Is 'food on the go' the answer to melting profits at Greggs?
Greggs looks set to change its approach to the high street in order to win more customers.
The heatwave may have provided the welcome boost that many retailers were praying for, but the same cannot be said of bakery chain Greggs, where profits dropped by £4.6 million and like-for-like sales slid by 2.9% in the first half of 2013.
And with company shares falling by 9% amid predictions that annual profits will be £3 million lower than expected, Greggs' chief executive Roger Whiteside explained that the baker is set for a change of direction in an effort to improve business.
Mr Whiteside hinted that the firm will start to apply a strong focus to the 'food on the go' market - worth £6 billion - as it attempts to regain lost ground on high street rivals. But what does this mean for the current setup and is the chain set for an entire facelift?
Back in 1973, sales of bread and rolls made up 55% of Greggs' trade. These days that's down to 6%, while sandwiches, savouries and drinks now account for 80% of sales. The shift is obvious, and it seems the company is ready to embrace it.
While the squeeze on profits means that expansion is unlikely, the aim is to reposition Greggs on the high street and abandon the old image of local baker. When new stores are eventually opened, they will be concentrated near offices, travel hubs and motorway service stations in a bid to grab passing customers.
Part of the move will see the company give up on its Greggs Moment trial - a series of coffee shops designed to extend the scope of the brand, which has proved to be an expensive failure.
Ultimately, the idea is to expand Greggs' offerings with a view to attracting a wider range of consumers. Stores will be open later to benefit from afternoon footfall, and staff will be brought in earlier to make bigger stockpiles of fresh food.
This all seems well and good - the chain needs to enhance its presence in certain locations, and switching its stock to meet demand is a logical decision that any business owner would make.
Yet despite the strength of the idea, the challenge lies in competing with names that are already well-established in this area of the market. Greggs wants to introduce seated areas to change the face of its stores, but this is something that companies like Pret A Manger have already got down to a tee. Branching out to coffee is a good idea, but will the product be strong enough to rival its counterparts?
These questions all need to be considered if the business is to see a notable turnaround in its fortunes, but there's more to take into account - namely that the rising popularity of home baking inevitably compromises the extent to which people rely on Greggs.
A baking revolution?
If there's anything that the Great British Bake Off has taught us, it's that turning on the oven and doing things yourself is making a comeback. Just ask The Apprentice runner-up Luisa Zissman, who very nearly won the latest series on the back of building her successful cupcake business.
The trend is a growing one, and Manchester supplier 151 Products recently revealed its sales of home bakeware items have doubled this year as more discount retailers look to stock such goods.
While this may not put a huge dent in the Greggs customer base, the company's decision to turn away from bakery and towards deli could prove well-timed given what seems to be the increasing popularity of DIY baking.
Whatever happens to Greggs' profits in the coming months, the example being set is a good one for all businesses: if things aren't working, find a way to change them sooner rather than later - but make sure you take enough time to get it right.
Dan O’Sullivan is Make It Cheaper's Web Content Manager, which means much of his time is dedicated to ensuring we have plenty of online material to help business owners understand the energy, insurance and telecoms industries. With years of experience working alongside SMEs, Dan is committed to making life as easy as possible for smaller firms. You can email Dan at email@example.com