Panera Bread Co (PNRA): 1 Thing Starbucks Corporation (SBUX) Absolutely Has to Fix

It makes sense, then, that Panera Bread Co (NASDAQ:PNRA) is encouraged by its expansion into more of what you might consider restaurant-level food. The company has doubled down on those heftier food choices and has just added a new line of pasta options to its menu.

Of course, Starbucks isn’t blind to the potential that food brings to its business model. That’s one reason the company shelled out $100 million in cash last year to buy the La Boulange bakery brand. A Starbucks Corporation (NASDAQ:SBUX) executive said at the time that the new brand would “help us expand day-parts, drive customer loyalty, and ultimately grow the overall business.”

Still thirsty
Sure, drinks have always been Starbucks’ strength, and that’s not likely to change anytime soon. But one reason the company needs to broaden its menu is that the competition over coffee dollars is fierce. And it’s leaving less room for sales growth in the category.

McDonald’s Corporation (NYSE:MCD), for one, credited premium beverages such as the new Chocolate Chip Frappe for helping drive revenue growth last year. The fast-food giant plans to keep leaning on its McCafe lineup as a big part of its growth strategy for 2013. And Dunkin Brands Group Inc (NASDAQ:DNKN) pointed to “strong beverage sales growth” at its Dunkin’ Donuts stores in the U.S as a major reason for the sales spike it booked last year.

Yes, Starbucks Corporation (NASDAQ:SBUX) will need to continue fending off those rivals in its core drinks business. But it’s clear that the beverage business can’t power big sales growth on its own.

Looking ahead
The company has started testing a deeper food menu by adding La Boulange options in some of its Northern California stores. CEO Howard Schultz said the results were strong so far, calling the food “significantly better than what we have right now, candidly.”

That’s a good sign, and it means that the likely next step will be for those menu options to be rolled out nationally. That should help food finally climb to a higher percentage of Starbucks Corporation (NASDAQ:SBUX)’ sales, potentially boosting revenue and profitability at the same time.

The article 1 Thing Starbucks Absolutely Has to Fix originally appeared on Fool.com.

Fool contributor Demitrios Kalogeropoulos owns shares of McDonald’s (NYSE:MCD). The Motley Fool recommends Green Mountain Coffee Roasters, McDonald’s, Panera Bread, and Starbucks and owns shares of McDonald’s, Panera Bread, and Starbucks.

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