Greggs reported that sales for the first quarter of the year and up until this point that sale have dropped 4.4%. They are blaming “bad weather, and under pressure consumers” as the cause for the fall in sales.
The bakery is a major feature of high streets in the United Kingdom with an estimated 1,700 stores, and still creating new outlets in order to increase sales. There are two factors which may point that Greggs is only heading down. Firstly, it may be that pasties have become increasingly less popular in a society that is concerned with body image and health. Secondly, the high rent costs of high street property which may no longer balance out with profits made from sales.
The high street has already been struggling this year, but this may the first occasion that a business of this nature may fail to survive. HMV, Jessops, Blockbuster, and Comet to name a few were all involved in sales of a technological nature, whereas Greggs is part of the food market. It is possible that competition from high street competitors such as Subway, and McDonalds are simply taking a greater percentage of customers.
Greggs have reported that they believe the issue is part of the decreased footfall in UK high streets, alongside the issue of competitors.
It is understandable that over the past few years Greggs variable costs have increased as the result of increasing basic food commodity prices. This is forcing them to raise their costs, putting further pressure on consumers. The business has been heavily pursuing deals and promotions in order to revitalise their customer base, but this is so far only proving to be a strain on their already limited profits.
The question is whether or not Greggs will survive the high street squeeze? And what will this mean for competitors in this industry?
I get the feeling that Greggs might die out, not only as a result of the competitive nature of the market, but also as a result of demand for certain foods moving elsewhere. But we will have to wait and see.