Panera Bread 2010 Annual Report Download - page 2

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Dear Stockholder, April 18, 2011
I am very pleased to report that 2010 was another very good year for Panera. Our Earnings Per Share (EPS)
grew 30% in 2010. This marks the third consecutive year that our EPS has grown 20% or greater. No one would
debate how difficult the economic environment has been over the last three years. We are proud to tell you that our
shareholder value (as measured by our market capitalization) has increased by $1.9 billion on a cumulative basis
over the past three years.
The key to achieving these results has been our continued investment in the quality of our customers’
experience to drive differentiation and competitive advantage. The investments that we have made over the last few
years drove our results in 2010 and we believe the investments that we made in 2010 will be the basis for our
continued success in 2011 and beyond.
Our 2010 system-wide comparable bakery-cafe sales increased 7.9%. On a two year basis, our comparable
bakery-cafe sales increased 10.1%. We believe these results put us among the very best in our industry and are a
product of the investments that we have made in the quality of our food; increased marketing expenditures; the
rollout of our MyPanera
TM
loyalty program; growth of our catering business and finally the quality of our
operations.
Menu Development
For the last several years, we have utilized the talents of our food development group and the size and scale of
our supply chain to drive innovation and differentiation of our food offerings through quality. This has driven the
success of our signature salad and sandwich categories as well as the establishment of our frozen drink and smoothie
category. We have also been able to broaden our soup lineup with the addition of Mac & Cheese in 2009 and a hearty
Steak Chili in 2010.
An investment that we made in 2010 that we believe will benefit us in 2011 and beyond was in the development
and rollout of our second generation Panini grills. We worked with a manufacturer for more than 2 years to develop
and test this customized grill which heats more evenly throughout the sandwich and allows us to make each Panini
to order. We expect the new grill, in concert with the addition of steak to our menu, will drive our hot sandwich
platform in 2011 and beyond.
Marketing
In 2010, we continued our multi-year initiative to refine our media and advertising strategy. Although we
increased our media spending in 2010, we still spend at a relatively low level (1.1% of system-wide sales in direct
media expenses in 2010) compared to many national restaurant companies that spend in the 3% — 5% range. We
made progress this past year in improving our messaging to capture the points of difference and the soul of the
Panera concept. We also made progress in learning the optimum media mix by market. Perhaps the most important
investment that we made in the Marketing area in the past 18 months was in our people. We have added a new Chief
Marketing Officer and a Vice President of Marketing. Both of these individuals have a great deal of consumer
marketing experience and are playing an important role in crafting our long-term marketing strategy.
In 2011, we will modestly increase our media spending and continue on our path of increasing the quality
awareness of our targeted customers and deepening relationships with our most engaged customers. We believe that
as we are early on in our media spending program, we will be able to carefully increase our spending while
generating a positive payback on our investment for several years to come.
MyPanera
TM
Loyalty Program
The rollout of our MyPanera
TM
Loyalty Program was perhaps the most significant organizational investment
we made in 2010. This program was rolled out system-wide by the end of November and we already had more than
4.5 million registered card members by the end of the year. This program is designed to surprise and delight our
guests through a combination of rewards and unique experiences that only Panera can provide resulting in deeper
relationships with our most loyal customers.