Photographer: Patrick T. Fallon/Bloomberg

Panera CEO Knocks Wall Street Culture That Celebrates Activists

  • Chain is now part of closely held JAB after $7 billion deal
  • Shaich says focus on short-term profit is stifling innovation

For Ron Shaich, the chief executive officer of Panera Bread Co., getting acquired by closely held JAB Holding Co. meant no longer having to worry about activist investors.

Ron Shaich Photographer: Peter Foley/Bloomberg

Ron Shaich Photographer: Peter Foley/Bloomberg

Shaich, who recently sold the cafe chain he founded for $7.2 billion, says that a Wall Street culture relentlessly focused on short-term profit and quarterly metrics is stifling innovation. And he adds it’s only getting worse as activist investors increasingly target the restaurant industry.

“The very nature of what activists want is to move the shares tomorrow -- it’s not helping,” he said in an interview. “These guys show up, they’re renting the stock and they tell you what to do -- it’s not a positive way to have dialogue.”

JAB, an investment vehicle of Austria’s billionaire Reimann family, agreed to buy Panera in April, adding the fast-casual chain with more than 2,000 locations to a portfolio that includes Krispy Kreme and Keurig Green Mountain. Starbucks had also expressed interest in buying the company, two people familiar with the matter told Bloomberg at the time.

Moving Faster

Now that he’s part of a private company, Shaich said he can innovate faster and be more aggressive to attract Panera’s target market of health-conscious diners. Panera has posted positive same-store sales each of the past 18 years, including during the financial crisis. From 2010 through its last day of trading in July, the company’s stock gained more than fourfold, outperforming the S&P 500 during that time.

Shaich faced activist pressure during his tenure running Panera: Wall Street questioned a digital transformation of the chain that didn’t go smoothly at first. Now, with more than 25 percent of the company’s sales coming through digital kiosks and its website and mobile app, Shaich feels vindicated.

“I say all of this as someone who has done this and won,” Shaich said. “I knew it was going to work, I just couldn’t say what month or quarter.”

Panera is currently rolling out cups that list the teaspoons of added sugar in various fountain drinks, including soda. The initiative comes a few months after the company, which sells PepsiCo Inc. beverages at its locations, became the first major chain to list the amount of added sugars in its fountain drinks. Shaich decided not to pull soda from the restaurants, but also added a set of unsweetened drinks to its menu.

Panera spent 2016 working to rid its menu of artificial sweeteners, flavors, colors and preservatives -- part of a multiyear effort that included removing nitrates from bacon. The chain also cleaned up its kids’ menu last year, claiming superiority over chains such as McDonald’s.

In May, after the deal with JAB was announced, Shaich joined the board of Whole Foods Market Inc., which was mired in a prolonged slump and facing pressure from activist hedge fund Jana Partners. Soon after, the organic grocer agreed to be purchase by Amazon.com for $13.7 billion.

In an interview before that deal was announced, Whole Foods CEO and founder John Mackey lashed out at activist investors, referring to Jana as “greedy bastards.”

One advantage of selling to JAB, Shaich said, is escaping the sense of “vulnerability” that comes with being a public company, with the next activist investor looking to shake things up never far behind.

“I couldn’t protect this place forever,” he said.

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