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Panera: Catering is ‘big business opportunity’

Panera Bread Co. plans to beef up its off-premises sales with catering, to begin milking meaningful data from its loyalty program and to expand its drive-thru units selectively, executives told analysts Friday.

In addition, Panera will be adding steak as a sandwich protein for the first time in a hot-sandwich push in the second quarter, according to William W. Moreton, Panera’s chief executive and president, who spoke on a conference call Friday, a day after the bakery-café company reported a 23-percent increase in fourth-quarter profit. Panera’s full results

“Over the last two years we’ve structured and built up the catering sales force and invested in tools of training,” Moreton said. In fiscal 2010, catering sales rose 26 percent and contributed about 1 percent to same-store sales growth, he added. And in the fourth quarter, catering sales grew 34 percent over the year-ago quarter. Similar rates are expected this year, and the company expects off-premises revenue will total about 7 percent of sales by year end.

Jeffrey Kip, Panera’s senior vice president and chief financial officer, said “We are thinking of catering as something larger.”

Moreton said Panera is looking at improving packaging, offering designated areas for pick up in the cafes and enhancing technology, with an online catering system expected to be available nationwide by the end of the second quarter.

“We really do think this will be a big business opportunity going forward,” Morteon said.

The company is also seeing strong carryout traffic at its 56 drive-thru units. Executives said they will be looking for more real estate opportunities that will provide for drive-thru options as well as looking at existing units that can be retrofitted with drive-thrus.

In addition, the “My Panera” loyalty program finished its rollout in November and now has 4.5 million registered card members, Moreton said.

“We believe our loyalty program contributed approximately two-thirds of the transaction lift in the [fourth] quarter,” he said. “We expect to continue positive transaction lift from this program in 2011.”

He said actual purchasing information is now available to the company, which will “get us as close to one-to-one marketing … as possible.”

In other Panera efforts:

- Soups. Panera executives said they have worked to enhance quality of items such as salads and soups, with the introduction of chili in the last quarter. Moreton said Panera is working on its chicken noodle and French onion soups. “Later this year, we’re going to test a program called ‘Soups of the World,’ which will have us bring some authentic recipes from different parts of the world to our customers,” Moreton added.

- Smoothies. The company already has rolled out a wild-berry smoothie this quarter and plans further rollouts through the year, Moreton said.

- Steak. “We’re going to introduce steak as a new protein for Panera in the second quarter,” Moreton said, “which we will combine with communications about our new hot sandwiches.” Panera completed its rollout of panini grills at the end of last year.

- Transaction numbers. “Much of our recent investment has been in focused on driving transaction growth,” Moreton said. For the full year, Panera recorded a 2.1-percent transaction growth at corporate restaurants and a 2.9-percent growth rate in the fourth quarter. “We expect transaction growth will be one of the key levers for our 2011 performance,” he said.

Contact Ron Ruggless at [email protected].

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