Greggs hit by heat, health and high energy prices

By Catherine Boal

- Last updated on GMT

Related tags: Energy, Thermodynamics, Greggs

UK bakery group Greggs has blamed a combination of hot weather,
healthier eating and rising energy costs for a drop in first half
profits.

Profits for the parent company of Bakers Ovens and Greggs bakeries dropped 20 per cent from £15.6m (€23m) to £12.5m (€18.5m)

Consumers worried about obesity concerns appear to be shying away from the pie, pasty and cake maker despite the introduction of wraps, sandwiches, salads and fruit desserts as part of its 'Healthier Options' range.

And the recent heatwave has also made an impression on eating patterns, Greggs' managing director Michael Darrington told Reuters: "As the temperature goes up, people switch from savouries to sandwiches, and then as it gets hotter, people eat less so the sandwiches go down too, wraps seem more resilient."

While sales rose 3.1 per cent to £243m for the half, like for like sales suffered a dip of 0.3 per cent.

The company said: "Our interim results reflect the combination of flat like-for-like sales and substantially increased costs, particularly for energy."

The group warned in March that higher energy prices would mean reduced profits from those reported in 2005.

And, according to last week's report, total energy costs rose to £2.4m (€3.55m) - an increase of 69 per cent.

In an effort to recoup lost sales, the company will embark on a £2.5m (€3.7m) restructuring programme costing 200 jobs.

The group's Northern and Scottish operations which have traditionally fared better than the Southern English outlets will be subjected to an overhaul with 14 shops due to close and the rebranding of 49 Bakers Oven stores to Greggs.

In addition to restructuring, the company will invest in new product development over the coming year.

The group said: "We are seeking to drive turnover growth through new product launches, and are beginning trials of a number of other innovations to extend the reach and appeal of our brands."

Outside of their UK operations, Greggs has expanded into continental Europe with six outlets in Belgium which, according to the company, are performing well with good core volume growth and margins.

Related topics: Ingredients, Health

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