High street baker Greggs has reported a 41% rise in annual profits after coming up with a successful recipe of meal deals, sandwiches and soups.
In the first 12 months of a five-year plan to revamp the Newcastle pasty and sausage roll-maker, profits excluding tax and one-off items climbed to £58.3m, with like-for-like sales up 4.5%.
The company’s new chief executive, Roger Whiteside, is remodelling the company as a coffee shop chain, with renovated stores offering extra seating and healthier products.
It now sells £1m of coffee a week after unveiling a smoother blend a year ago, while offering sandwiches containing fewer than 400 calories and less salt and sugar. Next week it is launching an extended breakfast range with a free-range omelette and porridge.
The baker, which celebrated its 75th anniversary last year, has been closing shops on high streets and opening new outlets at motorway service stations, along with three in Jersey and one on an Isle of Wight ferry. It is also targeting office and leisure and retail parks, Whiteside said.
Greggs, which has 1,650 stores, is increasing the number of new openings this year to 80 to 100, as it closes in on a goal of more than 2,000 outlets. Opening hours have been extended to catch people on their way into work and heading home.
Falling food prices are boosting disposable income and benefiting the company, Whiteside said. “Deflation in the grocery market is putting more pounds in people’s pockets … They are more likely to pop into Greggs and grab food on the go.”
He said he was not too worried about the uncertain outcome of the general election in May, but added: “We are keeping an eye on it. Consumer confidence is a fragile thing.”
The £6bn food-to-go market in the UK is becoming fiercely competitive thanks to the expansion of meal deals offered by the supermarkets, and growing competition from sandwich shops Eat and Pret a Manger, coffee outlets Costa and Starbucks and fast-food chains McDonald’s and Subway.
George Scott, a senior consultant at retail research firm Conlumino, said: “Greggs has been savvy to develop a well-rounded point of difference within this tough market. Its bakery heritage around its pies and pasties still gives it a unique draw, while investment in new products has helped broaden its appeal.
“Importantly for a traditional value player, Greggs continues to focus on remaining competitive on price. Its £2 breakfast meal deal matches that of rival Subway and its £3 sandwich deal rivals that of Tesco and Sainsbury’s.”