A year ago, Greggs launched its vegan sausage roll and jumped on the craze for plant-based food. It was a bold move for a company known to many for its old-fashioned sausage rolls, but it appears to have paid off.
Ned Hammond, an analyst at Berenberg, said the launch produced a “massive brand-awareness spike”.
It helped the Newcastle-based company issue five profit upgrades last year and propelled its shares to a record high of £24.66 in July. The shares dipped in November, but earlier this month, Greggs signalled it had enjoyed a record 2019 and that as a reward it would hand a £7m bonus to staff.
Then last week it moved into home delivery by announcing a tie-up with Just Eat — the latest effort by chief executive Roger Whiteside to transform what was once a staid bakery business.
Nigel Parson, leisure analyst at Canaccord Genuity, said: “This is driven by Whiteside after they took the view that if you are going on a weekly bread shop you’re probably going to buy it at a supermarket. That was historically their custom. That led to a transformation.”
That transformation has been under way for six years or more. Hammond said expanding into coffee — Greggs is now No 3 in the market — and moving into breakfasts, where it is second only to McDonald’s, plus a healthier range of products, also helped.
“The big question is can Greggs sustain this positive performance,” said Parson.
The chain is constantly looking for ways to expand — its latest figures showed 2,050 shops (302 of which are franchised) and it has plans for 100 more this year.
A vegan steak bake and doughnut have already been launched this year and it is trialling late opening in a number of locations.
This signals potential for further momentum. Sales of those vegan products and some of its newer items are still only a small proportion of total sales, which rose 13.5% last year. “If you look at what’s really caused the big jump in sales it’s actually been — albeit some from the vegan versions — a lot of old-school bakery products,” said Hammond.
A year ago, sales broke £1bn for the first time, while profits rose 15% to £82.6m. Profit numbers for 2019 are due in March. Whiteside has pointed to “cost headwinds” in the coming year from the rise in the national living wage and the cost of pork.
While Greggs is not popular everywhere — its only shop in Cornwall has closed — the shares were within a whisker of their record high on Friday, closing at £24.24, valuing the chain at £2.5bn. Hold.
