Greggs finds ingredient for growth on Facebook

Greggs is the UK’s largest food brand, with more shops than McDonald’s, Costa or Subway. Wearing his chief executive’s hat, Ken McMeikan tells Lucy Handley about how he is using customer feedback to expand the chain.

When Ken McMeikan started as chief executive of Greggs the baker in 2008, he decided to write to the 20,000 customers it had on file to ask what they thought of the brand. He got an impressive 11,000 letters back - not bad for a retailer famous for sausage rolls and steak bakes.

These days McMeikan prefers to receive feedback via Facebook, checking the Greggs page four to six times a day. He even admits to browsing the social media pages on his BlackBerry during board meetings. “As a chief executive, it is one of the most powerful tools, giving a greater sense of what is really happening in your business because you are not controlling what is coming through and it is real time,” he explains.

As a result of customer feedback, he has introduced hot sandwiches and added seating in 10% of shops. McMeikan believes these small changes have contributed to the brand’s pre-tax profit being up £4m to £53m in the 12 months to 2 January 2011.

But McMeikan is not resting on his sausage rolls. While many customers may associate Greggs with stodgy comfort food, a more upmarket version of the baker has opened in Newcastle - where the brand started out and still has its headquarters - with a new menu and room for 100 people to sit down. Chicken and stuffing square pies, spicy chicken focaccia and raspberry and chocolate cupcakes are on offer at the Moment shop, with not a sausage roll in sight.

Above: a selection of photos from Marketing Week’s visit to the Greggs headquarters in Newcastle. If you’re having trouble viewing the slideshow, please click here.

“We didn’t know whether customers would want a sausage roll or something more tailored for sitting and eating, so we went for a range that was more about sitting down. If customers say they want certain products we’ll bring them in. But so far we’ve found that they want a different product,” he explains.

The new range of food has been developed in-house, using Greggs’ own bakeries, chemistry and physics laboratories for microbiotic tests, product tasting and sensory evaluation among other technical tests.

McMeikan has recently signed off on another Moment shop to open in the north east. He notes: “We were very pleased with the first one and we will extend it before making the final decision on rolling it out nationally.” The new shops will be close to Greggs’ Newcastle head office and supplied by its £16.5m bakery at nearby Gosforth Park, one of ten across the UK.

Coffee market

The upmarket Moment shops also allow Greggs to cash in on the coffee market, which is set to grow from £5.4bn to £7bn in 2015. The chain is already on its way to making the most of this market, with coffee sales over Christmas up 21% on the previous year.

While the baker has been doing pretty well during the recession - profits are expected to be up again in its results out in two weeks’ time - McMeikan admits there is more it could be doing to reach customers.

He talks about “accelerated expansion” with grand plans to have 2,000 UK outlets. While he won’t commit to a particular date in which he wants to reach that number, the signs that growth is on the agenda include plans to open 70 new shops a year on top of the chain’s 1,571 current outlets.

Part of this growth has meant putting the brand in the hands of a third-party operator, something Greggs had to do when it opened its first branch at the Moto-operated Lymm Truckstop on the M6 in Cheshire.

“We took a pragmatic view of it. From a business point of view, we would rather [get products to] customers, whether it is run by Moto or us; so we feel it is worth going down that route. At the end of the day, you don’t have a choice in it, it is the only way you can get into motorway services,” he says.

The plan is to open a further motorway shop, as well as considering opening in industrial parks and airports. But while McMeikan is keen to grow Greggs, he is careful not to come across as a money-grabbing corporate figure, frequently mentioning the values that the company is founded on.

“From humble beginnings, the Gregg family built a business. What we stand for today is what they stood for before - providing delicious food that was affordable that still made some money for the family. The business grew on that very basic principle of not being greedy.

“Modern day leaders could learn so much from Greggs and how the business started. [Family member] Ian Gregg and we have a shared belief, which is that as a company grows successfully it has a disproportionate responsibility to do more for the communities in which it lives.”

To that end, Greggs helps to run breakfast clubs to improve the lives of the UK’s 1.6 million children living in poverty. Indeed, McMeikan was awarded the Prince of Wales’ ambassador for the North East in 2010 in recognition of his work in the community.

He is also vocal about the government’s controversial work experience scheme, where those claiming Jobseeker’s Allowance could potentially lose their benefit if they stop doing work placements. McMeikan, who is meeting the government this week to discuss the scheme, last week told BBC1’s Newsnight programme: “At Greggs, we don’t believe benefits should be taken away from anyone who leaves the scheme.”

McMeikan talks in meticulous detail about getting his pastries and other goods absolutely right, including the “care and expertise” needed to make a sausage roll. “It is folded 96 times to get the lift and texture that you have when you bite into it,” he explains.

Iceland customers can now buy Greggs sausage rolls in frozen four-packs to cook at home, the result of a one-year exclusive agreement between the two companies. McMeikan says there are more products in the pipeline and many more retailers knocking on the door to sell its food.

International expansion is also on the cards. When McMeikan took the reins four and a half years ago, he took the brand out of Belgium where it had 10 shops. “I stated at the time I still believe international expansion is right but it’s all about timing. It takes a cool reflective look at the markets before you rush in and make a particular decision,” he says.

He is currently visiting countries, looking at a variety of business models, including franchising, buying existing chains and opening its own shops. “We are very good at watching our competition and learning from them. At the right time we will make a decision about when we are going to expand. In the meantime, we are doing the groundwork.”

Loyalty schemes are also being studied by McMeikan as part of the brand’s efforts to update its customer database. He won’t commit to what type of programme he’ll go for, but a smartcard looks more likely than a paper stamp card because that would allow the baker to better collect customer data.

Greggs’ current database currently holds the details of more than 100,000 people, which the company can tap into for feedback and insight. But McMeikan stresses the importance of using that data properly to improve business. “The thing that most frustrates customers is when they repeatedly tell you something and you don’t seem to do anything about it. We need to find a way of translating that feedback into action,” he says.

That might include bringing back The Spicy One, a hot savoury product that was launched, withdrawn and then brought back for a limited time following a Facebook campaign.

The social network is not only used for feedback, it has also been a key promotional tool for the retailer. The recession and tough trading environment has meant that marketing has been tactical rather than brand-building over the past year, with a competition to win breakfast every week for a year aimed at gathering email addresses and buy-one-get-one-free vouchers for doughnuts being popular initiatives run through Facebook as well as on the brand’s own website (see Q&A, below).

Interim marketing director Lindsay Howard states that part of her role last year was to reverse transactional decline. Greggs customers currently visit stores an average of two or three times a week, spending between £2.20 and £2.30 a time, with 6 million transactions going through its tills every week.

The launch of ‘superstar’ doughnuts last October, which Greggs worked on with digital agency Steel, is something McMeikan highlights as an initiative that has improved business.

He adds that things have been better for Greggs than perhaps for other businesses because it has no debt and is therefore able to fund its expansion through its own cash. While he claims that food prices started rising three years ago, the company’s investment in new factories has meant that it can make its products more efficiently.

“We have been able to minimise the cost increases we pass on to consumers by running the business better than we did some years ago.”

While he is working hard to provide a good deal to customers, McMeikan wants to make sure that the brand isn’t just perceived as a faceless value retailer.

So it ran TV advertising from 2007 to 2009 featuring TV presenter Paddy McGuinness to “try to get across the personality of Greggs, using humour and showing us not taking ourselves too seriously”.

Marketing has moved towards positioning the brand as a baker as well as a retailer with ‘the home of fresh baking’ strapline launched in 2010, with advertising featuring its own bakers. McMeikan says he wouldn’t rule out brand-building campaigns, but the success of the digital launch of superstar doughnuts has encouraged him to continue focusing on tactical digital advertising.

The business also hasn’t had a marketing director since last October, when Howard finished her interim position. McMeikan says: “Marketing for me is less about getting customers to come in and spend with you, it’s more about trying to get across to customers what [the] business really stands for, what your values and beliefs are and what you are passionate about.

“If you can do that successfully, it translates into someone coming and spending more with you rather than going somewhere else.”

Ken McMeikan’s CV

2010 awarded HRH the Prince of Wales’ Business in the Community ambassador for the North East
2010 elected regional chair of the CBI North East
2008 becomes chief executive, Greggs
2005 joins Sainsbury’s as retail director
1990 joins Tesco, rising to chief executive of Tesco Japan
1986 begins retail career at Sears
1981-1986 serves in the Royal Navy

Marketer 2 marketer

John Timpson, chair at Timpson, asks:

Greggs has great retail sites - so much so I am always happy when I see one of our new shops is near to one. How are you able to manage your property portfolio so well and how are you going to make sure your shops are still in the best trading positions 20 years from now?

Ken McMeikan (KM): We have a great in-house property team that works with agents around the country. We have been successful at making sure every year we close and re-site between 15 and 30 stores. Normally we enter into a 10-year lease, but in that time the consumer may have moved on and you have to follow the customer. We also recognised four or five years ago the need to move into new locations such as retail parks, industrial parks and airports.

Chris Burggraeve, chief marketing officer at AB InBev and president of the World Federation of Advertisers, asks:

The secret of high quality beer, like bread, is hidden in its yeast. Brewmasters and top bakers tend to keep their secrets close to their hearts. Yet how could Greggs’ secret yeast play a greater role in its marketing mix and quality perception over the next 60 years?

KM: We have tried to do this in a more subtle way by launching the ‘home of fresh baking’ marketing campaign but without giving away our secret ingredients. The big opportunity for us is to think about how to get across that [taste] to people who haven’t tried it. Rather than saying “this is the secret” it is about how we get more customers trying Greggs food.

We are very proud of the products we make and don’t want to give anyone too much insight into how we do it.

However, we have tried to be more open over the past four to five years, even taking a journalist around our bakery, which we may not have done in the past.

The great challenge for Greggs is that half the UK population couldn’t get to a Greggs today. That tells you why opening new shops is the best way of letting new people discover what that secret is and making us much more accessible.

My last 24 hours

We had a board meeting yesterday and spent a lot of time looking at short-term challenges facing the high street and Greggs’ plans for this year.

We also looked at longer term strategic objectives such as where we go with wholesaling, Greggs Moment outlets and the coffee shop market and where we go with international expansion.

I also had a follow-up call about expanding internationally from someone who is very keen to get Greggs to expand in their country.

Last night I spent time looking at who is advertising on TV, what they were advertising and why, and trying to get a sense of what the wider consumer out there is hearing about from other businesses. Then on my way in this morning I texted people based on thoughts of what I’d been seeing last night.

This morning I hadn’t realised that all the north east managers were at the bakery having a meeting, so I went in unplanned to say hello and 25 minutes later came out. So I was doing one of the most important things a chief executive should - allowing your people to ask you anything that is on their mind and listening very hard to suggestions they had from customers.

Ken McMeikan on…

…The UK’s obesity crisis

As a baker, we have not only responsibility, but a great opportunity to help. In each of our food categories we have a dedicated team working on how we can remove some of the salt and fat content without losing the great taste.

We also do a lot to promote healthy lifestyles and run breakfast clubs for children to get a healthy, nutritious breakfast. We want to find a way of putting calorie information on shelf-edge labels so people can make a decision at the point of purchase.

…Saving the high street

With the number of shops that are closing, some high streets are less of a destination for customers. But people should not be too pessimistic about the future because, for example, where Woolworths has gone, companies like Poundland have come in.

Greggs, Costa and Subway are expanding to take up some of that spare capacity, but they won’t take it all.

Retailers will have to think about why customers should come to their shops. The service in shops has to be so good that it will encourage people to browse and buy in-store.

Parking is another challenge [in terms of accessibility and cost]. That is a major problem that high street retailers are going to have to work with councils to address. You can have a fantastic retail business but if it is difficult to get there then customers won’t come.

…A typical Greggs customer

There isn’t one. We have an almost even split between men and women, every age range, profession and everyone from barristers to builders. Depending on where the shop is, the range will vary. We try to cater for all age ranges and different needs of customers.

Q&A

Graeme Nash
Head of customer and marketing, Greggs

Marketing Week (MW): What have you learned through Facebook?

Graeme Nash (GN): We use it for insight, rather than trying to put a financial value on it. We get a lot of requests on Facebook - that is where you start to understand [customers] and reap the benefits.

For example, 12-year-old Harry Caldwell campaigned to get us to open a shop in his home town of Lydney in Gloucestershire. Harry got his MP involved and it really built momentum. When the shop finally opened we invited Harry along to cut the ribbon.

We’ve also run campaigns such as those that get people to vote to keep products. An example of this is the Mexican bandit baguette, which we first produced as a limited edition and is now in our top 10 products sold.

We have about 360,000 likes on Facebook and that is where our fanbase is. It is a rich source of information and helps some of those product decisions.

The fact it is instant means you can react and do something about it. Traditional research methods may not give you that speed of reaction.

MW: Who within Greggs responds to comments on your Facebook page?

GN: The customer care and brand communications teams, depending on the nature of the comment. It is important that we have conversations with people and try to put things right for them. It is an instant feedback mechanism and we’ve got to try to respond well. It is a challenge that many brands have at the moment, but we are trying to react and learn as we go.

MW: How else does Greggs use insight?

GN: We invest in products, tasting and brand research, in order to understand the market and our competitors. It is a constant flow of activity. The challenge for us is how to feed that back into the business in terms of what is actionable. Things like Facebook are great, but understanding how behaviour is changing takes a bit more time to filter through.

MW: What’s the strategy behind your recently launched mobile app?

GN: It includes a store locator, menu and links to Twitter and Facebook. We want to be accessible and if people are accessing social media that way, we need to be part of that.

Location is key within that. We know from our website and data tracking that is one of the most important things for customers. There is probably a million fancy things we could do on the app, but we just want Greggs to be as accessible as it possibly can be.

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