srcg wake-up: Greggs in line for successful 2009

Monday, 08 December 2008

srcg client director Andy Bolton reviews one of the success stories of British Food To Go retailing and assesses what the future may hold for the famous Northern bakers.

Walking down the high street in Wimbledon today looking for some inspiration for my lunch I decided to treat myself with a Steak Bake and BLT from Greggs (a definite treat bearing in mind my recent Ryvita lunches!)

Having walked past JS, M&S, Starbucks, Café Nero and Subway to sub-consciously arrive at my destination I thought it would be interesting to review Greggs recent performance and explore a potential critical success factor for 2009.

After suffering an ‘extremely poor' summer in line with most other retailers, it would be easy to forget that Greggs offers some very healthy vital statistics; 1,400 stores, 18,000 employees, turnover approaching £600m and pre tax profit of £50 million plus in 2007.

So what is it about Paddy McGuinness' favourite chain that stands them apart from their peers?

1. Scale - no other bakery chain has a national presence
2. Clear proposition - strong baking heritage and reputation
3. Ownership - all stores are fully company owned with none of the usual pitfalls of managing a franchised network
4. Store location and operations - stores are typically located in high footfall areas and can operate from a very small footprint including the back of store baking operations
5. They get the basics right - ranging is simple but effective, availability is always good, store design is clear and replicable and shopper throughput is high during busy periods
6. Local knowledge - their network of ‘local' super-bakeries ensures local products can often be found on the menu

Considering that times are only likely to get tougher on the high street and competition likely to intensify in Food to Go retailing what is the single critical success factor if Greggs is to achieve their corporate mission; ‘to become Europe's finest retail baker'?

The potential for a retailer partnership in 2009 is Greggs biggest opportunity for growth. Looking at the success of the coffee houses in this field over recent years (think Costa coffee at Exxon Mobil, there is even a Costa in my local Garden centre!) and the increasing migration of foodservice brands into the retail arena (Pizza Express in Sainsburys being the obvious one) the opportunity to leverage the Greggs brand is huge.

Subway immediately spring to mind as an example of forming successful foodservice based global retail partnerships - Family Mart in Taiwan, Couche-Tard in Canada and SPAR in Northern Ireland, to name just a few, have all formed alliances with Subway which deliver a win-win for both parties; increased footfall to store for the retailer and increased exposure to the Subway brand for Subway. With recent news that there are now more Subway outlets than McDonalds in the UK, their business model seems to be succeeding.

Knowing that Greggs already serves over 5 million customers a week, increasing their exposure to an additional 12 million customers that use SPAR stores would deliver ground breaking results.

Think of the increased credibility your local SPAR, Londis or Costcutter would get from having a hot food to go range, in store bakery and sandwich offering delivered by Greggs in store. The existing players (typically Cuisine de France or Country Choice) do a reasonable job but do not have the brand strength to deliver consistently on a national scale.

With both convenience retailers and food to go specialists likely to be squeezed further in 2009 a ‘Greggs at _______ (insert retailer name)' offer could go a long way towards safeguarding both businesses.

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