Panera Bread Foreign Market Entry Final PDF

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Professor Huang - Global Marketing Summer Course - Grade Received: A - This final essay discusses how a proposed company (in our case, Panera Bread) can enter into a new market (country) and what the company can do to see success in this country....

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Steffen S. Johnson Zachary Rowell Benjamin Hadley Matthew Diiorio Executive Summary Founded in 1987 the Panera Bread company have stylized themselves as a peaceful “Bakery-Cafe” and offers a wide variety of pastries and baked goods, such as croissants, bagels, cookies, scones, muffins, and brownies. Although the dine-in or takeout menu changes seasonally, the most popular items on the Panera Bread menu are soups, salads, sandwiches, pasta, bakery items, and specialty drinks. Currently the only two countries in which Panera operates are the United States and Canada. Panera believes that France is an Ideal target for international expansion. The economy is growing, the fast food restaurant sector of the economy in particular is booming, and the French people possess all of the characteristics that Panera is looking for in new potential demographics to serve. The French love bread and coffee with a good atmosphere, and that is what we will give them. The fast food industry is booming in France and is outperforming the traditional French restaurant industry for the first time. The people of France, who are trending towards shorter lunch breaks, are enjoying the convenience of fast food restaurants as well as the generally lower prices. By opening Panera Restaurants in France, the French will be able to enjoy a healthy menu full of French style breads, cheeses, and fresh vegetable, with convenient service. Panera fits in perfectly with the trends of the food industry in France. Using the analysis provided from cultural and financial sources, the marketing mix, marketing scheme, and overall preliminary marketing plan for Panera could be developed and

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expanded upon. With this analysis and marketing plan, Panera is primed or continued success within the French market and should appeal to many different aspects of French dining life. Overall, Panera should succeed based on these prevalent factors and the analysis that has gone into them on our team’s behalf.

Panera Bread Foreign Market Entry and Marketing Plan Introduction The Panera Bread Company is an American chain of bakery-cafe fast casual restaurants. Panera Bread was originally founded by Ken Rosenthal in Kirkwood, Missouri in 1987, under the name St. Louis Bread Company. In early 1993, Au Bon Pain Co. purchased the St. Louis Bread Company. In 1997, Au Bon Pain Co. changed the company name to Panera, a word that has roots meaning “bread basket” in Latin. Around the same time, the St. Louis Bread Company was renovating its 20 bakery-cafes in the St. Louis area. In May 1999, in order to expand Panera Bread into a national restaurant, Au Bon Pain Co. sold its other chains, including Au Bon Pain, which is now owned by Compass Group North America. Panera Bread moved into its new headquarters in Richmond Heights, Missouri in 2000. Panera Bread has gone on to open over 2100 stores throughout the United States and Canada. In addition to the store locations, there are also over 20 facilities that bake and deliver fresh dough to the bakery-cafes every day. In a 2008 Health magazine study, Panera Bread was judged North America’s healthiest fast casual restaurant. In June 2014, Panera unveiled its official Food Policy which detailed commitments to clean ingredients, transparency, and a positive impact on the food system. This policy outlines the company’s values and sets a course for continuous improvement. Since the

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disclosure of their official Food Policy, and winning awards for being healthy, Panera is now considered a quick a “healthy” place to eat in the United States by many consumers. Panera stylized themselves as a peaceful “Bakery-Cafe” and offers a wide variety of pastries and baked goods, such as croissants, bagels, cookies, scones, muffins, and brownies. Although the dine-in or takeout menu changes seasonally, the most popular items on the Panera Bread menu are soups, salads, sandwiches, pasta, bakery items, and specialty drinks. Currently the only two countries in which Panera operates are the United States and Canada. As a group we believe that expanding Panera Bread into the European market, specifically the country of France, would benefit the company greatly and bring Panera’s fast casual cafe style restaurants to the forefront of what is essentially an untapped market.

Proposed Foreign Market Expansion Panera Bread Co. believes that France is an ideal target for international expansion of our fast-casual dining cafe style restaurants. We believe that the cultural norms of the people in France as well as their taste in cuisine and ambiance will lead to the French people being extremely receptive of the dining experience at Panera Bread. The French economy is doing well and we at Panera believe the time is right for us to finally enter the market. The French Economy as a whole has been steadily growing for the past five years and is projected to continue to grow in 2018 at a rate of 1.9%. The future outlook for growth is positive as well, with most analysts targeting a growth of 1.8% in 2019 (Focus Economics... 2018) The fast food markets have also recently been outperforming traditional restaurants gaining a market share of 54%. With a strengthening labor market and slow but steady wage growth, Panera sees France as a great opportunity for direct investments and plans on new opening locations in cities all around France.

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The French people are known to have an affinity for their food and coffee. Although Americans certainly love their food and coffee as well, the French are generally accepted as having a more refined sensibility when it comes to what they eat. The French diet typically consists of far more vegetables and healthier foods than the United States and it wasn’t until recently that the concept of fast food began to gain a foothold in France (Edwards, C. 2016). For a long time in France it was considered normal for workers to take long two-hour breaks during the workday where a lot of them would go home and cook their own meals for lunch. However, those dynamics are changing, and the younger, busier generations are taking much shorter lunch breaks and are therefore seeking alternatives to cooking at home or sitting down at a traditional restaurant, which tends to be expensive. Indeed, the French workforce is beginning to behave more and more like Americans when it comes to how and where they eat. In efforts to save time and money, the French people are changing landscape of French cuisine to include more options for fast food, while still maintaining somewhat healthy menus. According to Hofstede’s cultural dimensions indices, France Scores higher in the Power Distance category by a score of 68 compared to 40 in the US. The United States scores higher in the individualism category by a score of 91-71. In the Masculinity category, The United States scores higher with a score of 62 compared to 43 for France. For Uncertainty Avoidance, France scores higher by a wide margin with a score of 86 to 46 in the U.S.. France also scores higher in the Long-Term Orientation category with a score of 63 to 26 in the U.S. In the Indulgence category, The United States outscores France by a score of 68 to 48. (Hofstede Comparison) While bringing Panera Bread into the France market is undeniably a great business move, we believe there are a few cultural differences that may have a minor impact on the foreign market expansion. The first cultural difference we believe is worth discussion is the way meals

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are treated in France. One blogger put it best when she said “The French have a saying about meals: At breakfast, we eat like kings. At lunch, like lords. At dinner, like servants. Whether or not that’s true definitely depends on the situation!” The French are known to eat larger breakfasts and lunches than dinners. We believe that Panera Bread can provide foods that can fall into all of these meal categories, but we need to market appropriately depending on the meal and time of the day. Secondly, the French believe greatly that bread, or the “baguette” in French, is to be used as a tool to eat with and is incorporated into almost all meals. While the United States view on bread and carbs may be different, we feel that this is another cultural difference that, if marketed correctly, could be beneficial to the growth of Panera in France. Small, balanced portions are another big cultural difference when comparing the U.S. and France. Since people in the United States tend to get a quick 30 minutes or less lunch break, we tend to over indulge and eat very quickly, such is the opposite in France. Lunches are considerably longer in France and treated as a social gathering rather than a quick bite to eat on the go. Since Panera is marketing in the United States as being a fast-casual bakery-cafe, we believe some marketing and adjustments need to be done before entering the French market regarding how lunches are approached and advertised. Lastly, what we believe to be the most significant difference between the two cultures is the pricing of items. Compared to the U.S., “fast food” in France is a lot more expensive because it is considered to be a luxury rather than a necessity. If a family was to go out to eat for lunch in France the food would need to be fresh, moderately priced, and worth the splurge to the family. In the U.S., fast casual and takeout is something that people do without even thinking about it due to running out of time or not wanting to cook when the provider gets home. Overall, we

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believe that if these cultural differences were taken into consideration and the proper marketing and instruction was provided to the people of France, Panera Bread would quickly have great possibility of becoming successful in the French market

Market Audit and Competitive Analysis in the Foreign Market Famous for its gastronomic meals, many people are choosing fast food for its convenience and lower prices. “A large proportion of urban population is time-pressed, and with these consumers seeking convenient food options, there is significant demand for Quick Service Restaurants and Fast Food (France Foodservice.., 2016)”. France is known to have very long lunch breaks. However, not every person has the ability to take a two-hour break. Some people have growing workloads, and others have to deal with differing time zones of international partners. Over the years, many people have had to shorten their lunch breaks, causing them to rely on fast food. “The French lunch hour has collapsed from 80 minutes back in 1975 to just 22 minutes, according to a 2011 study by insurer Malakoff Mederic” (Guttman, A., 2013). This is an opportunity that the fast food industry has seized upon. In France, it is common to travel home during the lunch break hours, typically between 12 p.m. and 2 p.m.. However, as less people have lengthy breaks, fast food becomes the go-to place for lunches. In 2012, the fast food industry finally outperformed the traditional restaurant market. “But last year 54% of total restaurant turnover in this country went to fast food and sandwich shops. It's the first time "convenience" food has outstripped the market of the traditional French brasserie” (Fraser, C., 2013). A brasserie is a French style restaurant. More restaurants, and not just fast food restaurants are incorporating burgers into their menus. Many traditional style restaurants are offering burgers, and the French are choosing

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burgers over classic French cuisines. “Baguette lovers may be horrified to learn that in 2017, for the first time ever, hamburger sales were higher in France than the classic jambon-beurre sandwich” (Burgers triumph.., 2018). Due to shorter lunch breaks and the “burger frenzy”, the fast food industry is continuing to grow in France. “In 2016, ‘le burger’ was the most requested dish in three-quarters of French restaurants” (Knight, E., 2016). As of 2017, there are over 385 fast food restaurants in Paris alone. The city with the second most is Marseille with 91 restaurants (Facture annuelle, souscription 12 mois min). “In 2015, the 16,218 companies (98% being small- to medium-sized companies) of the sector generated total sales of US$189 billion and employed 440,926 persons in France” (France Country Profile). Of this 189 billion dollars, McDonalds acquires over 5 billion dollars (over 4 billion euros). With the availability of fast food outlets and growing demand for a quick meal, the fast food industry is expected to continue to grow year after year. “The French Foodservice market is expected to experience a growth of 2.0% during 2015-2020 (France Foodservice.., 2016)” One of the local competitors of the fast food industry in France is Quick Restaurants. Similar to McDonalds, Quick offers a menu of burgers and fries. Most of the locations are franchises, similar to McDonalds. Quick does not salt their French fries. Instead, they allow you to salt to taste, and encourage customers not to add too much salt. Many of the burgers offered by Quick are of the same style as McDonalds with their own spin on ingredients. It is a popular local fast food restaurant almost matching the international McDonalds. Another local competitor is Brioche Doree. It is a fast-casual restaurant similar to Panera. It offers a flexible menu that can be customized by the customer. They offer many sandwiches and salads with lots of vegetables and are prepared on the spot, once the customer has ordered.

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They offer differing products at different times of the day, and their menu has many traditional French pastries. The menu is constantly changing with the seasons to utilize the freshest ingredients possible. One of the international competitors in France is McDonalds. McDonalds, France’s largest fast food company per capita, has over 1,300 outlets in France, equaling one restaurant for every 51,461 people. Only America has more McDonald's restaurants than France. France is McDonalds second most profitable market, behind America. “In 2013 sales reached 4.46 billion euros” (Wile, R., 2014). A weakness that McDonald's has faced is the people understanding that McDonald's food is not the healthiest. “Gregory Gendre, the mayor of Dolus-d’Oleron on the Oleron Island, off western France, has refused to grant permission for McDonald’s to build an eatery in his municipality” (French Food vs. Fast Food, 2018). The mayor wants people to choose local produce over fast food chains in hopes of establishing healthy eating in his municipality. Mcdonald's has grown to become a favorite in France, gaining market share with its incorporation of French items into its menu, such as French cheeses and desserts. However, it still has a lot of changes it needs to go through in order to keep growing in the French market. “Its share of France's "commercialized dining out" sector, which includes any chain restaurant as well as schools and hospitals, stands at just 12.5% and has begun to stagnate, according to Le Figaro” (Wile, R., 2014). France, known for its many delicious cheese’s, also has a lot of Domino’s pizza outlets. They have aggressively been opening in stores in France, reaching 2,000 stores in July of 2016 (Bonjour!, 2016). Domino’s, however, has had problems in France due to its online ordering system. There are many apostrophes in the French language which has been confusing for the

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ordering system. This has led many potential customers being told that the pizza was not available in their location (Cherney, M., 2017). “It had been a darling of the market that posted impressive sales numbers as it aggressively opened stores, made acquisitions and offered quick delivery and easy ordering from mobile phones” (Cherney, M., 2017). The error in Domino’s ordering system has been costing them millions of dollars. Panera, with its casual restaurant style feel, emphasis on fresh baguette style bread, and quick service, has the potential to become the most popular restaurant choice in France. Panera’s menu is already full of healthy options and delicious French style bread. In 2016, Panera had sales of 2.8 billion dollars in the U.S.. Just a little more than half of McDonalds made in France, with 2048 locations. It would not be unreasonable for Panera to establish around one-third of the number of stores as McDonalds in France, and take over McDonalds, in sales, as the largest fast food chain in France. Once the people of France realize that Panera has a healthy menu with service just as quick as McDonalds, Panera could achieve sales of over 500 million with 400 locations in France. This would give Panera about 1.5 percent of the market. While McDonald's is using sheer numbers on its side, Panera can grow its brand in France based on French trends towards health and quick casual dining. One French regulation that differs from the U.S. is the use of healthy messages in marketing of fast food. In 2007, France made a law that all food advertisements must contain healthy eating messages. “Advertisers who refuse to run the messages will be fined 1.5 percent of the cost of the ad, to be paid to the National Institute for Health Education” (French government orders fast food to carry health warnings, 2007). The messages that companies must use are statements such as “avoid snacking during meals” or “avoid eating foods high in fats”. The point is to curb the obesity issue in France.

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France is also trying to raise the value added tax on fast food to 20 percent. This tax is included in the sale price of foods not considered healthy such as fast food. Currently, restaurants pay a 10 percent tax (Important Rules About VAT In France, table 1.) Another law that has come into effect is the Fait Maison law. This requires that all dishes presented as “homemade” must be marked with a logo to represent the feature to customers. Customers who want to know that the food is homemade just have to look for a logo on the menu saying so. By not posing the logo for homemade dishes, there is a fine of up to 300,000 euros. Besides these regulations, France operates similar to America, which is good news for Panera. It will be an easy transition into the French market for Panera as their menu offers many healthy options. Incorporating healthy messages into their advertising will even be an asset for Panera’s image. Preliminary Marketing Plan in the Foreign Economy Panera’s marketing objectives in regard to France involve distinguishing themselves as the premier “fast-casual” dining experience in France, establishing Panera as the go-to healthy option for the breakfast, lunch, and dinner markets in France, and capitalizing upon the French dining environment of taking their time while eating, but also catering into the younger, busier generation of workers leaning towards a faster dining period. Through these means, the target market for France is a vast one, since it is not only the commoners of France that Panera will be targeting, but it will also be targeting those who need a quicker, healthier option than McDonalds, those who want to sit down and dine and take their time while eating, and those in between these margins of the “fast-casual” dining experience. These market segments can provide the perfect opportunity for Panera to gain a considerable market share of the fast-food restaurant business in France, while also helping to establish and market a healthier option for

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the French than those of their direct competitors within the fast-food industry. Panera’s market penetration plan essentially follows what would be expected of the company when entering into this new market; vast marketing efforts that explain that Panera will be entering the French market and some basic reasons as to why they would be choosing France as a destination, as well as providing to consumers the benefits that Panera will bring to France, why consumers should choose Panera over other brands, and how Panera will help to facilitate a changing environment of eating habits that can be seen all over the world, all while maintaining reasonable prices. Panera brings with it many strengths when entering into the French market, suc...