Special Report | May 2011 | By Daniel P. Smith

Moreton’s View from the Top

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Moreton’s first objective as new CEO was as clear as it was quiet: to not disrupt Panera’s culture and surging momentum by asserting his presence and sparking a corporate soap opera.

“If I wanted to accomplish anything in my first year, that was it,” Moreton says, adding that leadership development throughout the Panera ranks remains a foremost priority.

As promised, Moreton’s first year has been about solidifying Panera’s reputation as an industry leader. He placed a priority on reducing customer hassle and friction, attacking the ordering system, and testing table service in dozens of the brand’s bakery-cafés.

“We obsess about ways we can improve the customer experience,” Moreton says. “We look at every decision first through the customer lens, then through the operator lens, and finally through the cost lens.”

Moreton’s first year has witnessed its share of newsworthy items, highlighted by the launching of the MyPanera customer loyalty program in November 2010.

Distinct from a discount program, the MyPanera program seeks to deepen customer relations. Driven by sophisticated consumer-habit tracking systems, MyPanera doesn’t look at what customers say they do, but rather what they really do, a critical R&D distinction that captures behavioral-based data rather than self-reporting. The longer a customer frequents Panera, the more personalized the interaction becomes, leading to preview tastings of new products, exclusive events, and surprises such as free menu items.

“It’s as close to one-to-one marketing as we can possibly get,” Moreton says. “We’re going to make it special and make it another point of differentiation.”

By the end of 2010, Panera hit the news again with its voluntary decision to post full calorie counts on menuboards, the first national chain to take the step. As much as the operational move might have been about looming legislation, Moreton insists the decision was made with consumer trust as the guiding tenet.

“We have a menu that’s built around choice, some indulgent items and some healthy, and it simply didn’t make sense to take this out of the customers’ hands.”

“The underlying issue was that our consumers wanted to know. If we have a trusting relationship with them, then we needed to share this info,” he says. “We have a menu that’s built around choice, some indulgent items and some healthy, and it simply didn’t make sense to take this out of the customers’ hands at the point of purchase.”

Panera’s Future Path

Moreton says Panera’s success boils down to a few distinct factors. There’s the menu and quality of the food, as well as the environment and the people. As the economy staggered and others slashed costs and prices, Panera only looked more thoroughly into excelling in these areas.

“You put these deposits in a customer’s emotional bank account,” Moreton says, “and it wins in recessionary times as well as boom times.”

Part of Panera’s allure years ago stood in its decision to woo the business and student crowd with complimentary WiFi, a move some thought foolish and costly, as well as encouraging book clubs and business associates to meet in its restaurants. The “chill business,” as Moreton calls it, has become a driving force for Panera and bolsters the company’s reputation as a customer-centric spot. As customers get more dependent on personal technology, the brand will adapt to that shift like a nimble private company rather than a corporate freight train, advancing its customer connections.

“We can move with our customers and change with them,” Moreton says. “As needs and preferences change, we’ll move with it while maintaining our core.”

With a check average greater than most in the segment, Panera meets consumers’ sprouting demands for higher-quality food, service, and experience. Without the taxes of time and service burdening casual-dining establishments, the brand answers consumers’ desires for convenience. Those traits bode well for Panera’s future, though Moreton knows nothing is guaranteed.

Panera will continue its reach to “own” categories, Moreton says. With high-quality salads, for instance, the company felt china and silverware were a must. The brand also established a new distribution process that allows Panera to control lettuce from the field to the fork, improvements that offered a better, fresher product.

“We’re looking at the totality of the experience,” Moreton says of Panera’s big-picture mindset.

The brand will also look to heighten its off-premise opportunities. Panera’s catering business, unveiled in 2004 to only modest acclaim, jumped 20 percent in 2010 and spearheaded Panera’s ascent. The company’s all-out assault on the catering segment featured a broad reorganization highlighted by more sophisticated databases, improved packaging, and the interplay between regional catering sales managers—who serve as direct touchpoints with clients—and in-house catering coordinators. Whenever possible, Panera associates deliver food and arrange the space, a way for the restaurant to bring its experience to the outside world.

“There’s a Panera experience we do well within our four walls, but we’re finding the way to replicate this with catering,” Moreton says.

Panera will devote similar attention to its drive-thru business, seeking ways to answer consumers’ thirst for convenience. Unlike other brands, however, Panera plans to continue separating its drive-thru operations from the restaurant’s guests, a strategic move to address convenience without disrupting the cozy dine-in experience.

Leaning forward in his chair, Moreton says Panera’s entering an exciting time of growth, including plans to open as many as 100 new bakery-cafés each year. The company has upcoming changes to its menu and is “broadening out” categories, marketing, and messaging initiatives. The to-go business, catering, and various other off-premise channels will continue receiving attention.

“We learn, we reiterate,” Moreton says. “That’s what we do well, and that’s what we’ll continue doing.”

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