Greggs has shelved plans to build a £30M frozen food factory, which had previously been hailed as key to expanding its business with supermarkets, as it targets a food to go strategy.
Roger Whiteside, boss of the high street bakery chain, confirmed the move yesterday (August 6) in a conference call for analysts and the media covering interim results for the 26 weeks to June 30.
Planners had previously estimated the unit, scheduled to be built in Hinckley, Leicestershire, and the firm’s second frozen food facility, would create up to 300 new jobs .
“We managed to contain the costs to just about £0.5M, as we had made no physical commitment beyond paper planning,” Whiteside told FoodManufacture.co.uk.
When plans were first announced, one analyst said the frozen savouries site would give Greggs the capacity to take packaged frozen food distribution to a wider domestic retail and export market.
But Whiteside did say yesterday it was still looking to develop its frozen food distribution base to provide more supply flexibility for its stores.
He said Greggs was also investing £25M in systems and processes in the next five years and prioritising a food to go offering to tackle declining market share, profits and bread sales.
More than 70% of Greggs’ business was now derived from sales of food to go products, with bread, which once accounted for 50% of sales, “now less than 10%”, he explained.
The retailer was introducing a new pizza range to stores where relevant, and innovating in hot pies, slices and pasties, he said.
“We’re improving the quality of fillings and developing recipes. And there’s more to come.” Sandwiches were another core category.
Overhauling traditional categories
The retailer was overhauling traditional categories in response to consumer demand, with cakes first to get the treatment, added Whiteside. “We have introduced newer, more contemporary products.”
The rate of new store openings was slowing. But Greggs was making strong progress on store refits, said Whiteside, with many showcasing a single bakery and food to go concept, where before these were separate formats. “Now we’re developing just one, selling less of the traditional bakery categories.
“This is driving double-digit growth in the shops we have completed … If we’re to grow in food we need to stop competing in two camps.” Some shops might have to be relocated to align them with customer demand, he added.
The company had seen double-digit growth in refitted stores, he said.
Greggs reported it was also seeking to integrate its Moments coffee shop offering, currently in six dedicated stores, into its main estate and fit chairs in outlets where appropriate.
‘More than able to compete’
When challenged on how Greggs planned to compete with other high street coffee chains such as Starbucks, Whiteside told FoodManufacture.co.uk: “We are 1,700 shops, established for over 70 years. We are more than able to compete with other brands.”
First half total sales had risen 3.4% to £362M compared to the same period in 2012, Greggs reported. That was driven by new shop openings and business-to-business wholesale activities with discount frozen food retailer Iceland Foods, said Whiteside.
In terms of trading, first half like-for-like sales declined 2.9%. Profits in the period slumped by £4.6M, from £16M to £11.4M, with Whiteside claiming Greggs’ vertically integrated business model had contributed to the decline.