Greggs: pre-tax profits up 15%; big name coffee shops in its sights
By Jonathan Cooper, managementtoday.co.uk, Thursday, 15 March 2012 10:53AM
Unemployment may be at a 17 year high, but the UK's largest high street bakery chain Greggs is doing its bit to combat the job drought. It's opening a further 90 British outlets in 2012 and preparing to take on Starbuck's, Costa and the like.
The announcement comes after a decent year for the company, even in these tough times. Pre-tax profits are up 15% to £60.5m, although a good chunk of that is down to exceptionals and favourable tweaks to pension rules allowing payments to be linked to CPI rather than RPI inflation. Take that out and the rise is a more modest 1% - still not bad given that Greggs heartland is the hard-hit North East and North West of the country.
The first few weeks of 2012 are looking OK - overall high street footfall dropped 4% in the first 10 weeks of 2012 but Greggs saw their same-store sales drop by only 1.8% so it is doing less badly than most at any rate.
But it’s Greggs' plans to take on the high street coffee giants that will really raise eyebrows. Its new coffee shops are to be branded as Moments stores, and will feature seating and all the usual coffee shop paraphernalia. Greggs board has obviously taken note of the strong performance of the likes of Costa recently and has decided to grab itself a piece of the espresso action.
The first Moments - a 104 seater - opened in Greggs hometown last September and offers a full range of coffees as well as Greggs favourites like the cheese and onion pasty and Superstar doughnut. Three more Moments stores are planned this year followed all being well by a national roll out in due course. CEO Ken McMeikan is enthusiastic, claiming that reactions so far have been very positive.
Derek Netherton, Greggs chairman, was more measured saying: ‘While we expect 2012 to be another year of significant challenge for UK consumers, we believe that we are well placed to deliver further progress.’
Will Greggs cheerfully mass-market brand work in the more status conscious coffee world? We’ll see - but with a sector that’s expected to be worth £7 billion by 2015, and Greggs’ prices some 10% lower than the competition, it’s got to be worth a shot.
This article was first published on managementtoday.co.uk
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