Panera Becomes First Chain to Label Added Sugar in Beverages

(Bloomberg) -- Panera Bread Co., vying with Chipotle Mexican Grill Inc. to be the progressive vanguard in the restaurant industry, will become the first major chain to list the amount of added sugars of its fountain beverages.

The company, which sells PepsiCo Inc. beverages at its roughly 2,100 locations across the U.S., aims to steer customers away from sugary drinks, saying they contribute to obesity and heart disease. To offer alternatives, Panera is rolling out a series of “craft beverages” that are made without artificial ingredients.

The announcement comes the same week that Chipotle touted its effort to cut preservatives from its food. That move sparked a bit of a feud between the two chains. Chipotle Chief Executive Officer Steve Ells criticized Panera and other rivals for not having as pure a menu. Panera CEO Ron Shaich then called out his competitor in a Business Insider interview for its past problems -- a reference to its history of foodborne-illness outbreaks.

Ordinary restaurant diners may not care about the tiff, but they are gravitating toward less-processed ingredients. And the broader industry is relying on menu upgrades to attract customers during a slow period for restaurants. Panera said earlier this year it had rid its food of artificial ingredients, and McDonald's Corp. removed artificial preservatives from Chicken McNuggets.

In its push for healthier drinks, Panera decided to stop short of pulling Pepsi products from its restaurants, Shaich said in an interview. But the company felt that it was important to be transparent about the amount of sugar in soda.

“Panera is not about playing the food police,” he said. “We're about giving people options -- real options and real information where it matters.”

Soda sales are slumping as U.S. consumers try to cut down on both sugar and artificial sweeteners. Last year, the FDA released new rules that requires added sugars to be listed on nutrition labels for packaged food and drinks by 2018. The new regulation was opposed by industry groups, which call it unfair and unscientific.

‘On a Journey'

Panera's move may open up a new front in the battle against soda. The company plans to start listing calories and added sugar in its fountain beverages next week, with the goal of finishing the project by September. Customers will see a sign that shows that, say, a 32-ounce Pepsi has 410 calories and 110 grams of added sugar. The new beverages offered by Panera have less sugar than soda, and some aren't sweetened at all.

In response to Panera's announcement, PepsiCo touted its diverse beverage offerings and said it had a “wide variety of healthier choices for all our consumers, including those at Panera.”

“PepsiCo and Panera are both on a journey to offer consumers healthier beverage options,” the company said. “We have a diverse portfolio of low calorie, no calorie, no added sugar and unsweetened beverages.”

A small -- and shrinking -- number of Panera customers still want soda, but more and more of the company's customers are seeking out other beverage options, Shaich said. Drink sales rose in the markets where the new beverages were tested, he said.

Long Crusade

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.

And it has sought an edge over Chipotle, which struggled to recover from its food safety crisis. Over the past year, Chipotle's shares have slipped 5.7 percent, while those of Panera gained 25 percent.

It was considered a marketing coup when Chipotle said in 2015 that it had rid its menu of genetically modified ingredients. But there was criticism that the chain was still serving soda. Chipotle's announcement this week that it was the only national chain with no added colors, flavors or preservatives didn't apply to beverages.

Shaich said he informed PepsiCo of his decision before making the public announcement, but he declined to comment on whether the beverage giant was upset by the move. Panera's goal is simply to be give customers more information, he said.

“If they're embarrassed by the amount of sugar in their soft drinks, maybe they should reduce the amount of sugar in their soft drinks -- not hide it,” he said.

To contact the reporter on this story: Craig Giammona in New York at cgiammona@bloomberg.net.

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, Lisa Wolfson