Greggs 'in rude health' as its targets 3,500 shops and new locations

Newcastle bakery favourite Greggs is far from “peak Greggs” with plans to expand into new locations amid its current target of 3,500 stores, a senior director has declared.

The Tyneside food-on-the-go champion currently opens four shops every week, and last month topped annual revenues of more than £2bn for the first time ever, a result which led to it sharing a £20.5m bonus amongst staff. However, analysts noted a slowdown in volume growth since the fourth quarter, with some fearing the popular brand may have already peaked.

Now, CFO Richard Hutton has told how Greggs still has much more to give. He said: “We are a long, long way from peak Greggs I can assure you. Fundamentally it’s the strength of the brand and the under penetration in the market. Greggs is one of the strongest brands not just in the UK but when ranked against international brands as well, and that’s a huge asset.

“It’s in rude health and there’s so much more we can go at, in terms of the penetration across the UK, entering these new locations which are new to us but not new to the market, and also into new food and drink areas. Greggs is always looking to bring good value food and drink to more people. We effectively copy food trends so we never run out of ideas and are always looking for what the next thing is.

"As human beings we always want new, interesting stuff and Greggs is here to make that affordable. We are excited about different times of day, different channels and more interesting food. There is much more great stuff in the pipeline so watch this space.”

Mr Hutton, who also champions Greggs’ community initiatives and is a Trustee of the Greggs Foundation, said four shops every week are opened by the company’s but that it is not in danger of seeing its new shops start to cannibalise old shops.

He said: “The reason we feel confident that is not the case in this next phase is that the areas we are expanding into are locations where we are very under penetrated at the moment. The shop opening pipeline is typically areas which are maybe roadside, retail parks, supermarkets and transport locations – often areas you will access by car rather than by foot, like the traditional estate in towns and cities.

“This is a very different occasion we are targeting, which is not neglecting the legacy estate which we have kept healthy by relocation activity. The growth is coming from a part of the market we are very poorly represented and is attractive in terms of the return profile too. Wrapped together, the Greggs offer, with geographical and location specific penetration opportunities, is very clear.”

His comments came in an interview with Panmure Liberum analyst Ben Hunt, who quizzed the Greggs executive on the firm’s strategies to grow evening trading and deliveries through JustEat and Uber Eats, the strength of Greggs’ balance sheet to withstand any future scenarios similar to Covid, and its recent capital expenditure programs to aid the firm’s expansion to 3,500 shops.

The business initially extended its opening hours across a number of shops two years ago, and it has since flexed evening trading times, while also diversifying to offer new hot food products, including pizzas, chicken goujons and made-to-order food, which have also proved popular at lunchtimes.

Mr Hutton said Greggs will see growth in both evening trade and its deliveries, and while he admitted he was a little disappointed with the initial speed of growth, he said Greggs is now in a phase of steady profitable growth and doesn’t expect it to happen at a rapid pace.

He said: “I do have a lot of faith that Greggs can continue to grow across the day and the one ‘day part’ which is massively under represented is the evening. Because we came from the bakery sector we have been known for initially lunchtime and latterly breakfast trade and have a real strength in those areas.

“But we are hugely under represented in the evening market. As a brand, Greggs has 8% market share in food-to-go and post 4 pm it’s 1.7%. That’s not to say that it can necessarily get to the same level as a whole, but I have to believe it can rise from where it is.