News that Ken McMeikan had quit as Greggs CEO to move to Brakes was greeted with surprise by the industry and the City alike, resulting in a 5.7% dip in the high street baker’s share price. The first question on everyone’s lips: why would McMeikan want to swap a successful and feted position in retail for the vicissitudes of a wholesaler mired in debt, and heavily dependent on Compass?
McMeikan won’t elaborate beyond referencing his respect for his new employers. “I could not be more impressed with the group’s vision and investment plan,” he said on Monday, before paying tribute to Greggs: “A wonderful company with fantastic people.”
One thing’s for sure: Greggs, whose share price has risen 50% since McMeikan joined in 2008, will feel his departure.
In the past 18 months alone, McMeikan has defeated the government over the so-called pasty tax - and made three major strategic moves.
The new formats, coffee shop ‘Greggs Moment’ and artisan bakery ‘Greggs the Bakery’ are on a roll. And overall, Greggs now totals 1,641 shops - 20% more than it had when McMeikan arrived.
But Greggs is under pressure on the high street, with like-for-like dips of 1.6% in May, 2.3% in August and 2.6% in October. So McMeikan has been steering Greggs away from high street dependency, opening four outlets in Moto service stations, with another 26 on the way and five outlets on industrial estates.
He’s also moved Greggs into wholesale, supplying 11 frozen lines to 750 Iceland stores and the NAAFI. With stellar sales, supermarkets are reportedly keen to tuck in when Iceland’s exclusive deal ends in April. The pies are one of only two new entrants in The Top Products Survey.
“It’s sad he won’t be around to finish what he started,” says Darren Shirley from Shore Capital. “He will be a loss.”
But a new challenge awaits. At Brakes, McMeikan joins a private equity-owned foodservice giant with £900m in debts, though a refinancing deal completed last week eases the pressure. And a five-year plan has been agreed by outgoing CEO Philip Jansen to invest £250m in opening more multi-temperature sites, upgrading its IT infrastructure and product development. “The investment will mean that every order we place will be on one system, arrive in one delivery, and with one point of contact,” says Brakes Group CFO Phil Wieland. “The concept is obvious but achieving it takes time.”
He adds that McMeikan is the right man to deliver the changes Brakes has planned. “Ken is a great implementer. If you look at what he’s achieved at Greggs, Tesco and Sainsbury’s, he’s had a plan and made it happen.”
The scale of the plan should not be underestimated. “That’s a massive change programme to be putting through the business. It really does say their current IT and sheds are not doing a very good job,” says a senior wholesale source.
And will he miss the media and City attention he enjoyed at Greggs? Well, that could help explain the move. Rumours suggest Bain Capital is considering publicly floating the company in as little as 12 months. That would address its debt problem - and McMeikan’s would be a popular face to front an IPO.
“If they are coming to the public market then it’s a really good appointment and I suspect one of the reasons for mutual attraction,” says the source.
That’s after he can finalise a start date (he’s reportedly on a 12-month notice period) and quickly get to grips with a new sector. “The first thing he needs to do is settle quite a lot of customers - some are asking if they really want to be in a business which is so supportive of Compass and they weren’t too happy about losing Aramark,” the source says. “Secondly, whether for an IPO or for the banks, he needs to get EBITDA up, so Brakes will need to continue to put prices up.”