Drive-thrus, vegan doughnuts and 3,000 shops: Greggs looks to the future

.At the start of 2020, Greggs was very much the darling of the business world.

The Newcastle food company had seen a seven-year programme to transform its business paying off in the form of record results, a special dividend for shareholders and a one-off payment for its 25,000 staff. A long-held target was reached as the company’s 2,000th store opened in South Shields, leading it to raise its sights higher and aim for 3,000. Meanwhile, Greggs’ all-conquering social media presence saw stars lining up to be associated with its coolness.

Fast forward 12 months, and after a year like no other, Greggs was telling a different story. Last week the company reported a £13.5m loss after a year in which it had to make 820 people redundant and saw many of its stores having to shut during local and national lockdowns.

Ahead of those results, a number of analysts had questioned whether there was even an “existential threat’ to Greggs as fewer people work (and get lunch) in city centres. One suggested that customers wouldn’t want to pay for lunch having been making their own for the last year.

But within those results – which contained the company’s first loss in more than 30 years as a listed company, and possibly ever – Greggs was not just bullish for its future but revealed a number of signs that point to its recovery already being in train.

Saying that it will open around 100 stores this year, chief executive Roger Whiteside also outlined how it was planning to serve more food in the evenings and had benefited from having to accelerate digital services such as delivery and click-and-collect.

The pandemic has also offered opportunities. In a week when chocolatiers Thorntons said it would close all its stores – and after the likes of Debenhams and Top Shop also disappeared from the UK High Street – Greggs hoped that lower rents would help it get into areas it has previously not been able to.

Mr Whiteside said: “What Covid has done is open up some areas that we previously found difficult to access.

“Most of the shop opening pipeline is shops that are accessible by car, so we’re talking about retail parks and petrol forecourts and the like, which have been most of what we’ve been opening in recent years.

“On top of that, because Covid has impacted the marketplace more generally, places like central London and mass transport hubs, the availability of property has improved and the rental levels have fallen.

“So we opened a couple of shops even at the end of last year in St Pancras Station. They became available, and even though St Pancras isn’t busy yet, it’s going to be busy when things get back to normal and we want to be ready for that. We’re now looking at half a dozen sites in central London, and we’ve got negotiations going on in other transport hubs that suddenly have become more accessible to us. Those get added to our existing pipeline.”

Greggs started a delivery partnership with Just Eat just before the pandemic, and has seen takeaway sales to become almost 10% of its business in recent weeks. The delivery service also supports Greggs’ long-held desire to take a share of the evening meal market.

“It opens up the evening for us because we close at six o’clock,” Mr Whiteside said. “Two-thirds of demand for delivery is in the evening and we’re not even there, so we’re starting experiments now with opening later so that we can get food to people’s homes when the demand is there. That for us is another growth opportunity.”

If Greggs’ plans to open 100 new shops this year come to fruition, the company estimates it would create around 1,000 jobs – more than it had to cut last year. It would also be able to give more work to existing staff who agreed to reduce hours during the pandemic.

But the location of those stores will provide a clue to where Greggs sees its future.

Few of them are likely to be on the High Street. Instead they will open at retail parks and in petrol stations, meeting Mr Whiteside’s belief that Greggs should be wherever people are, and wherever people are hungry.

“Greggs is a different kind of business to a conventional retail business,” he said. “Most retail businesses rely on customers leaving their home to go to that place because that’s the mission they’re on.

“Greggs does not. Nobody leaves the house to find Greggs, that’s not what they do. They leave the house to go somewhere else and when they get hungry, they look around. If there’s a Greggs there, they might pop in and get a Greggs. We intercept other missions.

“The reasons retailers are struggling is that if people now realise they don’t need to get into the car to find the shop and they can do it online, the trip isn’t made. From our perspective, the risk for us is that, if fewer people are making the trip to another retailer, they might not find themselves next to a Greggs when they get hungry.

“My view is, that’s fine: there might be less footfall for shopping reasons, which we’ve acknowledged for years and years. People will spend less time buying clothes now because they’ll buy it online instead, in which case they’ll have all this time. I don’t think they’ll stay at home. They’re going to go out and do something else and wherever they go, they’ll find a Greggs there. That’s the plan.”

Roger Whiteside, CEO of Greggs
Roger Whiteside, CEO of Greggs

The food on offer in Greggs is also likely to change, if only gradually.

The click-and-collect service, allied with a new app being developed by the company, will allow Greggs to offer sandwiches to order that can be picked up at agreed times. The company is also likely to expand its range of pizzas and is investing in new coffee machines to develop the range of drinks it offers and rival the likes of Costa and Cafe Nero.

Though its food development team was furloughed during the pandemic – halting work on a vegan doughnut – they are now back and working on a number of vegan versions of popular items, following the success of the vegan sausage rolls and steak bakes.

What will remain a constant at Greggs is its community commitment, well known in the North East through its Greggs breakfast clubs in schools and the work of the Greggs Foundation.

Last month the company issued its first sustainability plan with “10 things we’re doing to help make the world a better place by 2025”.

The plan outlines a range of measures to make its operations more environmentally friendly and better for the communities it operates in, including reducing plastic packaging, increasing its healthy food options and having better animal welfare policies.

For Mr Whiteside, the plan built on the foundations of company leaders that came before him.

He said: “Greggs, right from the beginning – from John Gregg to his son Ian Gregg and beyond – has always been a business that sought to be a good corporate citizen and has had activities that support local communities. Trying to make great quality food accessible to everybody, not just to the well-to-do.

“There’s a separate Greggs Foundation that was set up by Ian Gregg 30 years ago. We’re well known among those who know for our support of people in hardship, things like our Greggs breakfast clubs. But we tend not to publicise that because we don’t want it to be misinterpreted, that we’re only doing it for the brand. We’re doing it because we genuinely think it’s the right thing to do.

“Over the years that whole agenda of trying to be a better business has taken on an importance now which is becoming of interest to investors; they’re interested in how your business operates.

“We responded to that by pulling together everything we’ve done to rate and asking what we can do to stretch ourselves further. That led to our sustainability report – we need to tell the world what we’re doing and be held to account for it.”