What do Greggs' results tell us about the future of food-to-go?

Date : 16 March 2021

Nicola Knight

Senior Analyst - Food-To -Go

This week leading UK food-to-go specialist Greggs released its annual results for 2020. Despite reporting its first loss in 36 years the tone is optimistic.  So how can Greggs' pandemic experience and plans for the future help predict what will happen to the food-to-go market in the months and years ahead?

Some will exit the pandemic financially fitter than others

Greggs has weathered the pandemic better than many of its competitors.  Total sales fell 30.5% vs last year against our IGD forecast of -47.1% for all foodservice food-to-go.  The forecast falls to -66.8% for the food-to-go specialists sub sector which includes brands such as Greggs, Pret, Subway and Itsu. 

Greggs attributes its resilience to the breadth of its shop estate and customer base with relatively modest exposure to workplaces and public transport. Others more reliant on city centres, transport hubs, office workers and tourists will have seen more significant falls in footfall.

The business has finished the year with net cash in the bank having repaid CCFF (Covid Corporate Financing Facility) loans and refinanced debt.  Smaller or financially weaker food-to-go businesses may not have these options.  As Greggs is ready to accelerate out of the pandemic, its competitors may struggle to keep up.

Property opportunities are there for the taking

Greggs has reactivated its shop opening pipeline demonstrating confidence in the long-term growth of the UK food-to-go market. During 2020 Greggs still managed to grow its estate, opening 28 net new sites to bring the total number to 2,078 stores as at 2 January 2021. This year it plans to add another c100 to this number – exceeding the 97 net new stores opened in 2019.  By 2024 it aims to have c2,500 shops and says there is potential for 3,000 in the UK.

The company believes that ‘opportunities for estate growth appear to be as good, if not better, than they were a year ago’.  The high number of vacant retail sites and reduced rents provide an opportunity for businesses, like Greggs, with money to invest. But fewer of Greggs stores will be on high streets (<50% by 2024 vs 56% in 2020) and they will be spread across a variety of formats tailored around specific services such as click and collect or delivery – a theme picked up in our Format Diversity trend for 2021.

City centres are not dead

Greggs highlighted retail parks easily accessible by car as an area of focus for expansion.  However, CEO Roger Whiteside also commented that even if fewer commuters travel into London once restrictions lift, the city would still be the busiest place in the UK and therefore still a significant opportunity for food-to-go businesses.

"Even if St Pancras train staion only gets back to half as busy as it was, our shop there will still be our busiest and biggest," he said.

Of course, this does not mean that cities like London can immediately sustain the density of food-to-go operators they had before the pandemic.  However, with gaps left by failed businesses and falling rental values opportunities will exist for those in a position to invest.  

Omnichannel is here to stay

Greggs started trialling delivery back in 2017 and announced a nationwide rollout with Just Eat in January 2020, just months before the first lockdown hit the UK.  This meant Greggs could hit the ground running as restrictions drove its customers online and food-to-go delivery boomed. Since then Greggs has rolled out click and collect to its entire estate and delivery (from 600 stores) is contributing an increasing proportion of total sales. Along with retail partnerships (demand for Iceland ‘Bake At Home’ range reached record levels) these channels provide alternative routes to Greggs products. 

Multi-channel activity in food-to-go has accelerated to meet consumer demand during the pandemic.  Not only do customers expect these services to stay but also that they will get slicker.  Operators that can integrate systems and data will gain efficiencies and customer insight to give them a competitive edge over less sophisticated rivals.  Greggs is already planning to leverage its loyalty scheme to open up CRM.

Read more about the future of omnichannel in food-to-go in our report, Food-to-go trends 2021 (non-subscribers can read summary here).

Sustainability is back on the agenda

Last year Greggs was due to launch its vision of how to develop the business in a responsible manner.  However, like many businesses, the challenges of the pandemic took precedence over sustainability ambitions and the project was delayed.

Now Greggs has launched the Greggs Pledge: ten sustainability commitments to continue to develop the business in a responsible manner over the next five years and beyond.  Also this month, Burger King announced its new sustainability charter, ‘Burger King for Good’ and last November McDonald’s revealed its ‘Serving Here’ campaign which includes a commitment to protecting the planet.  

Even before trading has returned to something resembling normality for these businesses, it’s impressive to see sustainability back high on the agenda.  And with COP26 coming to the UK in November the focus on this issue is only likely to grow during the year. What’s also interesting is that all the plans mentioned above include a focus on giving back to communities – perhaps a positive legacy of the pandemic.

Summary of Greggs financial and trading results

Financial summary

  • Total sales for 53 weeks to 2 January 2021 were £811.3m (2019: £1,167.9m)
  • Like-for-like sales in company-managed shops -36.2% vs 2019
  • Progressive recovery in sales levels through second half of year
  • Pre-tax loss £13.7m, including government support for job retention and relief from business rates (2019: £108.3m profit)

Current trading

  • Company-managed shop LfL sales -28.8% year-on-year in the ten weeks to 13 March 2021
  • Outside of Scotland (stores closed to walk-in customers for majority of the period), company-managed shop LfL sales in the rest of the UK estate were -22.4% year-on-year
  • Delivery sales particularly strong, at 9.6% of total company-managed shop sales in the first ten weeks of 2021

"Greggs has made a better-than-expected start to 2021 given the extent of lockdown conditions and is well placed to participate in the recovery from the pandemic. It has a clear strategy to extend its digital capabilities and to grow further in new locations, channels and dayparts.  These opportunities will benefit all of its stakeholders in the years to come.” Roger Whiteside, Chief Executive

Want to know more about the future of food-to-go?

Retail Analysis subscribers can access the following reports:

Key influences shaping the direction of the food-to-go market around the world, this year and beyond.Illustrated with examples of retailers and operators already leading the way in adapting to changes brought about by the COVID-19 pandemic.

Major foodservice operators are starting to roll-out new store concepts, developed for the post-pandemic era. We look at 10 formats and the key themes linking them together.