Greggs' gamble on healthy food and hipsters is starting to look risky

Greggs, the bakery chain synonymous with cheap pasties, sausage rolls, and greasy convenience foods, made a killing from its gamble in turning itself into a healthier food store last year but now it looks like its gamble is looking a lot more risky.

The retailer has been trying to reinvent itself as a “modern, well-invested food-on-the-go retailer” to rival the likes of Pret A Manager.

To do this, it has launched things like salads, no added sugar drinks, and soups. Morning coffees are also one of its fastest-growing products.

It significantly paid off last year but in the group’s latest trading statement for the first 18 weeks of 2016, it showed that sales growth has almost halved year-on-year as like-for-like sales rose 3.7% — down from 6% in the same period last year.

It says, however, that it it is continuing to drive sales growth, and fruit and flatwhites are helping that mission:

The improvements made to our shops and our product range continue to drive growth in sales. Our hot sandwich range and extended breakfast menu have proved particularly popular and the introduction of our flat white coffee is helping to continue our delivery of double-digit growth in sales of hot drinks.

We have extended our fresh fruit offer and have been encouraged by trials of our upgraded range of salads, which are freshly prepared in store and now available nationwide.

All salads meet our Balanced Choice criteria and include some innovative new products such as Teriyaki Chicken Noodle and Falafel with Houmous.

This is a contrast to its results statement for the 52 weeks to January 2, where Greggs said it would hike its dividend by 30% to 28.6p after profits soared by 50%.

This was because total sales rose by 5.2% to £835.7 million and ‘Balanced Choice’ range of healthier options now accounts for 10% of total sales, confirmed the group.

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