Smell the dough

19/11/2012 - 16:30
Greggs opened in the 1930s, starting predominantly with John Gregg’s delivering yeast on a bike; the first shop followed in 1951, in Gosforth, Newcastle, and the company now has 1,641 outlets. Catherine Chetwynd reports

Greggs is very forward thinking and continues to grow. Do you also remember your roots?

Included in our 1,641 shops is the original one that goes back to 1951. Some doors down from the original site is our new concept shop, branded Greggs the Bakery, where there is a symbolic bike on a wall as a reminder of our roots.

What is the difference between Greggs the Bakery and your traditional high street shops?

Greggs sells classic food on the go, Greggs the Bakery is largely about the range. We have got 75 new products in there, predominantly breads and cakes, and as well as the standard range, it also has new lines like walnut bread, olive breads and a range of artisan breads. Customers go in to buy what they would traditionally have bought from a baker’s and less of the sales will come from sandwiches and savouries, which are in the food on the go. And Greggs Moment has a range which is designed for customers who are more likely to be eating in, they sell many more drinks, coffee and tea, than you would get in either Greggs food on the go or Greggs the Bakery.

If you are selling artisan breads, are you aiming at a different demographic?

It’s quite interesting because the range has been developed based on feedback from our existing customers. They are saying they could go into a supermarket and get more artisan breads, a much broader choice, and therefore they would like to see that offered in a modern-day Greggs. I don’t think this is about targeting a particular audience, I think tastes have changed in the UK and we are trying to have a much broader appeal.

Are you going to continue to roll out the traditional, high street Greggs?

We are, there are still hundreds more shops we could open. We said we could have more than 2,000 shops in the UK and there are still more than 350 to come. When we open them, we decide whether they are a better fit for a food on the go shop, a coffee shop or a local bakery. That would depend largely on geography and location.

The distinction is largely percentage of sales that is going to come from bread and rolls – in a local bakery the percentage of bread, confectionery and cake is much higher than in a conventional food on the go shop.

In the 1970s, around 60% of what we sold was bread and rolls. Today, bread and rolls is around 10%. Where we have innovated is that our bread is still being sold in food on the go but as sandwiches rather than as a loaf of bread.

Over what period will you be rolling out the 350 or so shops?

This year we will open a net 100, last year we opened a net 84 shops; 350 or so shops will probably take another three to four years to open if we keep that up. Net applies because we open more shops than that but we tend to close 20 to 25 shops each year.

In January, you were talking about looking at some new locations like industrial and retail parks, possibly airports. How is that going?

The best example of that is motorway service stations. We opened the first Greggs at Moto’s Lymm Services on the M6 in Cheshire and that got off to such a great start – it exceeded Moto’s and our expectations – that in June we opened at our second at Birch Services [Lancashire], on the M62, and that is also doing well; then at Baldock services (A1) and Cobham services (M25). We will keep moving into areas away from the traditional high street locations and where there is still significant footfall. This year about 40% of our new shops should be in this type of location, business parks, train stations, bus terminals, where people are travelling, at leisure, at work; and we are likely to go for 50% from next year onwards.

Do you have any planned locations for more Moments?

We are going really fast on this. We have opened in Middlesbrough, Stevenage, Staines and our fifth in Metrocentre in Gateshead.

Have they evolved?

We are testing different ideas. Middlesbrough is in a shopping centre, not in a shop unit but in a walkway, it doesn’t have any walls; and the one in Stevenage is all on one floor, whereas the first one, in Northumberland Street [Newcastle], is on two levels. Otherwise, they are largely the same because we want to see whether the original idea works elsewhere but in slightly different locations, to see what that tells us.

Have you got any figures to back up the success of Moment?

No, we are not disclosing any of those yet because they are still part of our trial. Any comments we have so far are more about customer reaction to the range. So, it is interesting that the first one opened on the same street as our busiest Greggs shop in the country and it does not seem to have had any impact on the shop. Customers wanted to sit somewhere and go to Moment to do that. We still have more to learn about the coffee shop experience and we are learning fast.

When you introduce new products, for example, breakfast in the traditional high street Greggs, how do you promote that?

The obvious thing is for us to promote products in our shop windows and in displays within the shop. Increasingly, we will announce something new to our Facebook fans – we have 470,000 – so digital campaigns are becoming increasingly powerful. We would also use things like press – magazine advertising, bus shelters and local radio. TV tends to be quite expensive and we haven’t been using that as much over the last year, we’ve been doing much more targeted local campaigns. With six million customers coming through our doors every week, word of mouth is a very powerful medium for us. And if we can get our 15,000 staff in our shops to try new products, if they make the grade, then they can recommend them to customers. And we do product sampling and tastings to make sure people get an opportunity to taste the new products.

Last year, food inflation was significant. What have you seen this year and have you had to put prices up?

We have seen prices rising, although it was forecast that price inflation would come down. I think it is coming down but it has been slow. It is an industry-wide challenge: we have had quite an increase in a number of products and even some unexpected rises. For example, changes in European legislation meant there was a shortfall in the number of eggs available in the EU and the price rocketed. But as fuel prices start to come down, that will ease some of the inflation we have been experiencing. We continue to do what we have always done, we absorb any price increase for as long as we can but sadly, at times, we have to put it through and we saw that this year; for example, with pork prices, there came a point where we had to put a 1p or 2p increase on the price of sausage rolls and other related products.

There is a huge variety of operators in the grab and go sector, do you think the market is saturated?

I don’t think it is saturated but I do think it is very crowded. I still believe there is growth opportunity because during the recession period, late 2008/2009, the food on the go sector was still growing in terms of shop openings. And some of the larger players, the likes of Costa Coffee, have had quite phenomenal growth, they have been opening at almost double the rate we have. We have also seen the likes of supermarkets moving into convenience and I don’t think that’s any coincidence: anything that bakers sell, the supermarkets are also selling and they obviously see a growth opportunity there, otherwise they wouldn’t be rolling those shops out.

And Subway now has almost as many shops as Greggs. But the area where it is much more challenging is in the bakery retail sector. In the North East, in June, another bakery chain Peters, with 58 shops, went into administration. Over the last four years, we have seen a number of bakery chains fall by the wayside, that’s what is hurting more than anything. We need a vibrant bakery sector because that is where a lot of the innovation comes from, Master Bakers that have been in the industry for 100 years or more. It would be sad if we kept losing more and more of the smaller bakeries.

Which retail company, not necessarily in the grab and go sector, do you most admire and why?

I have to say that I continue to admire a few companies where I have worked: Sainsbury’s, who have continued to perform extremely strongly and again, Tesco, who I worked for, I think there is so much to be admired in what they have done on the global stage, as a British company. Outside companies I have worked for, I have been very impressed over the last four years or so with ASOS, As Seen On Screen: a modern day clothing retailer. Their growth, not just here in the UK but again, internationally, has been exceptional. They have shown such entrepreneurial flair, they have done phenomenally well.

Who owns Greggs?

We are a public limited company, we have a very broad base of shareholders. Our top 10 have one third of the holding, there is no one predominantly large shareholder. We also have a good mix of [investors] who have been shareholders of Greggs for many, many years, if not decades, and we have some who have [invested] over the last few years, including somewhere in the region of 2 to 3 per cent of shares that are owned by Greggs’ past and present employees. Our turnover is £700 million sales, with profits of £53.1 million.

If you wanted to meet someone for tea and cakes in a pleasant environment, other than in Greggs Moment, where would you choose and why?

I love taking people to our bakeries. If they had a great interest in baking, I’d take them to our newest bakery, which we opened in Gosforth last year. There is something very special in that we are not just a retailer, 90 per cent of what we sell we make ourselves and the 10 per cent is largely drinks and crisps. I’d show them our world-leading technology in terms of the new ovens that allow us to bake different products at different temperatures at the same time. We’ve got fantastic inventions – it is a bit like Charlie and the Chocolate factory.

Do you still plan to open a bakery in the south west?

We still have plans for opening near Salisbury, we have already purchased the land. It is just a question of timing, when our current bakery runs out of capacity and we get to a point when can’t support any more new shops, that would be the time to open a bakery for the south west. Originally we said we thought it would be 2012 but it could be 2013 now because we have been able to give the existing bakeries greater capacity.

You have not been able to open up in parts of Devon and Cornwall because your bakeries are too far away. Will a bakery in Salisbury change that?

Yes, absolutely right, for now we couldn’t get into Devon and Cornwall because it’s too far from our existing bakery and even with a Salisbury bakery, which gets us coverage of almost all of the south west, parts of Devon and Cornwall might still be out of range. But we have just opened a micro-bakery in Norwich and this is designed to supply maybe 30 or so shops, giving us the potential to get to parts of the country a central bakery can’t get to because the drive time is too great. We think we can do the areas of Devon and Cornwall that are out of range with a micro-bakery.

How many bakeries do you have?

We are currently running with nine and the tenth will be one in the south west. And last year we introduced a central specialist bakery where all they make is long life confectionary like gingerbread men. When I joined, we had 10 bakeries supplying 1300 or so shops, today we have got nine supplying 1600, and our aim is to get to 10 bakeries supplying more than 2000.

Personal stuff – Family? Children? Animals?

I have five children from age to 13 to 23, three boys and two girls. My eldest son is 23 and is working for P&G as a financial analyst. My eldest daughter is studying at the London College of Fashion and is due to finish in a couple of years’ time. My youngest are probably not at a stage where they are thinking about what they are going to do career-wise. They are very interested in what I do and they love Greggs.

How do you like to spend your spare time?

A lot of my time is spent following whatever the children are doing. I am that classic parent combination of taxi service and spectator at sporting events. My children are very musical and very sporty, so depending on the activity… next week I am supposed to be going to a concert my youngest daughter is performing in; and I quite regularly watch the two younger boys, who are both very accomplished rugby players and have a great love of all sport. I do like to spend time with the family. I also have a great love of running, I did the Great North Run last year; and I enjoy cinema, which is a great thing to do with the family as a Saturday night/Sunday night treat.

I also enjoy cooking. When our operating board has a team development day, we set ourselves a challenge to cook for each other. The last time, we said we’d bake bread at home and bring it into the office. I brought a walnut and apricot bread but the winner that day was our retail director, who made the most delicious bread. He had slight one-upmanship on us all because he’d got up early and made it that morning, so his came in slightly warm and first thing in the morning for breakfast, it was out of this world. It was not surprising we asked him to make it again the second time around.

I am very lucky, I have a wife, Melanie, who is an outstanding cook. While I will do baking that is very functional, I have to give a huge amount of credit to my wife, because she makes the best tasting food out of the pair of us.

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