Panera Bread’s Unlimited Coffee: Answering Consumer Wants or Fueling Addictions ?

At the beginning of the month, Panera Bread announced that it is launching a novel service : an unlimited coffee subscription. This new service is almost guaranteed to benefit Panera by increasing revenue and loyalty program subscriptions. But, will it be beneficial for Americans in the long term?

The Context. Starting on March 2nd, Panera Bread launched a service that is open to all rewards program members, offering free coffee refills if you subscribe to the service. At $8.99, the program pays for itself with the fourth cup of coffee for the period. But Panera’s CEO, Niren Chaudhary, is not after the coffee revenue. Chaudhary admitted that he has other priorities in mind:

  • Access to data. In order to sign up for the service, all those interested need to sign up for the rewards program. This means that Panera will now have access to all of the shopping patterns of the various demographics of its most loyal clients. The CEO plans to leverage this data in order to provide more tailored subscriptions in the future that are likely to appeal to clients.
  • Increased purchases. CEO Chaudhary does not mind if the company looses on the profit margins of simple black coffee. What he is more interested in is “What are customers buying this coffee with?”, he told Bloomberg TV. He aims to increase breakfast food sales by encouraging customers to come in and get the coffee that they have already paid for. Once in the store, the barrier to buying more items is reduced.

“We feel that this is a terrific way to get consumers more interested in not only in our coffee platform but also for them to get exposed to the strength of the food that we have in our cafes, particularly around breakfast,” Panera CEO Niren Chaudhary.

The Marketing. What I found particularly curious about the service is the way that it is marketed: using emotional marketing. During the Bloomberg TV interview, CEO Chaudhary repeated on several occasions that he plans to keep America’s cup always full, to help fill your cup with endless positivity and to provide the “cup of optimism that customers want to start the day.” Even if you don’t see the message from the CEO, you are unlikely to miss it as the service is promoted with the hashtag #YourCupIsAlwaysFull. This is very powerful messaging because it aims to place a cup of Panera coffee at the forefront of the consumer’s mind whenever they are in need of a pick-me-up and some positive energy.

The Dangers. In business terms, the service seems to be doing well at the moment. According to the CEO, customers visited the store more than twice as often as before and more than 90% of customers continued their subscription during the pilots, showing that the service answers a particular need or want. While the CEO views these as positive metrics, the health aspect should also be considered. Going to the store more often means that those clients are likely consuming more coffee. Not only that, they are likely buying an extra item as well, such as a cookie, because they are already there and they might as well. For a country that has heart disease (which is worsened by caffeine) as a leading cause of death and that is expected to have over 50% of its population be obese by 2030, these trends might not be as positive as the CEO portrays them to be. Chaudhary not only wants these trends to continue but he plans to study the consumer purchase behavior in order to further promote the food attachments that are already present.

“We have started the journey off with coffee, but we are going to be watching very carefully what kinds of food attachments are happening,” Panera CEO Niren Chaudhary.

Is the company creating a product tailored to its customers or is it just fueling their customers’ addictions? In the case of the latter, is it the company’s responsibility to avoid fueling and creating addictions or is each individual responsible for their own well-being?

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