Beloved for its cheap sausage rolls and steak bakes, Newcastle-based Greggs has been a staple on the British high street for years. Yet, at the turn of the decade, this established position looked incredibly shaky.
In the year ending 29 December 2012, Greggs saw pre-tax profits fall 2.2% to £51.9m as it blamed wet weather – much like it had throughout the year’s consecutive quarterly sales declines – for the slump. Greggs was called “lacklustre” by some retail analysts, who suggested it was struggling to resonate with British consumers who’d rather spend their cash at coffee shops such as Costa and Starbucks, both of which managed to do the opposite to Greggs and continue to grow throughout the recession.
Moving to food-on-the-go
Step forward Roger Whiteside. Joining as CEO in February 2013, having already served as a non-executive director on the Greggs board since 2008, the veteran retail man, and former Marks & Spencer and Ocado employee, quickly hit the reset button.
He decided that Greggs, which had its roots in being a bakery chain, would immediately focus on the food-on-the-go market. This plan involved closing 79 in-store bakeries, cutting over 400 jobs and completely updating its supply chain in the process. The strategy also involved refreshing the Greggs brand and using marketing to position itself more as an alternative to McDonald’s and Starbucks than your local bakery.
“I could see how good a business Greggs was but I could also see it needed to make some important decisions about the future,” recalls Whiteside of the brand he inherited.
“We were wrestling with customers who didn’t have as much money in their pockets due to the 2008 recession and the supermarkets who had ruined our position as a baker. There’s hardly any butchers, bakers or greengrocers anymore and that’s because of the supermarkets. I looked at our shops and thought why are we baking bread and why do our shops look like bakeries?
“People were sceptical and said we would lose our heritage if we changed [from a baker], but we could see from consumer insight that over 80% of visits were for food-on-the-go. It wasn’t as if we had to convert our customers, we just had to do a better job of serving them.”
Implementing these changes was a delicate process and the direct aftermath wasn’t pretty. In fact, for the financial year ending 29 December 2013, Greggs saw pre-tax profits fall a whopping 37% to £33.2m and shares drop by up to 10% as Whiteside began to implement his plan to modernise stores, close loss-making shops and convert the business into a food-on-the-go brand.
However, four years on and Greggs looks like a very different business. Over the first half of 2017, its sales grew an impressive 7.3% to £453m. Greggs closed 19 stores during this period but opened 61 new outlets, taking its total to 1,806 shops. And if you exclude the costs of this ongoing expansion plan, its profits actually grew by 1.8% to £27.6m. While analysts were doubting Greggs just four years ago, many are now calling it one of this decade’s greatest retail turnaround stories.
Offering more than sausage rolls
One of the crucial elements behind this turnaround has been providing for different food occasions. “We’ve overhauled our product ranges and have tried to give Brits new reasons to visit beyond the sausage rolls,” explains Whiteside of this process. Its £2 breakfast deal (which involves a hot drink and a snack) has been a key driver of sales over recent years, with early trade during stores’ opening and 9am becoming the fastest growing period of the day.
“Our breakfast menu was just bacon sandwiches before, it was a pork fest, so we extended it into porridges and fruit. We’re now number two in the UK breakfast market and that’s because people can get great breakfast with Greggs without breaking the bank.”
But while investing in breakfast might have been one of Whiteside’s most important changes, the success of its healthy eating range, Balanced Choice, has been the most surprising.
Greggs is not known for its healthy eating credentials. It is more synonymous with sausage rolls and doughnuts than salads, a point hammered home when walking around its Newcastle-based production factory, which appears to have pastry-making machines in every direction, churning out as many as 750,000 sausage rolls in a 24-hour cycle.
Yet, the Balanced Choice range, which includes salads, smoothies and yoghurts, is now Greggs’ fastest growing category. In 2016, sales exceeded £100m and it now accounts for 13% of total sales. So, has this been a difficult transition?
We’ve overhauled our product ranges and tried to give Brits new reasons to visit us beyond the sausage rolls.
Roger Whiteside, Greggs
“It really hasn’t been that difficult,” replies a surprisingly confident Whiteside, who says research groups showed him that everyone from white van drivers to city bankers wanted Greggs to offer more healthy options.
“People love our brand because it’s real, we don’t airbrush the products we advertise in our windows; they look the same when you pick them up. Brits also love the convenience of our locations so if we offer them a more healthy choice and they already have this existing trust for us, why wouldn’t they then choose Greggs for a salad?”
He adds: “We’ve made fantastic progress with Balanced Choice from a standing position in just three years. If you cut me, I’ll bleed M&S [Whiteside was head of M&S food from 1978 to 1999] but I can tell you that its food offer wasn’t always perceived to be as healthy as it is now. When I was first at M&S we had no healthy food options but we listened to customers and invented them. It’s the same process here. There’s a long way to go, but we also don’t want to be prohibitionists either – people need choices.”
Much like discounter brands such as Aldi and Lidl, Whiteside says Greggs has succeeded by tempting more of the price-savvy middle classes over. He explains: “We recently increased our ABC1 penetration by 3% so the middle classes are reconsidering us but there’s definitely more to go in terms of persuading people. The problem is low prices are associated with poor quality so getting people to associate low prices with high quality remains a big challenge”.
Over the coming years, Greggs has an ambitious store expansion plan. Looking at rival Subway, which has 2,500 sites and ambitions to open a further 500 by 2020, Whiteside says it’s “realistic” Greggs can match the 2,500 milestone.
However, he admits that this £100m investment in new stores could also be bad news for independents. “The independent sector represents half of all the UK’s food-on-the-go market but as brands [like Greggs] keep expanding, the reality is people will choose the brands over the local chap who can’t match them for scale, quality or price, and has none of the brand furniture.”
And with Greggs already in so many high street locations, he says this expansion plan will instead target drive-by locations, industrial parks and service stations. Its first drive-through site in Salford has been a “huge success” and “others will follow”, with this move part of a wider plan for Greggs to introduce more hot snacks and bring in more of the evening dinner market.
It will also introduce click and collect, tailored ordering (so consumers can pre-order customised sandwiches) and is strongly considering delivery much like McDonald’s partnership with UberEats. “Does a Greggs customer want someone to deliver food to their door to save them making it? Yes, because convenience is everything,” he adds.
“The question is still how to make money out of it and that’s what we’re trying to work out. If you work with Deliveroo, they charge a commission. There’s also the question of how it impacts customer behaviour. Will delivery cannibalise your shoppers’ time and stop them going to a Greggs shop? If someone can deliver and it isn’t too expensive we can use it.”
How marketing is making a difference
Whiteside has the swagger of a confident man and throughout the interview he tilts back on his chair. While this confidence is probably merited given Greggs’ recent upward trajectory, could prioritising the food-on-the-go market still be a risky move? After all, Greggs isn’t short of competition. He says: “The over-saturation question you ask doesn’t overly concern me. What is clear is customers don’t want to shop at one place so the birds of a feather flocking together approach is the best strategy. From a customer perspective, they want to be within walking distance of all the brands they love.
“And you know what, Greggs trades best when it’s next door to a McDonald’s or across the street from a bank. Ideally, you want to be right in the middle of it all.”
Marketing, he insists, has and will continue to play a huge role in Greggs’ turnaround strategy. It was also one of the first UK brands to introduce a fully digital loyalty rewards app, created by Eagle Eye and launched back in 2014. Last year, Greggs says the loyalty app’s customer numbers increased 225% year on year.
Any CEO worth his salt is driven by paranoia. As far as I’m concerned, they are all out to get me.
And in January, it hired Hannah Squirrell as its first ever customer director. Whiteside hopes Squirrell can boost customer loyalty in more disruptive ways.
“We’ve shown we can be a winning brand in food-on-the-go, we’ve upped the bar and done that. But now we want to be the customer’s favourite. What does that mean? Well, we need help with that and that is why we wanted to bring in a customer director. At the start of every customer journey insight needs to be embedded. We need to take that approach to another level.”
Greggs has no above-the-line strategy and much like more premium rivals such as Pret A Manger prioritises word-of-mouth buzz through tongue-in-cheek social media campaigns such as its recent Greggs diet plan, and in-store posters over TV advertising. “We punch well above our weight given our small spend on digital channels,” explains Whiteside. “Whether we want to go in with a spray and pray TV ad, I don’t know, it’s difficult to imagine. The existing Greggs assets probably provide more OTS [opportunity to see] than a multi-million pound TV campaign.”
One of the biggest brand assets, according to Whiteside, who splits his time between working in London and at the Newcastle HQ, is Greggs’ position outside the London bubble: “Originating outside of London has been helpful to the brand as it helps keep us grounded. The brand in a phrase is all about ‘keeping it real’ and avoiding the traps of corporate jargon. So many of our rivals become too overtly brand – we just want to stay down to earth.”
In four years, Whiteside has helped sales growth return to Greggs. Something that continues to happen despite concerns around Brexit, with Greggs’ low prices clearly resonating with British consumers who are starting to have less and less disposable income. But asked if his job is now complete and whether putting his feet up on the beach might be more tempting, his response is bullish.
“Look, any CEO worth his salt is driven by paranoia. As far as I’m concerned, they are all out to get me!” He pauses, before placing his fists on the table: “The job to grow Greggs is far from over; it is only just beginning.”