Greggs to cook up 6000 new jobs in expansion

Oct 21 2009 by Karen Dent, The Journal

GREGGS is planning to spend £50m-£60m annually for the next five years to open at least 600 extra shops and create 6,000 jobs in a major national expansion.

The Newcastle-based retail baker says it will fund its rapid growth by simplifying its supply chain to the tune of £10m a year and through its “ongoing cash generation”.

It expects to open up to 60 new Greggs shops next year and at least 70 a year from 2011 – more than double its usual rate of new openings. Each new shop will cost around £130,000 to open. The ambitious plans are at the root of the chain’s bid to become a national brand. The new shops – many of which will be away from the high street in airports, bus and rail stations, in and retail and industrial parks – will be focused in areas where Greggs has little presence, including the South West, East Midlands and North Wales.

There will be few new high street shops in the North East but the region is likely to benefit as Greggs opens more outlets in trading estates and out-of-town shopping centres.

Chief executive Ken McMeikan said: “There is the slight danger always in the North East we could well start to cannabalise our existing shops. But 50% of the 600 shops will be in the newer areas where customers work and travel.

“We are also replacing our bakery in Gosforth, which is one of our oldest bakeries. There will not be new jobs but it will be modernised, have greater capacity and will be more efficient.”

The Gosforth bakery improvement is part of the plan to boost supply chain efficiencies, which also includes bakery expansions and new facilities in the South.

Mr McMeikan said: “Historically we’ve been investing £30m-£40m in capital expenditure a year. As we increase, it’ll be £50m-£60m. That will be partly down to increasing shop openings and partly investing in our bakeries.”

The group laid the bedrock for the rapid expansion by pulling out of its Belgian business, converting its Bakers Oven shops to Greggs and centralising the way the business is run. It announced details of the plan in a trading update, which revealed a that sales so far this year are up by 3.8% (like for like increased by 0.2%).

The company is also benefiting from lower cost inflation, which is at its weakest for five years, plus a good wheat harvest and lower energy prices.

Mr McMeikan said: “I am pleased with our sales performance against the background of continued tough high street trading conditions.

“We are on the track to deliver our targets for the year, although the final outcome will depend on consumer sentiment and spending over the important Christmas period.”

In August, Greggs announced its profits jumped by 7.3% to £16.5m for the six months to June 28 and sales rose by 4.4% to £312m.