Greggs has increased the amount it charges for some of its items, including an extra 5p on sausage rolls and their vegan equivalent, despite the bakery chain having said earlier this year it had no plans to increase prices.
Roisin Currie, chief executive of the Newcastle-based group, said it had increased prices on a small number of products, including cheese sandwiches, in recent weeks as it continued to come under pressure from a growing wage bill.
She said Greggs had held off on other goods – such as breakfast and lunch meal deals – even though cost inflation remained at 4% to 5%. “The main driver of that is wages,” Currie said. “We put through a wage rise in January.”
She said Greggs had “no price increases on the cards currently” as it competes with other fast food chains, including McDonald’s, for a share of the breakfast and dinner markets.
Greggs said in March that it had overtaken the US-owned burger chain to become the UK’s most popular breakfast spot. In the same update, Currie had said the chain had “no plans for further price rises” on top of December’s increases of between 5p and 10p on some items.
McDonald’s said on Monday that its global sales had fallen for the first time in nearly four years in the second quarter as inflation-weary consumers skipped eating out or chose cheaper options.
Currie said Greggs had benefited during the cost of living crunch as consumers sought out low-cost options for eating on the go.
However, the price rises at Greggs reflect stubborn levels of inflation in the UK on food as some commodities continue to increase in price and wage rises add to costs.
Shares in Greggs rose nearly 5% on Tuesday as the group reported a 16% rise in underlying first-half profits to £74m, 5% better than expected. Sales rose nearly 14% to £961m.
Clive Black, a retail analyst at Shore Capital, said he expected some “modest upgrades” in profit expectations, although Greggs said its hopes for the full year remained the same.
Currie said sales growth had been driven by new store openings and relocations as well as new products, including pizza box deals and iced drinks such as its mango and strawberry cooler and the strawberries and cream refresher.
after newsletter promotion
She said the sporting summer, including the Euro 2024 men’s football tournament and the Olympics, had helped increase digital engagement and home delivery as fans bought snacks to accompany their home viewing. Delivery now makes up almost 7% of Greggs’s sales compared with 5.3% a year ago.
The group opened a net 51 stores during the first half and it plans up to 160 during the next six months. Currie said most of these would be in locations such as railway stations, airports and retail parks, where there was an opportunity to open in the evening and further expand the group’s share of the dinner market.
“The evening is growing faster than the average [store sales],” she said “We are very focused on it and believe that long term it will be a very profitable part of the business.”
She said trading in the evening was not only important for walk-in sales but also for delivery.
