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Artemis ProfitHunt: Team Carpe Diem
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Team Carpe Diem
11.02.20
Our Portfolio
Our Portfolio
Northern Roots...
Gregg's Background
Greggs plc is the largest bakery chain in the United Kingdom. It specialises in savoury products such as bakes, sausage rolls and sandwiches and sweet items including doughnuts and vanilla slices.
It is headquartered in North Tyneside, near Newcastle upon Tyne. It is listed on the London Stock Exchange, and is a constituent of the FTSE 250 Index.
Monopoly of the Baked Goods Industry
The first Greggs was opened in 1951. Growing regionally from its base in Newcastle, in the North East, Greggs began to acquire other regional bakery chains across the rest of the country from the 1970s onwards (Monopoly).
By the 1990s, it was the largest bakery chain in the country after acquiring its major rival, Bakers Oven, in May 1994. In 2017, the chain had 1,764 outlets, including 143 franchised outlets.
Company opened 90 net new shops in 2019.
Gregg's Monopoly
Why Greggs???
Adaptive Management! Recent historic proof include:
In September 2016, in response to rising obesity levels in the United Kingdom, Greggs introduced a range of sourdough pasties which are under four hundred calories. The Balanced Choice Bakes are in Greggs' healthy Balanced Choice range.
Why Greggs?
Decline in Store-Baked Bread Purchases
In November 2015, Greggs decided to discontinue selling bread. The company also mentioned that they were now focusing on "food on the go" products as customer habits were changing.
Rise in Digital Reward Systems
In February 2014, Greggs launched an electronic loyalty scheme app called "Greggs Rewards".
What does this mean for Us and Them??
Particularly in the fast food industry, consumer tastes can change very rapidly and abruptly!
This can mean that a company's sales slump and their share price DROPS!
What it means for us
Despite this, Greggs buck the trend, and instead, rapidly adapt their "product" to suit the consumer's evolving needs ---> Benefiting from from maintained/slightly impacted sales and a rising share price.
General Performance (v.s. FTSE 250)
Market Performance
What's with that Rise?
Greggs launched a vegan sausage roll in January 2019 (with a new wave of Social Media campaigning in November), made with vegan Quorn. Greggs have a partnership with the Quorn company.
Following the release of the vegan sausage roll Greggs had very strong core growth throughout the UK,"paving the way for other fast food chains to add a vegan option to their menus."
It's Rise and Rise...
In January 2020 it was announced that the chain would give 25,000 employees a bonus of up to £300 each (totalling £7m) after the vegan sausage roll boosted sales and profits.
An Excellent Finish...
An Excellent Finish!
Growth continued to be driven by additional customer visits with 'strong' demand across its traditional ranges and the demand for its vegan-friendly sausage roll, the bakery chain said (The Telegraph).
With the success of the Vegan roll, Greggs had added to its vegan-friendly menu with the launch of its 'Vegan Steak Bake' and its first vegan doughnut to finish off the year in style!.
Risky Business!
In general, when choosing to invest in Gregg's, there was no guarantee stock prices would increase, especially due to growing uncertainty and speculation in the Pre and Post Brexit economy - resulting in falls in investment.
It wasn't enough to simply assume the stock would perform well based on popularity of the firm, many other factors needed to be considered in the long term.
'Ceteris Paribus' would not necessarily hold.
Risks
Risks Regarding Raw Materials...
Raw Materials
Political uncertainty (due to 'Brexit') would impact the import of natural resources, essential for food production in general.
This would severely reduce stock prices of Gregg's as many would expect a severe time lag in the procurement of resources such as wheat.
We also import a lot of wheat from the EU and with lingering threats of trade barriers, Gregg's cost of production would increase significantly.
However, mainstream trading with the EU would only be impacted at the end of 2020 so this wasn't as big of an issue as of now.
What this Meant for Us...
What it means for us
BOTH BREXIT RELATED!
1st Arrow = Fears over the initial leave date (31st Oct.)
2nd Arrow = The UK Leaves!
What's Next for Greggs?
However, With their monopoly of the commercial bakery industry and talks of Greggs even becoming a FSTE 100 company, their ability to fend off other fast food competitors appears to be getting stronger by the year and total dominance of this industry is almost certain in the near future.
Greggs' unrivaled ability to quickly adapt to the tastes of it's consumers and it's growing focus on underrepresented consumers (like the Vegans) means that the Bakery would be able to bring its rolls and slices to a wider variety of audiences in the future (thinking international here!).