Why Panera Bread Is No Chipotle Mexican Grill

Chipotle Mexican Grill continues to blaze ahead while Panera Bread lags.

Jun 16, 2014 at 5:09PM

A Mission Of Bread And Hope Sm
Source:  Panera Bread

Both are part of the red-hot fast-casual industry, but Chipotle Mexican Grill (NYSE:CMG) continues to eat Panera Bread Company's (NASDAQ:PNRA) lunch. While both companies are continually moving toward similar "food with integrity" policies along with the higher-quality ingredient perceptions that they entail, there is one stigma that Panera Bread may never be able to overcome. And it is helping to make Chipotle Mexican Grill rich.

Panera is going all natural
On June 3, Panera Bread announced a new "comprehensive food policy." In the release, Panera Bread stated that it would remove all artificial additives from its menu by the end of 2016. The company has a commitment to use "clean" ingredients, and that also includes no added MSG and no artificial trans fats.

Panera Bread said this includes no "artificial colors, sweeteners, flavors and preservatives." It gave this example of its new food policy: "By replacing deli-style roast beef with sirloin steak, we were able to remove caramel color and now serve all-natural beef seasoned with just oil, salt and spices."

Then there is the whole Chipotle Mexican Grill thing. Its poultry has been "raised responsibly" without the use of antibiotics in a low-stress environment. Both companies work with local farmers whenever possible and source organic ingredients.

In the press release, Erik Olson, Senior Strategic Director for Health and Food for the Natural Resources Defense Council, stated that Panera Bread's policy on antibiotics has made it an "industry leader." He reminded the public that Panera Bread has already been purchasing chicken raised without antibiotics for over a decade and the company has expanded this to other meats as well. Where Panera Bread falls short, however, compared to Chipotle Mexican Grill is in the area of gluten.


Source: Chipotle Mexican Grill

The Chipotle way
Technically plenty of gluten-free options exist at Panera Bread, but for most people who seek a gluten-free lifestyle the idea of coming to a place with "bread" in its title sounds about as silly as a vegetarian patronizing a burger joint. Sure, there may be options for everybody, but you don't tend to see vegetarians lining up outside of Burger King. At least not in the United States.

On Chipotle Mexican Grill's website, it states, "No matter what your unique dietary needs are, Chipotle has options for you." And it means it, mostly stigma-free. For example, Chipotle Mexican Grill's website goes on to state, "Most people wanting to avoid gluten can eat anything we serve except for our large and small flour tortillas." Simple enough. Most people probably don't even think of Mexican food as having gluten in the first place.

Restaurant sales have a gluten sensitivity
In a world where a shift of just a percentage point or two in same-store sales growth could seemingly make or break a stock price in the short run, gluten-sensitive people can significantly impact a restaurant's sales and bottom line. Same-store sales last quarter for Panera Bread were up less than 1%.


Source: Wikimedia Commons

If you think this anti-gluten minority doesn't make a difference, think again. According to Nielsen, just 5% of households reported that they bought gluten-free products in 2010 and this rose to 11% in 2013. Meanwhile, Harry Balzer, vice president at the market research company NPD Group, states that about 30% of the public says it would like to cut back on gluten. Thirty percent of anything is an awful lot. Is there any wonder why Chipotle Mexican Grill and its mostly gluten-free menu had a 13.4% same-store sales pop last quarter?

Foolish final thoughts
One of the reasons Panera Bread grew successfully for years was that consumers saw it as quality, healthy, and fashionable. In a bit of irony, with the anti-gluten craze the word "bread" is becoming Panera's curse. It will be interesting to see, over the longer term, if the craze is really just a fad and if people eventually ditch corn-tortilla-wrapped burritos in favor of gluten-rich sandwiches once again. Keep an eye on the same-store sales trends of both Panera Bread and Chipotle Mexican Grill.

Warren Buffett's biggest fear is about to come true
Warren Buffett just called this emerging technology a "real threat" to his biggest cash-cow. While Buffett shakes in his billionaire-boots, only a few investors are embracing this new market which experts say will be worth over $2 trillion. It won't be long before everyone on Wall Street wises up, that's why The Motley Fool is releasing this timely investor alert. Click here to learn more about what's keeping Buffett up at night and the one public company we're calling the "brains behind" the technology.

Nickey Friedman has no position in any stocks mentioned. The Motley Fool recommends Burger King Worldwide, Chipotle Mexican Grill, and Panera Bread. The Motley Fool 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.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers