It seems the nation just can’t get enough of its vegan snacks. That’s the news from high street baker Greggs this morning, as it reported a strong end to 2019 thanks to its meat-free pastries.
The chain saw pre-tax profits for the year, excluding exceptional items, rise by 27% to £114 million with chief executive Roger Whiteside labelling the year “exceptional“.
And performance was in no small part due to the group’s vegan options which now include their sausage roll, steak bake and, more recently, a vegan doughnut.
But, taking the shine off the growth somewhat was a message of caution from Whiteside around the choppy trading conditions 2020 has thrown up already. He said: “We made a very strong start to 2020 in January, but in February saw a significant slowdown in sales growth as a result of the storms that have affected the UK. There is some uncertainty in the outlook, particularly given the potential impact of coronavirus.”
Disruption from stormy weather, which affected production and distribution at one of Greggs’ factories, meant like-for-like sales grew by 7.5% in the nine weeks to the end of February among company-managed stores. This is against a 9.2% reading in the year to the end of December.
As the data from the end of last year feeds through it’s likely we’ll hear similar stories from the UK’s consumer-facing businesses, especially those exposed to logistical disruption from the weather, and those relying on supply chain deliveries from the East.
But, aside from assessing the near-term hit to company accounts, for investors there are a couple of points to make on the back of today‘s update.
The first is about how we see short-term non-market news like the storms and coronavirus.
When we see shares dip on unforeseen news, the immediate reaction can be to decide whether the recovery will be V-shaped and swift, or lasting and damaging. If we don’t see shares bouncing back we can start to panic but it’s worth considering the third and most likely scenario - a measured recovery. Roads becoming accessible again might mean a return to business as usual but that is only the beginning of a firm assessing the impact to the balance sheet. And with the stock market being a forward-looking mechanism, a lot of the time we need to be patient rather than expecting the shares to spring back to where they were.
There is also a broader point here about the adoption of new trends and the way we treat them as they develop. We are hard-wired to be sceptical of novelty and revert to what we know - it keeps us from exposing ourselves to unnecessary risk. But, the danger is that we remove ourselves from the future altogether, through fear or cynicism à la Kodak’s rejection of the move to digital photography.
Be it offering plant-based snacks like Greggs, or recent shifts towards craft beer, online shopping, and even the humble selfie stick, clinging to the familiar can be damaging in the long run.
There is a well-trodden path from eye-rolling cynicism to outright adoption in many of these cases. When enough people do it, a refusal to change puts us in the stubborn bracket, as opposed to worldly wise. Those unwilling to recognise what the likes of a vegan sausage roll means might want to look to Greggs for inspiration. 2020 might have given the group a tough start but a paradigm shift like this must just have the time and the support to overcome these short-term hurdles.
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