Greggs PLC

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Greggs PLC

Fernwood House, Clayton Road, Jesmond
Newcastle upon Tyne NE2 1TL
United Kingdom
Telephone: (44) 191 281 7721
Fax: (44) 191 281 3033
Web site: http://www.greggs.co.uk

Public Company
Incorporated: 1984
Employees: 17,900
Sales: £456.97 million (2003)
Stock Exchanges: London
Ticker Symbol: GRG
NAIC: 311812 Commercial Bakeries; 311811 Retail Bakeries

Greggs PLC is the operator of the largest bakery chain in the United Kingdom, specializing in sandwiches, savories, and other bakery-related products. Greggs' stores operate under two names, Greggs, which focus on takeaway sales, and Bakers Oven, which offer in-store dining. The company's Bakers Oven units feature in-store bakeries. The Greggs units rely on large regional bakeries that serve clusters of retail outlets. The company's stores are located throughout the United Kingdom. Greggs also operates two stores in Belgium, units that represent the beginning of the company's expansion campaign into mainland Europe.

Origins

For the first three decades of its existence, Greggs was a small, local business, never displaying any sign that it later would become the largest chain of its kind in the United Kingdom. The business was founded by John Gregg during the 1930s, when he opened a small bakery in the Tyne suburb of Newcastle, England. There the business stood, mostly unchanged for the next 30 years, as John Gregg served nearby residents his selection of breads, rolls, cakes, and related items. Greggs did not begin to assume the stature of an industry giant until John Gregg died unexpectedly in 1964. His son, Ian Gregg, who had planned a career in law, was forced to shelve his professional aspirations and take over the family business. Ironically, it was its founder's death that gave Greggs new life.

Ian Gregg, who served as Greggs' chairman into the 21st century, took to his new career with relish. Instead of serving as a mere caretaker of the small bakery and its shop, Ian Gregg perceived the modest business as the beginning of a much larger corporation. He began expanding his father's company in the region surrounding Newcastle, establishing the company's model of expansion not long after his father's death. Although the property he inherited consisted of a shop with a bakery in the rear, Ian Gregg decided to separate the two functions, making production and retail sales geographically distinct operations. He established additional stores in clusters whose breads, rolls, and other items were supplied by a single, central bakery. The mode of expansion gave Greggs the divisional structure that later defined the company, with each wave of expansion adding another regional division to the company's operations. More important at the time of its creation, Ian Gregg's methodology also enabled the company to achieve production, managerial, and financial efficiencies, efficiencies that would increase as the size of Greggs increased.

By the beginning of the 1970s, Ian Gregg was ready to expand Greggs beyond northeastern England. He expanded outside the northeast by acquiring established, regional bakery chains, first moving to the north before expanding to the south. Greggs established a presence in Glasgow, Scotland, in 1972 and acquired properties in Leeds in 1974 and in Manchester two years later. The addition of these territories gave Greggs four regional divisions, the structure of the company when it took its next evolutionary leap in 1984.

In 1984, Greggs hired a new managing director, Mike Darrington, who presided over the company's day-to-day operation into the 21st century. He took the helm of a chain composed of 261 shops, the result of Ian Gregg's work during the previous two decades. With Darrington in charge, the company prepared for its next major surge in growth, an expansion to be funded by its debut on the London Stock Exchange. In 1984, the £37-million-in-sales Greggs completed its initial public offering (IPO) of stock, finding a wealth of investors willing to pay 135 pence per share for a stake in the company's future.

With the proceeds raised from its IPO, Greggs pressed ahead with its expansion plans, growing by internal means and by acquiring other bakery outlets. The company established several new regional operations in the years immediately following its IPO, forming a division in Birmingham in 1984, in South Wales in 1985, and in north London in 1986.

Acquiring Bakers Oven in 1994

A decade after its IPO, Greggs stood as a towering chain, with the creation of new divisions spawning clusters of new shops. By 1994—a significant year in the company's history—Greggs consisted of more than 500 stores operating in seven regional divisions. The stature of the company at this point was about to increase substantially, providing a fitting tribute to the company's tenth year as a publicly traded concern. In mid-1994, Greggs acquired the retail baking interests belonging to Allied Bakeries Limited. The transaction nearly doubled the size of the company, adding 424 shops and a new brand to the company's portfolio, Bakers Oven.

The acquisition of Allied Bakeries added a new dimension to Greggs' business strategy, one that contrasted and complemented the company's operations. Unlike the shops operating under the Greggs banner, the Bakers Oven shops featured in-store bakeries. Rather than assimilate the acquired units into the company's network of large central bakeries that served a cluster of retail shops, Darrington and his management team decided to develop Bakers Oven as a separate brand, a decision that opened new markets for the company's expansion. Through Bakers Oven shops and their in-store bakeries, the company was able to establish a presence in markets with lower population densities than the Greggs units demanded. For the Greggs model of a central bakery serving satellite shops to make financial sense, numerous retail outlets needed to be in close proximity to the bakery, which, in turn, required a population big enough to support numerous shops. The Bakers Oven units, in contrast, were self-sufficient thanks to their in-store bakeries and able to survive in sparsely populated regions, markets that Greggs was forced to avoid. Accordingly, once the Bakers Oven chain was added to Greggs' operations, the company began pursuing a two-pronged expansion strategy: building clusters of Greggs shops in large markets and establishing Bakers Oven units in smaller markets.

In the wake of the Allied Bakeries acquisition, Greggs became a chain with two complementary vehicles for growth and two distinct formats. The traditional Greggs shops concentrated on takeaway sales, while the Bakers Oven shops offered seating to its customers, functioning more like restaurants. Not all of the units acquired from Allied Bakeries conformed to Greggs' needs, including more than 90 outlets in south and west London, which were used to form the company's eighth division, Greggs of Twickenham. A ninth division was added when the company completed its next major acquisition, the December 1996 purchase of J.R. Birkett & Sons Ltd., a family-owned baking company. The Birkett division eventually was disbanded when the stores were converted to Greggs units.

By the end of the 1990s, Greggs' revenues eclipsed the £300 million mark for the first time, 15 years after the company generated £37 million in sales. The company's long-range plans included two ambitious goals. By 2010, the Greggs management team hoped to reach £1 billion in sales and at least 1,700 stores. To attain these objectives, much needed to be achieved in the decade ahead. By the end of 1999, the company operated more than 1,000 shops throughout the United Kingdom, realizing the majority of its sales from the 825 Greggs stores in operation.

Greggs in the 21st Century

As the company entered the 21st century, the Greggs units were driving its growth, both in physical and financial terms. The catering market, in which the company's Bakers Oven units operated, was proving to be less vibrant than the takeaway sector. Accordingly, the company focused on improving the performance of its existing Bakers Oven stores rather than expanding the chain. In 2001, Greggs' capital expenditure amounted to £27.4 million, which was used in large part to open additional stores and refurbish existing units. During the year, the company opened 67 new shops and closed 28 shops, giving it 905 Greggs units and 239 Bakers Oven shops. The year-end totals, when compared with the figures for 2000, reflected the company's reliance on the Greggs format to drive its growth. In 2001, the company increased the number of stores operating under the Greggs banner by 47, while the 239 Bakers Oven units in operation at the end of the year represented a loss of eight stores.

The beginning of the new decade marked the end of an era at Greggs, as the company, for the first time in its history, plotted its future course without a Gregg at the helm. After more than 30 years of presiding over the company's fortunes, Ian Gregg announced that he was retiring as chairman of the board. The announcement, made in 2001, led to the appointment of Derek Netherton as chairman designate in March 2002.

Company Perspectives:

We intend to be Europe's finest bakery-related retailer, achieving our ambitious growth targets by attaining world-class standards in everything we do. Our purpose is the growth and development of a thriving business for the benefit and enjoyment of employees, customers and shareholders alike. Our Values—Greggs is a customer-focused business, seeking to provide excellent products and services that deliver enjoyment and value-for-money. We are committed to people development, within a considerate culture that combines autonomy and accountability, and maintains a strong focus on profitability. In all our activities, we aim to achieve excellence through continuous improvement.

With Netherton and Darrington in charge, Greggs pressed ahead with its expansion. During the first half of 2002, the company opened 24 new stores and began to convert 50 Birketts shops in Cumbria, Lancashire, and southern Scotland to Greggs stores. The company also was exploring opportunities to expand into mainland Europe by mid-2002, with Belgium selected as the first target market. "We're hoping to have one store open this year and a couple early next year," Darrington explained in an August 3, 2002 interview with the Express. "We will start driving it about 12 months after that."

Greggs entered mainland Europe in early 2003, when the company opened two stores, one in Antwerp and another in Leuven. After experiencing slow sales at first, the two Belgian stores began to perform well by mid-2003, when the company announced that it intended to open two more Belgian stores within the ensuing six months. By this point, the company also was developing new retail formats designed for nontraditional locations. In July 2003, the first such store opened when an outlet debuted at a gas station near Edinburgh, Scotland. Greggs' property director, in an August 2003 interview with UK Retail Briefing, disclosed other nontraditional settings for company stores, listing "office area, industrial estates, transport hubs, and roadside," as among possible sites for future expansion.

At the beginning of 2004, Darrington celebrated his 20th year as managing director of Greggs. During his tenure, the company store count increased from 261 to more than 1,200, a period that saw annual revenues swell from £37 million to more than £450 million and annual profits increase from £1.7 million to £40.5 million. The company stock, valued at 135 pence per share when Darrington joined the company, was trading at £31.40 at the end of 2003. The growth was impressive, but if the company was going to reach its goal of £1 billion in revenues by 2010, a more remarkable rate of growth needed to be recorded in the years ahead. The foray into mainland Europe and the development of stores in nontraditional locations offered two new avenues of growth. In the future, much would depend on the company's success with these two experimental programs, as Greggs endeavored to become a more diversified retailer and assert its national dominance in new directions.

Principal Subsidiaries

Charles Bragg (Bakers) Limited; Greggs (Leasing) Limited; Thurston Parfitt Limited; Greggs Properties Limited; Olivers (UK) Development Limited.

Key Dates:

1964:: After his father's death, Ian Gregg takes control of his family's small bakery, named Greggs.
1972:: Greggs expands outside northeastern England for the first time, establishing a regional division in Glasgow, Scotland.
1984:: Greggs begins trading on the London Stock Exchange.
1994:: Greggs acquires the retail baking interests of Allied Bakeries Limited, giving the company 424 Bakers Oven shops.
2003:: Greggs opens two stores in Belgium, its first stores outside the United Kingdom.