Price rises at Greggs are ‘inescapable’ – but high street favourite is working hard to protect customers as much as it can from inflation, the firm’s boss says.
The Newcastle headquartered business, which now has more than 2,224 shops across the UK, has hailed a strong start to the year, with like-for-like sales rising 27.4% in the first 19 weeks of the year. Total sales in the 19 weeks to May 14 were £495m, up from £378m, and sales of hot food like chicken goujons and potato wedges are proving popular, which bodes well for its plan to have more shops opening later, and more shops also selling hot food.
CEO Roger Whiteside, who steps down from the board at Tuesday’s AGM, said Greggs also has a strong pipeline of openings, having opened 49 new shops since the start of the year, resulting in a portfolio of 2,224 shops in all. Looking ahead, however, he warned of rising cost pressures – but said Greggs is working hard not to pass on all cost increases to customers.
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He said “We moved prices at the beginning of the year and then, when the VAT relief was removed we had to charge VAT again, so that was price movement at that time, and we’re going to have to move prices again very soon. We’re just looking at, selectively, where those prices would move and can safely move them because they are still competitive relative to prices in the market.
“We won’t pass all the inflation on, but when we are forced to put prices up there’s always 5p or 10p typically, and we’ll only do it when the gap between us and our competitors isn’t going to be narrowed by that. It has to be carefully managed. But, it’s inescapable in the current climate. Prices need to move.”
He said the company was monitoring the market very closely, adding: “We monitor the market to see how our competitors are moving in price, and we have views from previous experience in terms of what happens as to demand within Greggs if we move prices on certain products, and we put that all together to make sure if we are moving prices, we do it in a way that has the least possible suppression of demand effect. So when prices go up, we don’t unilaterally move everything. Different things have different levels of competition and sensitivity in demand terms.
“It all depends on how much we think the market will bear. That’s what we’ve always done, and right now it’s a time when then whole market is under pressure for costs which we’re all trying our best to work with.
“Our starting point is we won’t pass it all on to consumers, because we want to protect consumers as much as we can from the impact of inflation. So we look to absorb what we can, which comes at the expense of the shareholder, and we look where we can do things where we reduce cost without impacting the size or the quality of the product. Some of those steps are being forced upon us by the extraordinary conditions.”
Meanwhile, he said the firm - which teamed up with Primark to launch a clothing range earlier this year - is continuing its mission to increase its vegan offering..
He said: “We are on a mission strategically to encourage more people to eat more vegetable content, or plant content in their diet rather than meat, so have vegan options now for most of our catalogue and our bestselling lines and are busy rolling things out like the vegan breakfast. We are still committed to offering choice to vegans and to people wanting to eat meat less, which we think is something we all have to do if we are going to make our contribution to making this planet a safer place.”
Sales levels in larger cities and in office locations continue to lag the rest of the estate but Greggs said transport locations have shown a marked increase in activity in recent weeks.
Mr Whiteside added: “As far as the city and office locations, they’re still not back to normal numbers and we don’t know if they’ll ever get back to normal - they’re about 10% down – because we think there’s going to be more home working compared to pre-pandemic and there’s going to be more online shopping than pre-pandemic.
“On a strategic level we’re not concerned about that - they are not a particularly high percentage of our estate and what we’ve shown during the pandemic is we’ve got shops in all locations and those other locations tend to benefit locally if people aren’t travelling to cities or offices."
