We're on a roll: How North East bakery giant Greggs lifted sales and profits

Finance Director Richard Hutton reveals how changes are lifting sales at North East bakery giant Greggs

 

Bakery giant Greggs is a business built on the popularity of its pasties and sausage rolls – yet the business attributes its current sales success to a switch in its coffee and healthier sandwiches.

The popular chain, which has 1,661 trading shops, is famed for its hot savouries but last year Greggs set in motion a strategic plan to become a leader in the food-on-the-go market, pitting the Newcastle-headquartered company against the likes of Pret a Manger and Costa Coffee.

Sandwich ranges have been expanded, healthier offerings below 400 calories were launched, a new blend of coffee was introduced and a huge capital investment programme began to streamline processes and refurbish its portfolio into more contemporary shops.

Interim results for the firm, for the 26 weeks to June 26, have shown that the change in strategy is working.

This time last year, the Newcastle-headquartered company said like-for-like sales for the first half of 2013 were 2.9% down, but that figure has now risen by 3.2%, while total sales have lifted by 3.1% lift to £373m.

Pre-tax profit excluding exceptional items also reached £16.9m, a 48% increase on the £11.4m posted for the 2013 comparable period.

The company, which has 1,661 shops trading, attributes its good trading year to date to a number of achievements against its strategic plan, saying it has seen encouraging results from the new sales initiatives.

Finance director Richard Hutton said: “In terms of products we have seen some very encouraging results.

“Our new coffee blend launched in January has been well received. We’ve seen double digit growth in coffee sales and that is continuing.

“Our relaunching of our sandwich range started this month, with new packaging and greater offerings under the ‘Balanced Choice’ range of products under 400 calories, such as a cajun chicken flatbread with 326 calories and six grams of fat.

“It’s a good example of how Greggs is offering a better choice to customers.”

However, customers worried the firm’s traditional offerings – hot savoury pastries – may be selling at the expense of the new sandwiches, salads and coffee need not worry.

“We have certainly seen switching, for example, some switching to pizza, but perhaps we are giving permission to people who come in and realise there’s something for them.

“We are now at a point where we are selling £1m a week through the Balanced Choice range

“Hot savouries still account for a third of sales and the sausage roll is still the number one bestseller – we sell 100 million a year.”

As well as making improvements to the products, the firm, which has nine regional bakeries each serving up to 250 shops, has stepped up availability of the range as well as extending trading hours, with some 200 shops now open on Sundays.

The new customer loyalty scheme, Greggs Rewards, has also been launched successfully and the firm said it plans to build on this.

As part of the strategic plan the firm is also closing some shops and relocating them to areas more convenient for customers, where they are close to places where they travel and work. That has so far led to 26 new openings and 36 closures.

Existing shops are also being refitted to look more modern, some with seating areas, and so far this year 131 refits have been carried out. By the year end that will have reached 200.

Hutton said the refurbishment programme will take two years to compete and, together with improvements to the firm’s processes, this will see capital expenditure for 2014 to be around £50m.

The firm’s current focus is fixed firmly on investing in the quality of the estate rather than its size, but Hutton said there is scope in the future to grow the number of UK shops to 2,000.

“There are still some areas where we aren’t so well represented, such as the West Country and the South East, so the potential is there,” he said.

“I think the focus on food-on-the-go has shown that’s the right place to be. It’s a growing market.

“There are still some challenges but we are pleased by the encouraging progress we are making.”

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