Food retailer Greggs has served up a fresh business model in recent years.
Repositioning itself from being a traditional bakery chain selling sliced loaves and apple turnovers to a food-on-the go specialist proved the vital ingredient to impressive growth.
This week’s half-year results showed a rise in underlying profits from £25.7m to £40.6m on sales up almost 15% to £546m.
Greggs’ resonance with contemporary consumers is down not just to a reassessment of what it sells but, crucially, when it sells and, increasingly, how it sells.
The shift has been overseen by chief executive Roger Whiteside who, since joining in 2013, has turned a business that once looked as if it could be going stale into one that consistently whets shoppers’ appetites.
After his arrival, Greggs stopped being a baker and fully embraced the food-on-the-go trend that was already evident then but has become ever more part of life since. It is central to a wider shift blurring the boundaries between traditional food shopping and catering – a change also reflected in Sainsbury’s new pizza delivery service with Deliveroo.
Even in 2013, the food-on-the-go market was worth £6bn and growing at an annual rate of 9%. Three-quarters of all customer visits to Greggs were for that purpose.
Whiteside said at the time: “While Greggs has defended its position as the leading retail bakery business, it has underperformed the food-on-the-go market as new entrants and existing competitors have rapidly expanded shop numbers and better met customer demands.”
Within two years, Greggs had stopped selling loaves and switched focus entirely to reflect contemporary life – a life, particularly in big towns and cities, in which buying breakfast on the way to work, rather than wolfing down a bowl of cornflakes at home, had become a ‘thing’.
The change was catered for early by McDonald’s, which introduced its breakfast menu in the UK in 1982 and by 2004 had added options such as Oat So Simple.
But even two decades later, there was still space for Greggs to move in.
Gap in the market
Today, breakfast on the go is still the fastest-growing period of Greggs’ trading day and it has become the UK’s third-biggest retailer of coffee.
There is more to go for in the breakfast market. Whiteside says: “Value you can afford is our entry point. We’re trying to democratise it. We think we can make high-quality food accessible to everybody.”
In a similar way, Greggs now sees opportunity at the end of the day, by extending trading hours to sell evening meals.
The retailer is piloting longer opening hours from this autumn when participating branches will remain open until 9pm rather than 6pm. Greggs has already been targeting the market with the introduction of a pizza deal – £2 for a slice and a drink – that kicks in after 4pm.
“The future’s omnichannel, or whatever you want to call it – a successful brand will be as frictionless as possible”
Roger Whiteside, Greggs
Hungry consumers heading for Greggs these days find more varied options on the menu than was the case before Whiteside’s arrival, as the retailer has recognised changing tastes.
They can still buy favourites such as sausage rolls – Greggs sells 2.5 million of them every week – and sweet treats, but there is much greater variety.
The retailer’s 6 million customers a week spend 22% of the total on ‘healthy options’ such as salads and 20% of sales are gobbled up by ’non-meat options’.
Greggs’ famous vegan sausage rolls helped power the sales rise in its first half, helped by a social media storm sparked by broadcaster Piers Morgan.
His tweet that “nobody was waiting for a vegan bloody sausage, you PC-ravaged clowns” was met with the response: “Oh hello Piers, we’ve been expecting you,” from the retailer. Greggs’ smart use of social media is one more reflection of its ability to align with contemporary behaviour.
The ‘how’
Having overhauled what and when it sells, attention is now turning to how. Greggs is one of the few retailers still to be opening more branches – it already operates 1,984 shops, but it will open around 100 net new locations in its current financial year.
The retailer’s value stance means it must keep property costs as low as possible, a reason why it has few branches in central London, for example, where the expense can be prohibitive.
However, the retailer is trying out new types of premises and adding digital to the proposition.
Almost 40% of Greggs’ shops are now “wholly outside of traditional shopping locations” – in airports and motorway service stations, for instance – and in the longer term, the proportion is expected to exceed 50%.
A variety of pilots are underway. They include drive-thru stores, the fourth of which has just opened in Newcastle upon Tyne, click and collect and delivery options, leveraging Greggs’ loyalty scheme and app.
A click-and-collect breakfast service is available in seven cities at the moment, including Manchester, while delivery partnerships are being tested with Just Eat and Deliveroo.
Whiteside sees the future as multichannel – even for sausage rolls. Believe it or not, some customers do order a sausage roll for home delivery, but that is not typical. Whiteside says orders are typically for families or groups and the average transaction value is more than three times the £3 generated in-store.
He says: “We’re moving towards a systems-fully-integrated platform. The next battleground is digital. The future’s omnichannel, or whatever you want to call it – a successful brand will be as frictionless as possible and maintain ‘club membership’, as I call it. We want to stay part of that repertoire of brands.
“We’re now taking the opportunity because we’re having a good year, to invest and we want to link it to our loyalty scheme in some way.”
Greggs faces the same big-picture problems as other retailers, such as any impact of a Brexit no-deal on the supply chain, tariffs, exchange rates or consumer sentiment.
However, it looks well positioned to keep customers salivating at the value, product and convenience it has made its strengths.
No comments yet