It’s the food-to-go specialist that is number one in the UK lunch market, number two for breakfast, and clocks up coffee sales that outstrip those of Starbucks.
McDonald’s? Good guess.
Pret A Manger? Not quite.
Costa? Wrong again.
Among such formidable competition on the high street, you’d be forgiven for not immediately landing on the correct answer – Greggs.
The chain’s chief executive, Roger Whiteside, rightly allows himself a smile as he sits down with Retail Week to discuss the impressive position it has established for itself during his tenure to-date.
“Suddenly all the railway stations want to talk to me. Even one or two of the airports want to talk to me, would you believe?” Whiteside jokes.
It’s not hard to see why. Greggs is, to excuse the pun, on a roll. In the six months to June 29, pre-tax profit surged 51.9% to £36.7m, as like-for-likes jumped 10.5%. The chain opened its 2,000th store in South Shields in August and, just last week, hailed a 9.4% uplift in same-store sales during its third quarter. It now holds around 5% of the fiercely competitive and highly fragmented food-to-go market in the UK and boasts a market cap of close to £2bn.
From soggy bottoms to vegan sausage rolls
Yet Greggs wasn’t always such a palatable investment. When Whiteside took the helm back in February 2013, the business, which at that point still extolled itself as ‘the home of fresh baking’, had something of a soggy bottom.
Pre-tax profit had fallen 11.9% to £53.3m in 2012, as like-for-likes dropped 2.7%.
Greggs simply wasn’t moving with the times. It was still focusing predominantly on bakery – an arena in which Whiteside soon realised it was fighting a losing battle with supermarket rivals including Tesco, Sainsbury’s and, increasingly, the discounters.
He shifted Greggs away from selling loaves and take-home cakes and repositioned the business to focus on the lucrative food-to-go market, selling chicken goujons, potato wedges and pizza slices alongside bakery favourites such as steak bakes – and, more recently, the phenomenon that is the vegan sausage roll.
“We’ve spent the last six years at Greggs transforming the business, but that really is only to get to the start line”
Roger Whiteside, chief executive, Greggs
That hasn’t happened overnight. Economics graduate Whiteside has spent the last six years centralising Greggs’ supply chain and IT systems, revamping its proposition, modernising its stores and rethinking where they are located “to be less dependent” on high streets – 38% of its shops are now situated in other locations such as retail parks and travel hubs, a proportion the former M&S and Ocado executive wants to take to 60% within five years.
“We’ve spent the last six years at Greggs transforming the business, but that really is only to get to the start line,” Whiteside insists. “Where we’re going next wouldn’t have been possible on the platform we were on six years ago – a decentralised, traditional bakery model.
“We have centralised Greggs in every aspect, modernised Greggs at the front end through the look and feel of our shops and refocused Greggs around the type of food that we offer. Now we are close to the end of that journey – we’ve probably got another 18 months to run on system and supply chain changes; at that point we need to take that platform and develop a multichannel, seamless business.
“Making all that happen is more exciting than what we’ve done over the last six years because it’s all of that stuff that touches customers.”
A digital bakery
Greggs will need to move quickly in those areas if it is to keep up with the likes of McDonald’s and Pret, both of which now offer home delivery and are making increasing use of touchscreen pads and new payment methods in their stores to blend the physical and digital worlds.
Greggs is already dipping its toe into deliveries through a partnership with Deliveroo – an area that, for Whiteside, represents a “really interesting” avenue of growth. Indeed, Greggs will introduce a £4 evening meal deal, including a hot sandwich, potato wedges and a drink, later this year to try and make inroads into the evening meal market, when 60% of all food deliveries in the UK are made.
But that is just the start of Whiteside’s multichannel blueprint. Greggs stores of the future will be able to “serve multiple queues” Whiteside says as he leans forward in his chair to map out his vision.
“Eventually, there will be one shop, which will have a drive-through lane, a queue of people who have walked in like normal, a queue of people who ordered on their phone and came to collect, a queue of people with helmets on to pick up deliveries for customers. Some of our shops will have all those queues happening at the same time – and some of those I envisage also having table ordering,” he muses.
“With all those queues happening at the same time, you’ve got to think about how you manage them all quickly, friendly, seamlessly. If you can do that, you’ve got a winning formula, but it’s not easy to do.”
Thrill-seeker
Whiteside is a man who likes a challenge. A self-confessed “adrenaline junkie”, the 61-year-old is a keen skier, windsurfer and motorbike racer.
“That really does take your mind off the day job,” Whiteside explains. “When you’re doing adrenaline sports, you haven’t got any room for distraction. When your life depends on it, that’s all you focus on.”
Whiteside should know – participating in such sports has almost cost him his life on more than one occasion. His eyes widen and fixate on the corner of the room momentarily as he recalls one such brush with death while windsurfing in Bournemouth a number of years ago.
“The wind flattened me, so I fell in the water under the sail, and got twisted up in my harness,” he says, tugging on an imaginary rope around his chest as he relives the terrifying moment. “I’ve already taken water in and I’m fighting to get out of this bloody harness. I reached up to get out of the water, ready to gasp for air, but I hit the sail and took in more water. That’s when you start to panic.
“I eventually get the presence of mind to dive down and swim away, but the sail seemed to follow me and you’re still looking to get up for air. Eventually I did, but I very nearly drowned.”
“If you’re not changing, you’re going backwards – you may not know it, but you are, because you’ll be losing ground on those who are changing. There needs to be a constant sense of paranoia around where the consumer is going and where the growth avenues are”
Roger Whiteside, chief executive, Greggs
No doubt to the relief of his wife and two children, Whiteside has put down his surfboard in recent years, preferring to stick to the ski slopes of Canada or the golf course – he plays off a handicap of 14. But he is not yet done riding the wave at Greggs and wants to make a further splash by making the business “bigger and better” through constant innovation, be that in product, new meal deal propositions, or store formats.
“We don’t write it down and say: ‘We will be innovative.’ It doesn’t work like that,” Whiteside says, explaining the culture he has instilled within the business. “In our case, the senior management team engage less in the day-to-day and more in the future – the things that will make a strategic difference to the business rather than spending time chasing operational issues that are short-term.
“That’s a way of keeping busy, but it means you haven’t got your eye on the real ball, which is looking at where the consumer is going and how the business needs to change over time.
“If you’re not changing, you’re going backwards – you may not know it, but you are, because you’ll be losing ground on those who are changing. There needs to be a constant sense of paranoia around where the consumer is going and where the growth avenues are.”
Raising the dough
The vegan trend has established itself as one of those key areas of growth, as an increasing number of consumers seek plant-based options and supermarket rivals expand their vegan ranges. Only 16% of Greggs customers who purchase the vegan sausage roll are actually vegan, Whiteside reveals – a statistic that illustrates the sheer volume of “flexitarians” that are shopping for meat-free alternatives to improve their diets.
“People are bothered about what they eat, no matter where in society they come from or what lifestyle they lead,” Whiteside says. “So we won’t compromise quality to get the vegan ‘badge’. Only a vegan will compromise eating quality for a vegan choice. If you tried the sausage roll and didn’t like it, you wouldn’t buy it again.
“Vegans might, but flexitarians won’t. That makes the product development hurdle much harder to jump. It took us a couple of years to get to the vegan sausage roll and we are trying to see whether we can offer a vegan choice in every category we sell.”
Expanding its vegan range isn’t the only growth opportunity Greggs has. Analysts at UBS see space for 3,000 Greggs stores in the UK. But Whiteside is cooking up an international expansion plan.
“At some point in the future, do we venture abroad again? We’ve done it before. As a baker, we had a go in Belgium and it didn’t work. We’ve not had a go as a food-on-the-go brand,” Whiteside says.
“At some point, we’ll have to try, we just don’t know when or where, but it’s the logical extension of the strategic thinking. To succeed, the bigger you get, the more growth you need. Can all that growth be provided by your home market? For the foreseeable, certainly, but you need to think about laying down foundations to take you beyond that.”
The prospect of overseas expansion may offer Whiteside some food for thought, but with a multichannel proposition to hone in the UK, Greggs still has plenty on its plate here.
But few would bet against Whiteside’s strategy gobbling up an even greater market share.
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