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Greggs profits still on a roll with a boom in its vegan snacks Greggs profits still on a roll with a boom in its vegan snacks
(about 8 hours later)
‘Grab-and-go’ chain announces exceptional year with 27% rise in pre-tax profits ‘Grab-and-go’ chain announces exceptional year with 27% rise in pre-tax profits but warns floods may hit sales
The runaway success of the vegan sausage roll has resulted in bumper annual profits at the UK’s biggest bakery chain Greggs. Greggs made record profits in 2019, the year that it launched its popular vegan sausage roll, but the Newcastle-based company said the storms and flooding that battered Britain in recent weeks have put the brakes on sales.
The vegan sausage roll was launched in early January 2019 to coincide with Veganuary, a movement that encourages people to embrace plant-based diets during January and has been a big bestseller ever since. The bakery chain said the wettest February since records began had caused a “significant” slump in sales. The flooding in south Wales caused the temporary closure of its bakery and distribution centre in Treforest, as well as 40 Welsh stores.
The firm posted a 27% rise in 2019 pre-tax profits excluding one-off charges to £114.2m. Like-for-like sales grew by a record 9.2%. Roger Whiteside, the chief executive, hailed 2019 as an “exceptional year” for Greggs. Greggs makes its vegan doughnuts at Treforest but the production line was damaged by floodwater, taking the treat off the menu for several weeks until it can be repaired. Despite the upheaval, sales at stores open more than a year were up 7.5% in the nine weeks to 29 February 2020.
This year, Greggs launched a vegan steak bake and a vegan doughnut in response to consumer demands for more vegan choice, and the Quorn-filled steak bake has become its second-best-selling vegan item after the vegan roll. The update came as Greggs posted a 27% rise in 2019 pre-tax profits excluding one-off charges to £114.2m. Like-for-like sales grew by a record 9.2%.
Greggs has tapped into the growing popularity of plant-based food. Almost a quarter of all new food products launched in the UK last year were labelled vegan, and the number of Britons who have eaten food containing meat substitutes rose from 50% in 2017 to 65%, according to the market research firm Mintel. Roger Whiteside, Greggs chief executive, said the coronavirus outbreak could hit future sales if lots of people stopped travelling to work.
Greggs’ traditional pork sausage rolls are still one of its best sellers with 2.5m sold every week. “The bit we have no control over is demand,” he said. “If there is some sort of widespread contagion how might that affect the way people behave? We just don’t know that really.”
Greggs is now trading from 2,050 shops, up nearly 100 from the previous year, and is rolling out a delivery service in partnership with Just Eat. The company is considering paying another special dividend and will make an announcement in July. Last year it paid out £35.5m to shareholders via a special dividend. Whiteside has said the company would pay staff who have to self-isolate because of coronavirus. “Our default position is that we pay contract hours. We don’t have any zero-contract hours,” he told the BBC.
Its 25,000 staff were handed a £300 “thank you” bonus each in January, although some workers get to keep just a quarter of the bonus as a result of universal credit deductions. Greggs said it would share a further £12.8m of profits with employees. All staff benefit from the 10% profit share agreement. The amount they receive will depend on how long they have worked for the company and how many hours they work. Greggs has been a rare high street success story due to its changing menu that tapped into the growing popularity of plant-based diets with a vegan range which includes a sausage roll, “steak bake” and doughnut. Despite the shift, its traditional pork sausage rolls are still one of its bestsellers, with 2.5m sold every week.
Whiteside said: ”We made a very strong start to 2020 in January, but in February saw a significant slowdown in sales growth as a result of the storms that have affected the UK. There is some uncertainty in the outlook, particularly given the potential impact of coronavirus.” Greggs is now trading from 2,050 shops, up nearly 100 from the previous year, and is rolling out a delivery service in partnership with Just Eat. The company is considering paying another special dividend and will make an announcement in July. Last year, it paid out £35.5m to shareholders via a special dividend.
The storms in February, which brought strong winds and floods to swathes of Britain, caused some disruption at one of Greggs’ factories. It was the wettest February since records began. Its 25,000 staff were each handed a £300 “thank you” bonus in January, although some workers got to keep just a quarter of the bonus as a result of universal credit deductions. Greggs said it would share a further £12.8m of profits with employees. All staff benefit from the 10% profit-share agreement. The amount they receive will depend on how long they have worked for the company and how many hours they work.
While conditions for UK retailers remain tough amid a shift to online shopping and fragile consumer confidence, the food-on-the-go sector continues to grow. It is estimated to be worth £24bn and grew by 3.7% last year, according to market research firm NPD. While conditions for UK retailers remain tough amid fragile consumer confidence and the shift to online shopping, the food-on-the-go sector continues to grow. It is thought to be worth £24bn and grew by 3.7% last year, according to market research firm NPD.
John Moore, senior investment manager at Brewin Dolphin, said: “The baker has shown that the hype around the vegan steak bake last year was no one-off hit. The dreadful weather impacting on sales in February and potential disruption from coronavirus to come – are reminders that, despite the internal hard work, external factors can heavily influence the business.”