Greggs sausage roll and pasty prices set to soar as chain hit by increasing costs

Greggs, the bakery and fast food chain, has warned that rising cost pressures could see the prices of some of its products go up for the second time this year.

The Newcastle-based chain was already forced to raise the price of its sausage rolls by 5p in January as part of a wider increase that saw other products rise by 10p. Now, though, it says “further changes are expected to be necessary” due to the prices of ingredients increasing.

Fears of wheat and sunflower oil shortages, from both Ukraine and Russia, have added to existing inflation, caused by energy price hikes and a return to customer demand following the end of Covid restrictions in the UK.

This, combined with higher staffing rates, effectively means the cost of doing business for Greggs is set to rise by around 6 or 7 per cent going into 2022, it has warned.

The company, best known for its regular and vegan sausage rolls and steak bakes, used the publication of its annual results for 2021 – which showed record profits after losses the previous year due to store closures in the pandemic – to set out its concerns.

Outgoing CEO Roger Whiteside said that while sales growth during the first nine weeks of the year were 3.7 per cent ahead of 2020 levels, the outlook was more challenging. Shares in the company also fell 6 per cent last year.

“Cost pressures are currently more significant than our initial expectations and, as ever, we will work to mitigate the impact of this on customers, however given this dynamic we do not currently expect material profit progression in the year ahead,” he said.

The share price hit came despite Greggs swinging back to a pre-tax profit of nearly £146m in the year to 1 January, from its first-ever loss, of £13.7m, in 2020. The profit is higher than its pre-pandemic profit of £108m in 2019.

In a statement, the business said in the face of possible price hikes, it would try to protect its reputation for being “outstanding value for money”.

And despite rising cost pressures, Greggs plans to open 150 new shops every year, eventually taking the total from 2,181 to 3,000 in the UK. It will also extend late opening to 500 shops this year and home delivery to 300 more outlets, taking the total to 1,300.

Mr Whiteside said the business needs to establish a reputation of being open late before it can realise the full benefits of keeping its doors open until 8pm, rather than the usual 6pm.

Greggs has vowed to share 10 per cent of its profits among staff every year and will distribute more than £16m this time. This means a member of staff who has been at the company for more than six years, and works 20 hours a week, will get £800.

Ross Hindle, an analyst at Third Bridge, told the PA news agency: “Overall, the UK food-to-go market remains depressed, with commuter footfall stubbornly below pre-Covid levels.

“Despite difficult trading conditions, Greggs has been able to punch above its weight thanks to a recipe of competitive pricing, clever location strategy, and their JustEat delivery partnership ... More shops may have meant more sausage roll sales, but a lack of like-for-like growth is now a concern.”

He added: “With the wow factor of its vegan offerings now a distant memory, Greggs needs to provide more innovative and broad meal and drink choices, our experts say.”

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