Greggs to ‘reshape’ business to revive sales

Greggs is to switch focus to food-on-the-go and away from its traditional bakery business as well as introduce a more customer-focused marketing strategy after a sharp drop in profits for the first half of the year. 

Greggs is to revamp its stores nationwide to support the expansion of its food-on-the-go offering.

The bakery chain, which has almost 1,700 stores across the UK, posted a 29 per cent year-on-year drop in profit to £11.4m for the first half of 2013. Like-for-like sales over the same period dropped 2.9 per cent year-on-year to £361.7m.

It blamed hot weather for stunting demand of its bakery products, but admitted it had “underperformed” in the food-on-the-go category – which it values at £6bn – as new entrants and existing players expanded their offering. Greggs has developed two separate shop formats in recent years: the ’food-on-the-go’ format and the ‘local bakery’ format. It will now merge the two brands into one through a nationwide revamp of its stores.

It plans to expand its pizza, sandwich and breakfast ranges in a bid to compete more directly with chains such as Pret-a-Manger. Greggs’ fledgling coffee shop chain “Greggs Moments”, which launched in 2011, will also be folded into the new plan for its stores.

The company says the changes will be backed by a brand building strategy focused on “customer engagement”, which includes the launch of its first digital customer loyalty scheme. It will build on the company’s existing loyalty card, which was launched earlier this year to nab customers from food and drink outlet rivals such as Costa and Subway.

Roger Whiteside, chief executive of Greggs, says because it is a “daily-fresh business” it has an advantage over those food-on-the-go brands that need to keep products on the shelves for longer. The strategy aims to extend the brand to as many consumers as possible, he adds.

He adds: “Whilst over many years Greggs has developed a leading position in the bakery market, customer preferences are shifting towards ‘food on the go’. Greggs is a much-loved and trusted brand and we can leverage our heritage in fresh bakery to compete successfully in the food on the go market.

“As a consequence we will spend the next two to three years reshaping the business as we build the platform for the long-term sustainable profit growth for the benefit of shareholders, employees and the wider community.”

The announcement comes a year after the company’s previous chief executive Ken McMeikan revealed plans to expand into overseas markets. It has, however, now decided to back down from the move in favour of focusing on driving domestic growth.

Stewart Baxter, director at shopper marketing firm Mesh Marketing, says the comfort food ranges that served Greggs “so well when times were tough” now look “out of step with 2013’s more confident consumers”.

He adds: “As shoppers’ spending shrank, many found solace in Greggs’ savoury snacks. “Part of Greggs’ success has been its ability to respond to customer feedback and engage with social media. It must do so again, and not allow itself to be blinkered by its former success. Failure to adapt to changing client tastes could leave the shareholders who piled in during the glory days with a very bitter taste in the mouth.”

Greggs marketing strategy in brief

  • The retailer will merge its food-on-the-go and bakery outlets into one single brand.
  • The “Greggs Moments” coffee offering will be integrated into the new store revamp.
  • The “Greggs Rewards” loyalty scheme will be extended to digital platforms.
  • The retailer will dial down activity around its “bake at home” business with Iceland.
  • It has halted plans to grow its international footprint to concentrate on ensuring its domestic survival.