Will Greggs remember 2014 as the year it turned its fortunes around? The bakery chain said today its pre-tax profits were up 41.1% to £58.3m in the 53 weeks to January 3rd as its focus on coffee and ‘food-on-the-go’ begins to pay off.
The Newcastle-based business has come a long way since this time last year, when it reported a near 19% profit slump on the back of a 0.8% dip in like-for like (LFL) sales. This year LFL sales were up 4.5% and total sales were up 5.5% to £804.4m. The company will pay a dividend per share of 22p, up 12.8% on last year, which helped push its share price up almost 4% to 905.5p this morning.
Greggs is keen to lay the credit for this success at the door of its decision to take things a bit more upmarket. Coming to the realisation that the public’s taste had evolved beyond steak bakes and cakes, the Newcastle-based chain has begun introducing healthier ranges, fancier sandwiches, salads, soups and barista style coffee in the last couple of years.
This tactic risked alienating its core consumer but it appears to have paid off – Greggs say it’s now the market leader for breakfast food-on-the-go and second for sandwiches, and it’s selling £1m worth of coffee extra week.
Roger Whiteside, who became chief exec in 2013, can’t take all the credit though – he said that ‘improved market conditions’ – higher disposable incomes combined with a lower cost of ingredients – had been a factor.
‘2014 was a year of significant change and an exceptional step up in performance for Greggs as we began to implement our new strategic plan centred on the growing food-on-the-go market,’ he said. ‘We have improved both our food offer and the shop experience for customers.’
Greggs can’t afford to rest on its laurels though. The report itself identifies market saturation as a key risk and the company faces stiff competition from the likes of Pret, Eat and Costa as well as supermarkets, which are also keen to get in on the act. Fresher concepts like healthy Asian-themed chains Itsu and Wasabi could also be a threat if they can generate much traction outside of London. Whiteside will need to balance innovation with the brand's characteristic homeliness if Greggs is to remain relevant.