Dive Brief:
- Panera launched Panera Grocery on Wednesday, a service that lets diners buy produce and pantry items alongside the cafe's menu items, according to a company release. The chain is selling bagels, baguettes, breads, milk, yogurt, cream cheese, apple, avocados, blueberries, grapes and tomatoes. Panera Grocery can be ordered on Panera's app or website and is available via contactless delivery, Rapid Pick-Up, Drive-Up and Drive-Thru and contactless delivery via Grubhub.
- “It’s a win for our associates because we will be able to keep our cafes open longer, and it’s great from a business standpoint because it should be incremental profit and revenue for us at a time when we desperately need it,” Panera CEO Niren Chaudhary told CNBC.
- Subway now offers Subway Grocery at more than 250 restaurants in California, Connecticut, Oregon, Tennessee and Washington, according to the company's website. The sandwich chain is selling bread, meat, egg patties, cheese, vegetables, frozen soups, cookies and chips, and some items are available in bulk.
Dive Insight:
Cash-strapped independent restaurants have been selling perishable ingredients as groceries for weeks now to prevent revenue from drying up amid the novel coronavirus crisis. Now, the pandemic's impact has pushed deep-pocketed legacy chains to adopt the same tactic.
The move makes sense. Chaudhary told CNBC that the chain lost 50% of its business after it closed its dining rooms, and that the chain began cooking up the idea for Panera Grocery two weeks ago as sales continued to slide. Chaudhary also disclosed that the chain has furloughed some workers in the field and support center.
Subway has suffered layoffs as well, cutting 300 corporate employees in February even before the novel coronavirus hit. Bob Grewal, who owns the master development rights to Subway restaurants in six markets, told Nation's Restaurant News that Subway Grocery first launched 11 days ago at a few Orange County, California, restaurants. The goal of the program is to help franchisees bolster off-premise orders and keep more employees on the payroll as the economic effects of the pandemic intensify.
Potbelly is also offering a Potbelly Pantry program, according to an email sent to Restaurant Dive, hinting that this grocery trend may continue to spread across major restaurant chains that serve fresh ingredients. It's a savvy move — not only does it open up a new revenue stream, but is also a way to sell off perishable inventory in bulk before it goes bad. These grocery programs could also bolster restaurants' fresh halos, a bonus that could differentiate chains from their rivals both during and after the pandemic. It also provides an additional way for restaurants to connect with consumers, many of whom have grown frustrated over long wait times for grocery deliveries.
These programs also better align with new consumer spending habits. Diners have moved 10% of their spending away from restaurants and to groceries during the coronavirus crisis, boosting grocery sales almost 73% as of the week ending March 20 compared to the same week in 2019, according to Black Box Intelligence. Whether or not grocery sales will be enough to ward off further restaurant layoffs and losses in the near term, however, is another question.
