Source: Greggs

The chain is increasingly targeting travel hubs and roadside locations for new stores

Greggs has begun work to expand its distribution and manufacturing network, as CEO Roisin Currie targets more store openings.

The food-to-go chain is currently redeveloping its distribution centre in Birmingham, while work to extend another at Amesbury is scheduled to begin during the second half of this year. The project is set to be completed by late 2024, and would add capacity for another 300 shops across both sites, Currie said.

In addition, Greggs is set to add a fourth production line at its savoury factory in Longbenton on Tyneside during the fourth quarter of the year. It’s also currently looking for suitable sites to open a national distribution centre, as well as additional manufacturing and frozen storage facilities over the next two to three years.

“It’s all part of delivering capacity for growth because of our belief that we can have significantly more than 3,000 shops in the UK,” Currie said during a call announcing Greggs’ half year financial results this week.

Greggs is currently two-and-a-half years into an ambitious plan to double its turnover to £2.4bn by 2026, with the aim of around half of that figure coming through new store openings. It remains on track to reach its target of 150 new stores by the end of 2023 after opening 94 during the first half of the year. It also closed 44 during that time, as part of the strategy that is increasingly targeting travel, and roadside locations.

While Greggs remains “very focused” on opportunities in the UK, Currie revealed that a “small team” are currently looking into potential international markets, and where there might be opportunities.

“At this point it’s very much around researching the demographics, the size of the market and who else is out there,” she said.

Sales at its 2,378 shops were up 21.5% to £844m, in the 26 weeks to 1 July. Pre-tax profits grew 14.2% to £63.7m, despite a £16.3m writedown due to a Covid-related insurance claim.

Greggs is extending opening hours

Lengthening store opening hours was one of the reasons the company cited for the growth. Evening shop sales contributed 8.3% of all sales at company-managed shops, compared to 6.5% during the first half of 2022 – Greggs’ fastest-growing trading time.

“We’re trying to stretch the opening hours across most of the shops we’ve got, that might be to 6pm, 6:30pm or 7pm,” Currie said. Around 300 of its shops now close at 9pm or later, while a small number of stores, including its new Gatwick Airport store, now open 24 hours.

Currie also reaffirmed plans to open a 24-hour drive-through site by the end of the year.

Customers tended to favour more hot items during the evening, with sales of hot pizza, pizza sharing boxes, chicken goujons and wedges doing “particularly well” Currie explained. To capitalise on the trend, Greggs would extend its hot menu after seeing strong demand for later opening hours, with plans to trial the launch of a hot wrap in the autumn.

Inflation remains

Currie warned that while inflation was “cooling” the chain does not expect it to reverse fully, with the company expecting inflation within its operations to be running at around 9% by the end of the year.

While Greggs had seen falls in ingredients and energy costs, wages remained high following the increase to the national living wage in March, she said, ruling out any immediate price cuts. The company has secured forward cover on its requirements for food, packaging and energy for the next four months.

Currie said there had been a small number of price increases of around 5p to 10p on some lines in June, however, to offset the rises, the company had worked to “protect” the price of some of its meal deals, holding its cold sandwich and a regular hot or cold drink offering at £3.60, for example.

“We are well placed to manage through the remainder of this year and protect our value proposition for our customers,” she added.