Fresh thinking: What can leaders learn from Greggs’ new strategy?

Future Leaders 2015

FUTURE LEADERS / GREGGSFUTURE LEADERS / GREGGS

ABOUT

Future Leaders has been launched this year by HouseMark with the ambition of challenging the next generation of housing leaders to unearth new ways of working. The programme brings together one cohort of housing professionals who, over a period of six months, undertake three visits to companies such as Greggs, John Lewis and Hilton Group.

Greggs is an iconic high street food retailer, with more than 19,500 employees and over 1,650 stores. It implemented a new business strategy in 2013. This publication reports on the lessons from a HouseMark Future Leaders’ visit to Greggs Headquarters in Newcastle in June 2015.

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Contents

When Roger Whiteside took over as chief executive of Greggs, like-for-like sales were falling fast. Two years on, both its produce and fortunes are looking healthier – so how has he got Greggs on a roll?

ere you asked what item sold by Greggs had the fastest increase in sales in recent years, you might say

‘a sausage roll’ – but you’d be wrong. The family baker, started by John Gregg in 1939 when he began selling eggs and yeast from his bicycle in Newcastle-upon-Tyne, now has coffee as its number-one growth product.

Roger Whiteside, chief executive of Greggs, says: ‘We generated coffee sales of £1 million a week in the run-up to Christmas last year and expect drinks to continue to be one of our top-performing product categories for the foreseeable future.’

So is this a problem for a business that has grown from its community baker origins to have a presence on high streets from Portsmouth to

Perth? In a word, ‘no’.‘The truth is that we lost our way

a bit during the recession and we lost market share because we were confused as to whether we were still competing in the bakery take-home food sector or the fast-growing food-on-the-go sector,’ says Whiteside. ‘So our sales were under pressure and we had one of our worst years in 2012.’ According to Whiteside, ‘the key measure of a retailer’s success’ is its like-for-like sales in existing stores: in 2012, Greggs’ fell 2.7 per cent.

A new plan was needed, fast. Whiteside – the former head of Marks and Spencer’s food business – moved from the Greggs board to become chief executive in February 2013. He immediately instigated a business review and convinced the board

some tough decisions were needed (see Leading questions box).

The company needed to become a ‘winning brand in the food-on-the-go market’, but to get to that point, it had to cut costs and diversify into other products that customers wanted. As part of Whiteside’s five-year plan, the 79 in-store bakeries all had to close and 400 jobs were lost, attracting restructuring costs of £8.5 million in 2014. Food production was consolidated to nine regional bakeries, two distribution hubs and two centres of excellence. Yet in 2014, like-for-like sales grew 4.5 per cent and the company share price has trebled (see Key facts). So how have Whiteside and his team done it?

The plan was built around four pillars: great-tasting, fresh food; a great shopping experience; having simple and efficient operations; and improvement through

change. ‘It’s about reflecting how consumers are changing their shopping habits,’ says Whiteside. ‘When we talk to our customers now, the vast majority are coming to us because they need something to eat there and then, and they like what we sell to eat there and then.’

This is not just pasties and pastries, but coffee and healthier, lower-calorie foods, which is why Greggs launched its Balanced Choice range. The range includes a variety of sandwiches, salads, etc that are all less than 400 calories. As

a result of these healthier additions to the range, sandwiches were the fastest-growing food item in 2014.

Greggs has also been ensuring it is in the places that people want it, when they want it. This has meant closing some high street shops in favour of locations near places of work or leisure – office, retail and industrial complexes, as well as travel hubs. Also, by focusing on becoming more efficient, Greggs saved £2.9 million in 2014 – £1 million more than expected. In future, a £25 million investment in an ‘enterprise resource planning’ IT system from SAP is expected to save £6 million per year by the end of the programme.

In taking these steps, however, Whiteside also wanted to retain the ‘culture of the family-style business’ as ‘we’re here for the long run and it’s much more about doing the right thing as a result’.

This means investing time and effort into making Greggs ‘a great place to work, as well as a good neighbour to the communities in which we operate. Keeping our values at the heart of the business, at all times, is what makes Greggs different.’

To this end, Greggs shares 10 per cent of its profit with staff and continues to support the Greggs Foundation – set up in 1987 to support people in need in its communities (see page 4 for more).

So is Whiteside confident the business is now on a more secure footing and able to anticipate the next big thing after coffee? ‘One of my mantras is ‘restless dissatisfaction’,’ he says. ‘Nothing is ever good enough, ever. Greggs has been going through change ever since it started and will continue changing. We do not and will not stand still. Ever.’

Tasty tweetsHow Greggs harnesses social media to reach its core customers

The charity that began at homeThe Greggs Foundation is a cornerstone of the business

24-hour pastry peopleA tour of the new state-of-the-art bakery at the Newcastle HQ

Food for thoughtAttendees share their views

People firstThe importance of keeping staff engaged in turbulent times

Changing manWhat Greggs means by ‘improving through change’

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Key facts

Greggs began trading in 1939

In July 2015 Greggs had more than 19,500 employees and over 1,650 stores

2014: sales up 5.5 per cent to £804 million

2014: pre-tax profit up 41.1 per cent to £58.3 million

2014: operating margin 7.2 per cent - up from 5.4 per cent in 2013

Nine regional bakeries Will spend £65 million in

2015 (£48.9 million in 2014) opening 60-70 shops and refurbishing up to 220

Leading questions

How do you run management meetings? We have a ‘huddle’ on Monday mornings, which lasts a couple of hours, and should be a free-for-all. If you want to have an open style of management you need to be sure that you can have a free and open debate. We are able to challenge each other’s performance – that’s how a high-performing team should be.

How can you drive forward big changes in a business and secure board approval, when you’re not at a crisis point?It’s interesting that normally businesses need to get into trouble before they make that kind of decision. The best-run businesses don’t let themselves get into that position. You’ve got to come up with a clear, simple plan that everybody can buy into. You’ve got to say ‘okay, this is what we’re trying to be, in the long run, this is what we want to look like in five years and then the five years after that’.

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“The vast majority of customers are coming to us because they

need something to eat there and then, and they like what we sell to eat there and then

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Tasty tweets The charity that began at home

24-hour pastry peopleGreggs reaches up to 3.4 million people a month on Facebook and Twitter. Here is how it mixes visual jokes and an approachable tone to serve up commercial success

The state-of-the-art bakery at Greggs’ Newcastle HQ runs continuously, six days a week, and is manned by loyal staff who take their sausage rolls seriously …

he effective use of social media has been crucial in helping Greggs to communicate with its

customers. Simon Smyth, marketing and communications manager at Greggs, says the company has focused on Twitter and Facebook as its main channels in an attempt to build a more ‘emotional connection’ among customers with Greggs and its products (see Key learning points).

To guide this, Smyth says Greggs has conducted extensive market research to determine its main market segments. It has identified six segments and the core three are: weight and wellness; young free and social; and work-life balancers. The main brand message it wants to convey is that Greggs provides a tasty range of food and drink available on-the-go, throughout the day.

Smyth says: ‘We use social media to ensure we are ‘in the room’ for conversations about us and our products. It is also excellent for helping foster our “brand personality”.’ The mix of cheeky visual gags involving Greggs’ products and a straightforward, approachable tone has gathered 718,000 ‘likes’ on Facebook and 100,000 followers on Twitter.

In June 2015, in an exceptional month on social media for the brand, Greggs achieved a combined social reach of 3.4 million people. This rose to 7.5 million when Greggs’ social media content was further shared by journalists. It is perhaps no coincidence that sales are up 3.9 per cent in 2014 and two years of declining like-for-like sales in existing stores reversed to 4.5 per cent growth last year.

y the mid-1980s, Greggs was a successful national retailer. As a result, Ian Gregg and his wife were receiving an

increasing number of calls and letters from charities to help with their particular cause. ‘Ian and Jane used to take these letters home in a carrier bag, and then it was literally a kitchen table charity,’ says Jackie Crombie, manager of the Greggs Foundation. ‘They used to sit at the kitchen table, read every single one of the letters and support a number of charities.’

Ian Gregg established the Greggs Foundation in 1987 to put this on a firmer footing, and its funds have been bolstered by 1 per cent of Greggs’ profits every year. In 2014, dividends from shares, Greggs’ profits and fundraising by Greggs’ staff of more than £450,000 meant the charity raised £1.5 million.

Crombie says the Foundation has four programmes, two of which focus on Greggs’ origins in the North-east and two which are national. Of the latter two, perhaps the most relevant for housing professionals are the Breakfast Clubs, for which Greggs raised £88,000 in 2014. These now run in more than 300 schools across the country and ensure more than 19,000 children receive a nutritious breakfast each school day. Forty-two of the clubs are run in partnership with housing associations and if any of the Future Leaders attendees want to help increase this number, Crombie says she would certainly not stand in their way …

Charlotte Spendley Head of finance, East Kent Housing

I’m on this programme mainly because I’m really

interested in how other organisations deal with developing their culture. We’re at a turning point as we’re only four years old, so I’m hoping to get some ideas from this process.

Lai Chan Income team leader, Southway Housing Trust

For me, the six months on Future Leaders is mainly about being more

creative and innovative. Because so much of my job is firefighting, taking myself out to try and see where I want to go or where I see the team going is really valuable.

Sue Harrison Director of business planning, Bromford Housing Group

I’ve been in the housing sector for 23 years and I’ve seen a lot

of change over that time. I was particularly attracted to Future Leaders because it’s looking outside housing and we’re expected to become more commercial - particularly larger housing groups.

Katie Bond Director of home ownership, Notting Hill Housing Group

There’s a lot I’m looking forward to getting out of this programme.

I’m interested in how people drive forward innovation, how you can overcome people’s nervousness about change and also how to develop and embed a culture across an organisation.

e are at the heart of Greggs, a company that serves millions of customers a week, and we are giggling. The reason is that,

to visit the state-of-the-art bakery at the company’s Newcastle headquarters, we must first dress in full protective blue hats, smocks and, er, beard protectors.

However, when you consider that the production line whizzing and thudding by us produces thousands of sausage rolls every hour for distribution around the UK, a halt in production due to a stray hair is definitely to be avoided.

The three production lines at this bakery – one of nine across the country – are run by 45-50 people a shift, 24 hours a day, Monday to Saturday. The staff here have been at the forefront of changes made to the business in the past 18 months to become more efficient, but if there is any disquiet they don’t show any sign.

Chris Bowen, a production supervisor and our guide, says: ‘I have been here for a few years now and Greggs really does have family values and does live these. The conditions and benefits are good and staff are very loyal.’

“Because so much of my job is

firefighting, taking myself out to try and see where I want to go or where I see the team going is really valuable

“[Ian and Jane Gregg] used to sit at the kitchen table, read

every single one of the letters and support a number of charities

Amit Patel Assistant director of corporate services, Asra Housing Group

I really want to learn, through networking with other attendees,

what other organisations at Future Leaders are doing. I also want to learn from different companies in terms of how we can innovate within Asra.

FOOD FOR THOUGHT WHAT ATTENDEES WANTED TO TAKE FROM THE VISIT

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Key learning points

Greggs staffs its social media channels from 8am-6pm, Monday-Sunday

One of Greggs’ most popular social media posts in 2015 was ‘the sausage-less sausage roll’ for April Fools’ day. It generated 3,000 likes, 884 shares and 907 comments

The award-winning Greggs Rewards loyalty programme – which allows customers to pay for their order in store via an app on their smartphone – was launched in 2014 and already has more than 100,000 account holders.

Roll call

Greggs bakeries and other production facilities have been awarded accreditation from the British Retail Consortium

Each sausage roll has 96 layers of pastry Three wagons of minced meat are delivered

every day from a local firm At the end of each production run, the meat

processing machinery is stripped down and thoroughly cleaned

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People first Changing manGreggs places a huge emphasis on staff engagement – it’s an approach that has been vital amid the tough decisions of the past two years, says people director Roisin Currie

A key pillar of Greggs’ new strategy is to ‘improve the business through change’. The man at the heart of delivering this, Darren Mayne, explains how the plan covers everything from developing new products to working out the best stores to sell them in

o say that Greggs places emphasis on its company values is like saying it sells a fair few sausage rolls.

According to group people director Roisin Currie, who joined the business five years ago after 20 years at Asda, a clear sense of its values ‘is what makes Greggs successful’ (see Key learning points).

Yet how straightforward was it to stick to these values, when, in 2014, the company had to restructure and make large numbers of redundancies as a result?

‘Initially we were looking at about 500 people being made redundant,’ says Currie. ‘We’d never done anything like that on that scale as a business, yet every discussion that we had as a board, we focused on our values and ensuring that, while this was a tough decision that the business had to take, we would do it in the right way. It made us think about how we would communicate, engage and involve our people throughout the process.’

As a result of a very thorough consultation process, Currie says, Greggs was able to limit the redundancies to 400. Central to this were ideas from staff about how they could alter their roles and also change some of the current ways of working.

This theme of ideas is an important one to Currie, as she feels it allows a large and geographically disparate group of more than 19,500 employees to feel engaged in the business and ensure Greggs is doing all it can to tackle the

arren Mayne, product category manager at Greggs, has had some interesting job titles in his time at the company. He

has been category manager for exotic savouries – overseeing new product development – and is now one of the senior team on ‘Project Sunrise’. His current post puts Mayne at the heart of the fourth of the Greggs strategic pillars to ‘improve the business through change’ and encompasses everything from analysing the 80 million ‘big data’ points on the 400 product lines sold in Greggs’ 1,664 stores, to ensuring business improvements feed through to the bottom line.

Project Sunrise has a simple concept: change. Many of the housing professionals attending the Future Leaders visit to Greggs want to learn about organisational change and development, so they lean forward eagerly.

‘I think what’s really interesting is the words, and that they’re in that order – it is very much about people, process, and then technology,’ says Mayne, describing the approach he and his colleagues are taking towards updating and simplifying

Greggs’ processes. This covers everything from deciding how much of which products each store needs at a particular time, to new product development.

Mayne says that, although Greggs is now beginning to implement the SAP ‘enterprise resource planning’ IT system, which he describes as ‘really exciting’, the business has not sat around waiting for its arrival. Sticking to his mantra, the 20-year retail veteran says much of his time in the past 18 months, since Greggs embarked on its new strategy to become a leading food-on-the-go retailer, has been spent working with colleagues throughout the business to refine what they do and why (see Key learning points).

Mayne has also been working with an external consultancy on a ‘big data’ project to better understand the trading patterns of individual stores. This has pinpointed nine different store segments, such as ‘tourist shops’, with the hope that new products can be targeted at stores where they will be more likely to succeed. As a result, he says, the business has already made substantial savings in the first year, and will save even more in 2015 and beyond.

company’s ‘biggest challenge’ of attracting and retaining talented people. ‘The best ideas that make a difference to this business come from the people at the coalface,’ she says. As a result, in 2014 Currie launched the ‘Your Ideas Matter’ initiative, which is a feedback process open to all staff and attracted 180 ideas last year – all of which were included in Currie’s monthly board reports.

Greggs staff are also incentivised through rewards for shops that score highly in monthly customer experience surveys. Perhaps most impressive, however, is the fact that Greggs sets aside 10 per cent of its profit each year to share with staff – this figure was £6.4 million for 2014.

So how well does this all work? In 2013, the year before Greggs began what Currie calls its ‘huge change process’, its engagement score from the 89 per cent of staff who completed its annual employee opinion survey was 76 per cent. In 2014, this dropped just one percentage point. Valuable indeed. Ph

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“Every discussion that we had as a board, we focused on our values

and ensuring that, while this was a tough decision … we would do it in the right way

Key learning points

Greggs’ values ‘commit us to being enthusiastic and supportive in all that we do, open, honest and appreciative, treating everyone with fairness, consideration and respect’

Greggs’ ‘Brilliant’ management training programme helped the company to meet a target to fill at least 65 per cent of vacancies internally in 2014

Currie is impressed by Virgin’s initiative to encourage frontline staff to ‘please their customers’ with a discretionary £200 a month. She hopes to echo this with Greggs’ new ‘Fix it’ initiative Key learning points

Greggs has a standard, two-page document it uses throughout the business to pitch and evaluate new product ideas

Mayne on project management: ‘Always conduct stakeholder interviews right at the outset so you can find out what people want and manage expectations accordingly – including ruling out certain areas for this particular project if need be in order to retain its focus’

When launching a new product, Greggs always conducts post-launch evaluations. It does ‘Hot’ meetings one week after launch to check everything ‘happened on time’, and then does a four-week review

Megan Henderson HR manager, Leeds Federated HA

I want to learn from other organisations and others on the

Future Leaders programme to find out what we can do better to motivate people. I’m just going to push myself a little bit more and learn some more skills.

Steve Percival Gas and electrical manager, Southway Housing Trust

I’m here to really develop myself and learn some new skills. Like

a lot of people I’m looking to move my way up the career chain, so that’s the reason I’m here.

Claire Shiland Head of neighbourhood services, Cartrefi Conwy

We’re a stock transfer organisation in North Wales

with 4,000 properties. I’m here to learn about diversification as we are looking to diversify and grow, so I’m really keen to learn from the private sector.

Emma McNish Assistant director of HR, Asra Housing Group

I’ve just been appointed as assistant director eight weeks

ago, so this is all around me developing as I’m on a journey. I’m also here to learn how other organisations do things.

“I want to learn from other

organisations to find out what we can do better to motivate people

Fay Moore Senior service manager, Axiom Housing

I’m ready to move into more of a corporate role so I’m interested

in how Future Leaders can help with that. I am very impressed with the way the chief executive keeps evolving Greggs. We need to do this too – especially in our supported housing.

FOOD FOR THOUGHT WHAT ATTENDEES WANTED TO TAKE FROM THE VISIT

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HouseMark is the leading provider of integrated data and analysis, insightful knowledge transfer, high-quality consultancy support and, via Procurement

for Housing, cost-effective procurement services to the social housing sector. More than 950 housing organisations are HouseMark members, and we are

jointly owned by the Chartered Institute of Housing and the National Housing Federation – two social housing sector not-for-profit organisations that

reinvest their surpluses into the sector.

HouseMark’s Future Leaders promises to inspire, educate and equip the next generation of leaders, decision-makers and influencers in housing. Our unique

programme takes delegates behind the scenes of well-known commercial organisations to hear candid accounts from successful leaders who have ‘been

there and done it’. The programme is combined with insight sessions and tailored coaching which will enable delegates to explore and develop their

own leadership style and ensure they are equipped to apply what they have learnt in their own organisation. For more information, please contact

manveer.hundal@housemark.co.uk or call 024 7646 0500.

Campbell Tickell and 24housing are supporters of Future Leaders.

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