Greggs still has faith in the high street

by Marcus Leroux - 22/09/2009

"The convenience food group believes in town centre retail, even though many others may have their doubts"

The high street doesn’t have a lot of friends right now — not, at least, friends who are in a position to stem the rush online, out of town or out of business.

But it does have Greggs, the humble high street baker armed with its arsenal of sausage rolls and pastries. Here is a business that believes in the high street, that wants to be a part of it, to be a bigger and more accessible feature in shopping centres up and down the country. If not power to the people, then a pasty, perhaps.

Ken McMeikan, the Scottish former Tesco executive who leads the company, has set a bold target for new store openings, jostling for space with supermarket convenience stores and fast-food giants. The former Royal Navy seaman is in combative mood, quick to make the case for Greggs’ fresh produce — “but that isn’t at the heart of why you don’t have more than one million customers coming through a day. It’s simply that there isn’t a Greggs near you. You can talk about heritage, the freshness, but if there isn’t a Greggs near you, you cannot come in.”

This is leading Greggs into an increasingly congested takeaway food market. “Walking around, you get a feel for who Greggs sits alongside and therefore who we compete with. That’s anywhere there’s food-on-the-go — McDonald’s, KFC, WH Smiths and the supermarkets.


“That’s exciting for Greggs because it gives you the opportunity to go back to the point that we make the products ourselves. We have got a great value perception, so the challenge is to get across how fresh and good-quality [our food is].”

Mr McMeikan plans to add another 600 stores to Greggs’ present 1,400, which would make it one of Britain’s most prolific outlets. Coffee shops, which for much of the past decade have been the principal saviours of decaying high streets, appear to be stagnating — Starbucks is striking a cautious tone in Britain as it retrenches in the United States, while lesser chains, such as Coffee Republic, have fallen into administration.

Looming consolidation among mobile phone operators will bring the closure of their retail branches, another recent arrival to ailing town centres. So the arrival of Greggs may provide a helping hand, not to mention a consoling cheese slice, to hundreds of high streets.

Mr McMeikan is keen to guard against the perils of over-expansion, warning against the reckless target- driven growth that many blame for Starbucks’ troubles in America. “Location, location, location is key. You have got to hold your nerve. It would be easy to expand too fast, because of the number of vacant units out there. But it’s not a race to see who’s got the most shops.”

Yet the expansion will bring Greggs into a collision course with Subway, its American peer, and the supermarkets. Fred DeLuca, the founder and chief executive of Subway, has said that its franchise system meant that the invisible hand of self-interest would take care of location decisions.

Subway also has a target of 2,000 stores in Britain, but that, according to Mr McMeikan, is where the similarity ends. “That’s the sort of comment that somebody would make when they weren’t thinking about the individuals. I think there’s a duty for a company to say we want to open stores that will be successful because by opening stores you’re creating jobs and helping the economy. If you’re looking after your people, they’re looking after the customers. If they’re looking after customers, they’re lookiing after shareholders. I worry about franchisees. The impact could be horrific. If you think about how difficult it’s been to get finance, people are putting their life savings in.”

Greggs, like its food-to-go peers, is also looking increasingly at airports, railway stations and workplaces. It is in discussions with other retailers that would see branches open in larger stores. A friend of the high street he may be, but even Mr McMeikan has cast an eye on less troubled waters.

More Details: http://business.timesonline.co.uk/tol/business/industry_sectors/retailing/article6841778.ece