Bakery chain Greggs has announced it is forced to increase prices of popular breakfast items due to inflation. The company said it was planning on implementing the changes "soon" with product prices set to increase by up to 10p.
Roger Whiteside, who will step down as Greggs’ chief executive on Tuesday, said in an update to shareholders that the business is in the process of working out its latest potential price increases due to cost inflation.
He said: “At the start of the year we made some increases and then, when the reduced rate of VAT went back to normal, we had to add that back onto prices where we’d been able to pass the reduction to customers during Covid.
“We are now going to have to make some increases again soon. It will be on selected items, but it will be across different areas, so there might be 5p or 10p increases on some products.”
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Like other companies, Greggs has been hit with rising costs from energy to meat and Russia’s war in Ukraine, a big producer of sunflower oil, has forced it to source alternatives.
Greggs customers already struggling with the rising cost of living could see this as further reason to tighten their belts. But one analyst said that some customers might switch from even more expensive rivals.
Ross Hindle, an analyst at Third Bridge, said: “The big unknown is how consumers react to the rising costs and tightening of wallets. It is believed that there is an opportunity for Greggs to gain market share from ‘posh’ coffee shops and more expensive food-to-go operators as Britons cut back on their mealtime and beverage spend.
“However, balancing market share opportunities with margin protection is likely to be a big challenge for Greggs. The group will struggle to increase prices while still maintaining its value-for-money proposition in the market. Savoury and breakfast products are the most likely to be priced higher.”
He added: “80 per cent of Greggs’ range is manufactured in-house, providing some flexibility in how the group navigates inflationary pressure. However, Greggs will still face intense cost headwinds.”
Greggs already increased prices earlier this year following changes to tax and higher costs for energy, food and staff and the firm said in March that it expects more changes over the coming months.
While like-for-like sales at the shops rose by more than 27 per cent in the first 19 weeks of this year, compared to 2021, the company said it was a "flattering" comparison due to the Covid restrictions in place a year ago.
In the 10 weeks to May 14, a period when restrictions were easing in 2021, sales were up nearly 16 per cent. Its shares were trading down 2.8 per cent early on Monday.
“Sales levels in larger cities and in office locations continue to lag the rest of the estate but transport locations have shown a marked increase in activity in recent weeks,” the company said. “Sales of hot food and snacks are showing particularly strong growth, with chicken goujons and potato wedges proving popular. It said expectations for the financial year are unchanged.
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