Greggs enjoys earnings growth
significant portion of UK consumers still find a slot for a good
sandwich bite or cake indulgence to the satisfaction of high street
bakery chain, Greggs.
Through 1242 outlets spread across the UK and expanding into continental Europe, Greggs is set to score its twelfth consecutive revenue driven earnings growth in 2004.
The group shrugged off the endemic bakery market pressures recording 7.5 per cent sales growth to £216 million in the first half of the year. Operating profit and earnings a share went up by 10.6 per cent to £13,1 million and 76,1p respectively.
Credit goes to the constant chopping and changing of the group's portfolio to keep it in line with the increasingly fickle market. Between January and June of 2004, the group closed down 14 shops and opened 25 new ones. More than 1000 of these shops trade under the Greggs brand and the rest are operated by subsidiary brand Bakers Oven.
As the numbers increase the portfolio image is tweaked and turned which seems to have prepared Greggs for the health craze. The group's new sandwich range Lifestyle Choice has been well received by the health conscious consumers.
Product innovation has not been of rocket science caliber. A 50 per cent fat-reduced mayonnaise, on a range of sandwiches, a selection of fillings with no mayonnaise, 5 per cent fat spread and a low fat range containing under 3g of fat per pack.
As a result sandwiches have driven a significant portion of the growth while cakes and other confectionery products recorded modest growth. Bread and rolls are on a steady decline as a proportion of Gregg's total sales.
So it has not all been hunky-dory, bread and rolls have taken a beating. In response, the group has ordered work on its brand seeking to re-emphasise its bakery heritage. The message was carried in point of sale material, in-shop promotions, and a major media campaign that included TV advertising, under the slogan 'It's the way we bake it that makes it'.
The objective is to soften the takeaway orientation of certain outlets and reinforce seating down sales through strong bakery heritage.
Its a relatively new trick of pushing a tired commodity by tying it to an interesting experience.
"The consumer response was encouraging, reflected in an improving like-for-like sales trend in the latter part of the first half," said managing director Michael Darrington.
Darrington's 20 years tenure at the helm of the group has been one defined by expansion. "Over these 20 years we have expanded the business by almost 1000 shops, and increased sales from £37 million to £457 million," said Darrington.
He has been given a long-term goal of establishing annual turnover of £1 billion and 1700 shops by 2010. He might be looking on continental Europe to achieve this goal. Three shops have been launched in Belgium and the fourth one is in the pipeline.
