Panera Bread’s $7.5 Billion Merger With Krispy Kreme Could Threaten Starbucks

Photo: Terry Johnston on Flickr

In the business world, major acquisitions can be useful in helping one brand get to the level needed to challenge other major companies in its category. That’s exactly what Panera Bread is getting out of a major takeover deal that was just approved by shareholders this past week.

First announced a couple of months ago, Panera will be sold to Krispy Kreme owner JAB Holdings for a total of $7.5 billion. In the transaction, JAB will assume $340 million of debt from Panera Bread while giving it the financial strength and capability to potentially challenge a massive coffee shop chain like Starbucks. This is because JAB already owns some major coffee brands and restaurant chains like Keurig Green Mountain, Caribou, Peet’s Coffee and Tea, and Einstein Bros. Bagels that can be funneled towards the growth and success of the nationally renowned Panera Bread.

Panera’s already doing some great things that have translated into improved earnings, like expanding delivery and digital sales and the removal of many “taboo” ingredients from their food that has resonated with most customers. Compared to the rest of the industry, including Starbucks, Panera is doing extremely well. It’s showing in their nearly 21% net income increase between the first quarters of 2016 and 2017, and a 5.3 percent jump in sales during the first quarter of 2017: a quarter where several chains saw only a one to two percent increase.

At over 2,000 stores and a $150 million posting in retail/grocery sales in the US alone, Panera does have some catching up to do to reach the 12,000-plus stores controlled by Starbucks. But the financial backing of a major investment firm like JAB and connections to major coffee brands like Caribou and Keurig gives Panera plenty of room to grow even further, potentially handing Starbucks some serious competition to consider.