You might spend $1,100 a year on coffee and that is staggering,” Panera CEO Niren Chaudhary said. “[…] A very important growing daypart is breakfast and we think we are under-penetrated [in that category]. We believe by providing this service, it will help get customers into our cafes.”
But at such a low price-point, how will Panera see a return on investment from the program? Panera tested the coffee subscription program in select markets in Raleigh, Cleveland, and Columbus, Ohio, and saw that the program was a “net positive in terms of business impact,” and that on average, a coffee program subscriber comes into the store about every other day.
“We saw a 200% increase in frequency of customers, food attachment went up by 70% and we were able to attract new customers,” Chaudhary said. “Also, 75% of these redemptions were happening off-premise, which just shows that it fulfills this unmet need for frictionless convenience.”
The coffee subscription program is available through an “omnichannel experience,” via in-store pickup/order-ahead, drive-thru, to-go, and delivery (although delivery has a minimum order requirement). Panera's vice president of wellness and food policy, Sara Burnett, credits this convenience with bolstering the 90-95% program retention/renewal rate from the beta market test.
Another key aspect of the coffee program is improving coffee quality in order to better compete with industry competitors who already have a reputation for providing a morning coffee ritual.
“Last year we went back and started partnering with different coffee companies, adjusting our light and dark roasts to make sure we were getting those notes we want,” Burnett said. “Secondly, we were already buying high-quality beans but now we moved to whole bean and started grinding them fresh every day with new grinding and brewing equipment.”
For now, the coffee program offers drip coffee in four varieties (light and dark roast, decaf, hazelnut), iced coffee, and tea in a variety of flavors, with room for innovations in the simple drink platform in the future. They also are offering plant-based milk alternatives with no upcharge (the upcharge has been removed for all stores systemwide, following criticism of the policy by vegan and vegetarian communities).
Of course, tying the coffee subscription program to the MyPanera rewards app is purposeful: more coffee drinkers means more active loyalty program users.
“The coffee subscription program will act as a catalyst for the loyalty program so people have more of an incentive to sign up,” Chaudhary said. “We look forward to growing that at a nice clip.”
Contact Joanna Fantozzi at [email protected]
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