Greggs has announced strong results for FY2016, with like-for-like sales up 4.2% and total sales ahead by 7.0% to £894m. Operating profit grew 8.6% to £78.1m. Here we look at some of the factors driving 2016 growth and the outlook for 2017.
Focus on food-to-go missions grows further
Greggs' transformation from a bakers to a food-to-go specialist is well developed within its proposition. Its range of food-to-go options has been extended over recent years: sandwiches for example are a growing part of the range, while the breadth of snacks and counter based options are increasing as well, including more hot food options. It remains true to its core value positioning however, not least through extensive use of meal deals.
Going more strongly after breakfast
Its £2 meal deal is a key driver for Greggs at breakfast, and CEO Roger Whiteside spoke positively about the growth in its fastest growing daypart. Significantly, breakfast attracts customers on the go, including those on their way to work, reducing its reliance on general shopping footfall. New coffee machines are supporting its increased focus on breakfast, and the coffee range is growing at pace: lattes are now Greggs' number 3 best selling product, and the hot drinks range continues to expand in both coffee and tea.
Driving healthier ranges to extend appeal
Sales of the Balanced Choice range reached £100m last year. Alongside its healthier meal options, which now extend across salads, sandwiches and savoury bakes, Greggs is adding more fresh fruit, freshly prepared yoghurts, fruit and nut snacks and gluten-free products.
Converting systems and supply chain is an ongoing focus
The £100m investment announced in March 2016 is supporting growth in store numbers as well as improved quality and efficiency in manufacturing. At the same time, the app enabled Greggs Rewards scheme is helping to provide new levels of customer insight. Greggs has also been experimenting with delivery - with the longer term target an app based click & collect service.
Expansion will continue
Greggs remains committed to opening new stores, and to build on its total store count of 1,764 at year end. Accelerating the rate of store openings from 2016, Greggs aims to add 100 stores in 2017. The South West and Northern Ireland, where it is currently underrepresented, are the primary areas of focus - though incumbent competition in both markets will provide challenges. More broadly, Greggs did express some caution over the future trading landscape, anticipating food input inflation of 6-7%. Against this backdrop, the realignment of the business will grow in importance, particularly in systems and supply chain as it looks to position itself better to take advantage of food-to-go growth.
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