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Greggs still on a roll?

Daniel Lane

Daniel Lane - Fidelity Personal Investing

I had my first vegan steak bake at the weekend. And you know what, I’d have another. It seems I’m not the only one happy with my meat-free pastries either, looking at this morning’s update from high street bakery Greggs.

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The chain reported a 13.5% growth in yearly total sales, with like-for-like sales up 9.2% among company-managed stores, and said it expects full year profits to be “slightly higher” than anticipated when it reports in March.

The growth comes on the back of greater attention to the firm’s promotional propositions like lunchtime deals as well as their widening vegan-friendly range.

And with potential cost inflation ahead, particularly on pork products, according to chief executive Roger Whiteside, being a key name in the move towards vegan alternatives might be what the firm needs to continue the strong sales growth it has seen over the past year.

Greggs isn’t the only grab-and-go retailer to take note of the rise in demand for meat-free products but it is the most notable to adapt its range successfully, and not alienate either omnivores or herbivores. As Burger King found out this week with their meat-free (but not vegan) burger, it shouldn’t be underestimated how tricky it is to navigate satisfying changing attitudes. Do it badly or get it wrong and you’re pandering or chasing the trend, go too far and you’re virtue signalling.

But such is the current success at Greggs that management have taken the opportunity to reward staff with a special £7m bonus, meaning each of the chain’s 25,000 employees will get a new year boost to the tune of £280 this month.

New year, new me?

With around 300,000 pledges to take part in Veganuary this year, according to the Vegan Society, shareholders will be hopeful the company grows its popularity among those living even a short-term plant-based lifestyle.

Shares boomed during the summer after the launch of the vegan sausage roll but fell back on worries that the to-go bakery still has the capacity to follow the wider retail sector woes. However, November’s upward revision to earnings brought life back into the share price coming into 2020.

The laws of capitalism tell us the firm’s 2019 success should be competed away as other market entrants look to get in on the act but with a growing product line, including my meat-free steak bake, the company is beginning to carve itself a niche, despite whomever comes along with the next big thing.

As the appetite for a more sustainable diet grows (the Golden Globes served an entirely plant-based meal on Sunday) companies will need to adapt their own environmental, social and governance (ESG) standards to make sure they stay relevant and maintain the sustainability of their earnings.

Changing demographics and greater acknowledgement of ESG standards are two topics to feature in our 2020 outlook, produced by investment director Tom Stevenson. If you want to find out Tom’s thoughts on the year ahead, you can download the latest report now.

Important information: The value of investments and the income from them can go down as well as up, so you may get back less than you invest. Investors should note that the views expressed may no longer be current and may have already been acted upon. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.

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