Greggs is to open a number of shops after 9pm offering evening meal deals as it tries to grab a slice of the takeaway dinner market following its success in attracting breakfast diners.
The initiative was revealed as the UK’s largest bakery chain handed shareholders a £35m special dividend after profits jumped more than 50% to £40.6m in the six months to 29 June, partly thanks to the success of the vegan sausage roll launched in January.
Sales at established stores leapt 10.5% as the chief executive, Roger Whiteside, said the vegan pastry had helped attract new shoppers and change the perception of Greggs from “an old-fashioned bakery from the north” to a “modern food-on-the-go brand”.
Whiteside said Greggs had now overtaken Starbucks to become the UK’s third largest takeaway coffee seller, behind Costa and McDonald’s, as total sales for the chain rose 14.7% to £546m.
One in eight new customers bought a vegan sausage roll, which has overtaken some doughnuts and other pastries to become one of the chain’s bestsellers. Traditional sausage rolls remain the number one item, however.
More vegan products are in development, although Greggs is not revealing details yet. After a small test, Greggs is also planning to open a number of sites across the UK until 9pm offering evening meal deals and hot food. Most stores currently close between 6pm and 7pm.
“We want to see whether or not people will choose Greggs instead of another fast-food outlet, a takeaway or going home and heating up lasagne in the microwave,” Whiteside said.
“We want to try and do the same for evening as we did in breakfast. We weren’t in breakfast a few years ago and now we’re number two [in the takeaway market].”
Shares in Greggs slid more than 5% to £22.56 as the company said it was not upgrading profit guidance for the year, after a series of upgrades. Instead the company is paying out the special dividend of 35p a share on top of an 11.9p interim dividend, which is up 11.2% on a year ago.
The company is also upping investment, bringing forward plans for robot-led automation at its pastry manufacturing site in Balliol Park in Newcastle upon Tyne as well as developing new ideas including evening meals, online ordering for collection and home delivery.
“We want to invest in the exceptional year to provide the basis for long-term growth in the future,” Whiteside said.
But he warned that the current pace of sales growth, partly helped by weather conditions, was unlikely to continue. “You shouldn’t expect more of the same of this type of number when we next update,” he said.
He insisted the company had not reached “peak Greggs” and still had several avenues for growth.
While other high-street operators are closing stores, Greggs is on track to open its 2,000th outlet in the next few weeks as part of plans for 100 new stores this year. Greggs has said it sees potential for 2,500 outlets in the UK.