- Subscribers in test markets visited Panera almost every other day, and many of those customers purchased food during their visits.
- "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 told Business Insider.
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Panera is unleashing a radical new weapon in the fast-food breakfast wars: an unlimited coffee subscription.
The subscription provides unlimited hot coffee, iced coffee, or hot tea at all Panera restaurants for a fee of $8.99 monthly, or about $108 annually. Panera is rolling it out nationwide over the next week to members of its MyPanera loyalty program.
Subscribers will start saving money after about their fourth cup of coffee, according to prices in Richmond, Virginia, where a single cup of Panera's coffee costs $2.20.
A subscription like this is unprecedented for a major national chain.
"We are the first brand to do it and we're super excited about that," Panera CEO Niren Chaudhary told Business Insider. "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."
Subscribers in test markets visited Panera every other day
Panera tested the coffee subscription model in about 450 restaurants across three states before deciding to roll it out nationwide.
Subscribers in test markets visited Panera almost every other day, and many of those customers purchased food during their visits, Chaudhary said. More than 90% of subscribers renewed their memberships for subsequent months.
"This was a win clearly for the customers because they saw unbeatable value," he said. "And it was a win for us as a business in terms of driving incremental traffic, incremental food purchases, and therefore incremental profit dollars."
The subscription also lured new customers to Panera. Test markets saw a 25% increase in signups to Panera's loyalty program, and almost all of those signups came from customers who are new to Panera, according to the company.
Customers must sign up for the loyalty program, which currently has more than 38 million members, to access the unlimited coffee subscription.
Panera's subscription could expand beyond coffee
MyPanera members can sign up for the subscription through Panera's app starting Thursday. In-store signups will be available starting March 2.
Subscribers can order coffee through the app for pickup or delivery or in a Panera restaurant through kiosks or a cashier.
Panera said its recently revamped coffee offerings, including light roast, dark roast, decaf, and hazelnut blends will be available to subscribers. The company also said almond milk will now be available to customers for free and its exploring adding other non-dairy alternatives.
If the subscription model is successful, Panera could expand it to include more than just coffee, Chaudhary said.
"We have started the journey off with coffee, but we are going to be watching very carefully what kinds of food attachments are happening. What are customers buying this coffee with?" he said.
He said the company could use different subscription price points or bundle propositions to add more versatility to the subscription model.
Overall,Panera is hoping to become a part of more Americans' morning rituals with the new coffee offering, Chaudhary said.
"Coffee is not just a hot liquid. It's more than that," he said. "It's a cup of optimism that customers want to start the day."
Many Americans feel guilty about how much they spend on coffee, however, which reduces their enjoyment of the beverage, he said. Americans spend about $1,100 on coffee annually, according to a survey by the money app Acorn.
"That's where Panera comes in because we, as a brand, we want to remove all conflicts for our customers and we believe that customers should not have to make compromises," he said.
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