Bakery-cafe chains expand menus, benefit from ‘healthy’ image

Bakery-cafe chains expand menus, benefit from ‘healthy’ image – Special Report: Second 100

Paul Frumkin

While Panera Bread Co. marks its second year since graduating to the ranks of the Top 100, the fast-casual chain continues to cast a large shadow over the remaining four players in the Second 100’s bakery-cafe segment.

With 2002 systemwide sales totaling $688 million, Richmond Heights, Mo.-based Panera is approaching the combined sales results of Au Bon Pain, Bruegger’s Bagels, Corner Bakery Cafe and Einstein Bros. Bagels, which together generated $853.9 million for the year.

“Panera Bread is sucking up a lot of oxygen from the segment,” observes Malcolm M. Knapp, president of Malcolm M. Knapp Inc., a New York-based foodservice consultantcy. “They have a model that works, and they’re delivering quality that people want. If you were looking to franchise [in the bakery-cafe segment], who would you go with?”

Roger Lipton, president of Lipton Financial Services in New York, agrees, adding, “As a direct competitor, Panera keeps widening the gap.”

The Panera juggernaut notwithstanding, the bakery-cafe chains in the Second 100 are working to extend their reach by targeting discontented quick-service customers through more diverse and flavorful menu items, improved service and more sophisticated store designs.

Several chains also are attempting to leverage consumer perception that their menus are more healthful than those of their quick-service competitors. “Overall, the bakery-cafe segment benefits from having healthy connotations,” says Nancy Hampton, vice president of marketing for Brinker International’s Corner Bakery Cafe. “It’s a halo for everybody in the category.”

Boston-based Au Bon Pain, which Compass Group PLC owns, introduced touch-screen kiosks in 90 of its 130 company outlets that provide customers with a nutritional breakdown of every item available. “The computerized kiosks allow customers to access data on cholesterol, protein fiber, calories and other nutritional information rapidly,” according to Jim Fisher, vice president of marketing.

Au Bon Pain, which is celebrating its 25th anniversary, also is rolling out a new decor package designed to inject energy into the outlets. The remodeling includes more shelving for grab-and-go customers and a blue and yellow color pattern that evokes the South of France. Seventy of the 130 company-owned units should be remodeled by the end of 2003.

As part of the strategy to build customer frequency, Au Bon Pain is focusing on hospitality and service, which internal measurements show have improved 75 percent over the last two years. Regular new product launches, including salads and wraps containing lower cholesterol and calories, have been introduced.

Strategic menu extensions also are helping bakery-cafe chains grow. Golden, Colo.-based Einstein Bros. Bagels has expanded well beyond the breakfast daypart by offering new lines of hot entrees, soups and sandwiches — notably four new panini sandwiches on ciabatta bread that are expected to be available systemwide by September.

Ed McPherson, Einstein’s chief marketing officer, adds that Einstein will “emphasize its baking heritage” by adding a full complement of artisanal breads to its menu by 2004.

In addition, Einstein is expanding through several key partnerships. The chain has opened kiosks in 90 Super Target stores and 27 nontraditional outlets in airports, universities and hospitals. It also teamed up with in-flight caterer LSG Sky Chefs, which is featuring Einstein-branded products on some 300 flights.

Einstein Bros. Bagels has expanded beyond the breakfast daypart by offering new lines of hot entrees, soups and sandwiches.

Einstein is owned by New World Restaurant Group Inc., which also owns Noah’s New York Bagels, Manhattan Bagels and Chesapeake Bagel Bakery brands. The financially troubled New World recently completed a debt refinancing when it closed on $160 million of senior secured notes due in 2008.

As Brinker’s 82-unit Corner Bakery Cafe continues its expansion into more suburban locations, the chain is rolling ahead with the service upgrades it began last year. The new service style allows customers to order from menu boards at the counter, get a beverage from a self-service counter and take a seat. A staff member then delivers the order to the table.

“All of the new stores have this service style,” Hampton says. “And we’re going back and making modifications in existing stores.”

Corner Bakery, which has been adding about 12 new units each year, also continues to broaden its menu. Its new entree salads and grilled Italian-style panini line have performed well for the brand, Hampton says. Two new entree salads — chopped salad and harvest chicken salad — have proved to be particularly successful, she says. And a hot panini breakfast sandwich has helped to drive traffic during the early daypart.

BAKERY-CAFE CHAINS RANKED BY U.S. SYSTEMWIDE SALES

U.S.

Systemwide

Foodservice

Sales

(By Fiscal

Year, in

Millions)

Latest- Prec.- Fiscal

Year Year Year

Rank Rank Chain End Latest *

1 1 Einstein Bros. Bagels Dec. ’02 $311.7

2 2 Au Bon Pain Dec. ’03 203.1

3 4 Corner Bakery June. ’03 186.0

4 3 Bruegger’s Bagel Bakery Dec. ’02 153.1

U.S. Systemwide Foodservice

Sales

(By Fiscal Year, in

Millions)

Latest- Prec.-

Year Year

Rank Rank Chain Preceding Prior

1 1 Einstein Bros. Bagels $299.8 $300.0

2 2 Au Bon Pain 200.2 202.5

3 4 Corner Bakery 147.2 125.0

4 3 Bruegger’s Bagel Bakery 164.7 170.0

* Actual results estimatesTOTAL:$853.9 $811.9$797.5 or projections

Source: NRN Research

BAKERY-CAFE CHAINS RANKED BY U.S. SYSTEMWIDE SALES GROWTH

(Year-to-year percentage change)

Latest- Prec.- Fiscal Latest Preceding

Year Year Year VS. VS.

Rank Rank Chain Eng Preceding Prior

1 1 Corner Bakery June ’03 26.40 17.72

2 2 Einstein Bros. Bagels Dec. ’02 3.97 -0.07

3 3 Au Bon Pain Dec. ’02 1.45 -1.15

4 4 Bruegger’s Bagel Bakery Dec. ’02 -7.03 -3.11

* Acutal results estimates orAVERAGE: 6.20 3.35 projections

Source: NRN Research

BAKERY-CAFE CHAINS RANKED BY GROWTH IN NUMBER OF U.S. UNITS

(Year-to-year percentage change)

Latest Prec.- Fiscal Latest * Preceding

Year Year Year VS. VS.

Rank Rank Chain End Preceding Prior

1 1 Corner Bakery June ’03 24.32 21.31

2 3 Einstein Bros. Bagels Dec. ’02 6.22 -0.27

3 2 Au Bon Pain Dec. ’02 -1.01 0.51

4 4 Brueggers Bagel Bakery Dec. ’02 -5.04 -6.18

AVERAGE: 6.12 3.84

* Acutal results estimates or projections

Source: NRN Research

BAKERY-CAFE CHAINS RANKED BY NUMBER OF U.S. UNITS

Year-end

Number of

Units

Latest- Prec.- Fiscal

Year Year Year

Rank Rank Chain End Latest *

1 1 Einstein Bros. Bagels Dec. ’02 393

2 2 Bruegger’s Bagel Bakery Dec. ’02 245

3 3 Au Bon Pain Dec. ’02 197

4 4 Corner Bakery June ’03 92

TOTAL: 927

Year-end Number of

Units

Latest- Prec.-

Year Year

Rank Rank Chain Preceding Prior

1 1 Einstein Bros. Bagels 370 371

2 2 Bruegger’s Bagel Bakery 258 275

3 3 Au Bon Pain 199 198

4 4 Corner Bakery 74 61

TOTAL: 901 905

* Actual results estimates or projections

Source: NRN Research

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