Panera Bread Chases Chipotle Mexican Grill in the Sustainable Race

An expansion of Panera Bread's sustainability advertising campaign might be the key to helping the brand through the tough times.

Feb 24, 2014 at 4:30PM

Last year, the Food and Drug Administration made a shocking discovery. Contrary to popular opinion, the solution to animals being sick more often because they're crammed together like toes in a ballet shoe isn't to constantly medicate the animals -- in fact, that's a bad idea. In December, the FDA put drug companies on notice, telling them that they had 90 days to add labels to their products indicating that the drugs should be used only on sick animals. 

In January, Panera Bread (NASDAQ:PNRA) celebrated its 10th year of sourcing meat raised without the use of excess antibiotics. Cutting down on the processed nature of the food it serves has become a mark of pride for Panera, and the success of Chipotle Mexican Grill (NYSE:CMG) has no doubt had some effect on how the brand portrays itself.

The value of sustainability
Over the last decade or so, a movement has been growing in almost every sector -- clean and green. Auto manufacturers are touting their high gas mileage, banks are reporting on their sustainability, and even Web hosts are singing the renewable energy song. While everyone is on the bandwagon, there are a few drivers up front, leading the way.

Since its inception, Chipotle has made a huge deal out of the fact that it uses sustainable and, when available, local ingredients. Chipotle uses organically grown ingredients, sources beans that have been cultivated in a specific manner, and recently added a vegan sofritas filling to the menu. Almost all of that good work makes it way right into the company's advertising as well.

Panera has also been doing the work for a while, but the focus hasn't been as sharp. Over the past year, though, the business has realized the value in its good works. Now Panera is talking about the food it donates, the meat it sources, and the community cafes it runs, where customers who can't afford food can still eat. 

Why even bother?
There's certainly an argument to be made about the value of any specific sustainability action. Maybe it makes sense to offset your carbon footprint, maybe not. What you can't argue with, though, is the success that Chipotle has had. While the business is driven by its fast and flavorful food, it's also getting a boost from its self-portrait, painted as the brand that cares. Over the last 12 months, the company's stock has hammered the return of the S&P 500.

Panera, on the other hand, has put up a lackluster showing. Bad weather has put the brand on the back foot, and through the beginning of February, the road was still looking bumpy. By adding a feel-good sustainability component to the brand message, Panera is hoping to bring in extra traffic even when the weather turns against it.

As the last quarter showed, there's still some work to be done. Chipotle had no problem impressing the market with its early winter results, showing that when the going gets tough, the masses are headed to its restaurants, not Panera's. Still, there's a lot of value in the work that Panera is doing, and it just takes a few good ad campaigns to bring that value to bear on the bottom line. With close to a year of lag time in major marketing campaigns, this may be the quarter that Panera starts to really show some upside from its sourcing.

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Andrew Marder has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Chipotle Mexican Grill and Panera Bread. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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