How a food-on-the-go strategy helped Greggs back on the road to success

Newcastle-based baker Greggs has switched focus to the competitive food-on-the-go market - and the new strategy is beginning to pay off

Greggs lorry on the Quayside
Greggs

North East bakery Greggs is gradually winning its battle to cement its position in the food-on-the-go market, having seen sales lift 4% at the start of this year.

Better-quality coffee, increased supplies of sandwiches and longer opening hours have all helped the bakery giant Greggs to improve its sales, having shifted its focus to the food-on-the-go market last year, a competitive market putting it up against the likes of Pret A Manger.

The Newcastle-headquartered business said it is forging ahead with its strategy, with its own shop like-for-like sales up by 3.7% in the 17 weeks to April 26 after a 4.4% decline last year.

Chief executive Roger Whiteside has updated shareholders on progress in the interim management statement, revealing it is making good progress in its refit programme which has so far seen 66 shop refits to match the new format this year.

Poorly-performing shops in high streets are being closed in favour of opening closer to customers places of work and travel locations. The firm has 1,663 shops as of now, 80% of them on high streets and 20% in new locations, but Whiteside has said that within five years 40% will be placed at convenient sites for customers and 60% will be on the high street.

He said: “We are on target for 200 refits this year and the 66 made this year are performing well. We’ve also opened 20 new shops and, as part of the acceleration of the closures, 28 have been closed.

“Part of the consequences of the disposal of freeholds has given property gains of £1.4m and last year that was only £0.2m so that will have a good effect on profits.”

The year-on-year performance is in part benefiting from comparison with a period of weak trading in 2013 when like-for-like sales for the first 17 weeks declined by 4.4%, impacted by heavy snow in January and March 2013. But an improved range of offerings and the introduction of promotional meal deals and Greggs Rewards, the new mobile loyalty scheme, has also impacted well on revenues.

“This year we didn’t have snow,” said Whiteside, “but we did have floods in January. So we prefer floods to snow, given a choice.

“The figures also come as a result of some of the changes, such as the improvements to freshly-made sandwiches, and the new brand of coffee is doing extremely well. The reward scheme is also starting to build momentum. It’s early days yet but it’s certainly in the thousands.

“We are happy with the soft launch we carried out at the start of the year, all of the technology is working so we’re gearing up for more recruitment into that.”

Last year the firm announced redundancies as part of its plan to improve the efficiency of its bakery network and growing operational effectiveness in support areas. As a result, 79 shops offering in-store bakeries will be transferred to its regional network, a move that doesn’t affect North East roles. However, a restructure at its head office in Newcastle, affected less than 50 roles in the region. The chief executive said changes to the in-store bakeries are being made throughout the year but that consultations have been completed with others.

He said: “Everyone who is losing their job now knows they are going and in total we lost 360 people.”

Looking ahead, Whiteside said the business faces issues with input cost inflation. Whiteside explained: “At the moment, a lot are deflationary, such as flour, sugars and proteins, but our teams say they are expecting to see them rise again, although there is uncertainty. Oils, wheat, chicken and dairy are expecting to rise, so there’s a warning there.”

Overall, the management is encouraged by the performance in the year to date and said the results for the year are expected to be satisfactory – but the second half of the year will be more challenging.

Journalists

David Whetstone
Culture Editor
Graeme Whitfield
Business Editor
Mark Douglas
Newcastle United Editor
Stuart Rayner
Sports Writer