Business Growth - How small businesses can be more Greggs
Karen Cresswell, CFA, CMktr, FCIM, MBA
Business Coaching, Leadership Consulting, Change Management, Strategist
Greggs recent H1 results once again beat expectations for both revenue and profit. The group is growing strongly and sustainably within a highly competitive industry. Recent growth drivers have been an increase in the number of shops, higher sales in the evening and continuing menu development.
I have followed Greggs for over 12 years both as an investor and a marketer. (I worked as a fund manager for over 12 years and am a Chartered Financial Analyst and a Chartered Marketer). My early analysis back in 2012 looked at their history, management, financial trends and position within the industry. I was impressed with their brand building and transformation from a bakery to a food-on-the-go retailer. However, what really stood out was their early commitment to their staff and the local community. Greggs was a pioneer in providing help for the elderly, breakfasts for school children and support to charities.
Why do Greggs’ sales regularly outperform their competitors?
Greggs have their finger on the pulse of demographic and social change.
Previous growth in shops has concentrated on high street shoppers and commuters and this has served Greggs well increasing their sales and market share. With this rate of growth starting to ease, their aim now is to grow the number of shops in travel locations like airports and train stations, tapping into the increase in air and rail travel. *
The group identified the increased demand for food-to-go after work and now almost half of their shops serve food until 7pm or later.
They are onboard with consumer trends and continually develop their menu to supply the tastes and flavours that shoppers prefer.
How do Greggs generate sustainable profit?
The group looks ahead and negotiates forward prices for its three main production cost areas: food, packaging and energy. Controlling costs enables them to offer customers value.
What can small businesses learn from Greggs?
Greggs understand the wider business environment, they anticipate changes, take advantage of opportunities and move quickly to lessen the impact of threats.
Every business owner of a small or medium sized company can use analysis to help them think externally and strategically so that they too can identify opportunities and try to avoid threats.
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One helpful and easy to use tool for analysis is PESTLE. This looks at the key external factors (Political, Economic, Sociological, Technological, Legal and Environmental) that influence a business. It can be used in a range of different scenarios and?will work for any size of business.
Looking at Greggs you can see that they have identified and acted on Sociological changes – one of these being that people are working late, are perhaps too tired to cook, and require food-on-the-go with no hassle. ?By staying open until 7pm or later they are meeting their customers’ needs.
Greggs have also understood how the Economy and buyer behaviour is changing – GDP growth, although not exciting, has been better than expected and inflation has fallen back to the Bank of England’s 2% target inflation**. People are still cautious and looking for value but are spending on low-cost areas as treats. e.g. sweet desserts and coffee. *** Greggs opened it’s first store selling coffee in 2011 in its home town of Newcastle and then quickly grew and expanded. Despite many stores being next to a Costa, or other coffee shops, it proved exceptionally popular due to its great value and being available alongside its food-on-the-go offerings. ?With the number of stores continuing to increase and provide what customers want, coffee contributes to Greggs remaining on a growth trajectory.
How can you use PESTLE analysis to improve results in your own business?
??????? i.??????????? Keep current with economic and political trends. You don’t need to be an economist, but you do need to know which areas are seeing growth so that you can identify opportunities (and vice versa). ?
????? ii.??????????? Listen to a mix of experts and get your data from a variety of sources.
?? iii.??????????? Remember that change is constant. Data needs to be updated regularly.
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As an owner of a small business, you can use the same tools as a large corporate like Greggs to help you understand the position and potential of your business in the market. This will help you increase your chances of building sustainable revenue and profit. Then, like Greggs, you will be in a stronger position to benefit your staff, your customers and the wider community. ?Let’s Be More Greggs!
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*(A total of 1.61 billion journeys were made by rail passengers in Great Britain in the latest year (1 April 2023 to 31 March 2024). This is a 16% increase on the previous year, reference https://dataportal.orr.gov.uk/publication-dates-for-statistics.
(IATA predicts The IATA predicts that the number of passengers traveling by?air?will reach 4.7 billion in 2024, a jump from the 4.5 billion passengers who travelled in 2019.)
** The average forecast of GDP growth for 2024 has been raised from 0.4% at the beginning of this year to?0.9%, with inflation falling back to its 2% target. Economic growth so far in 2024 has been better than expected, while inflation has fallen back to the Bank of England's 2% target.30 Jul 2024. (Reference: https://commonslibrary.parliament.uk/economic-update-a-better-short-term-outlook-for-2024)