How do you think about growth beyond the UK? Seems like Greggs is already close to their 3,000 store target, so long-term growth will have to come from elsewhere
Great question, and one I’d love to see Greggs expand on. In the UK, they’re already profitable and are continuing to improve efficiency and cost-effectiveness to drive even greater returns. For example, they’re focusing on high-footfall areas while closing underperforming locations.
However, for long-term growth, I’d like to see Greggs explore international expansion. The US seems like a logical next target, offering a large market with significant growth potential.
Greggs is one of our favorites! We also covered the company pretty extensively. The only issue in investors’ minds is the slowing organic growth over the past few quarters and the uncertain UK macro environment.
Nonetheless, over the long term it should be fine.
The growth is impressive. It would be interesting to see if they could expand into another country, although I doubt other European nations have quite the same love for sausage rolls as we do. Maybe America!
It is indeed impressive yet it is slowing down. Nonetheless, the company has levers to maintain its growth (delivery, evening trade, new stores etc.).
As for international expansion we think it’s more difficult than what one can think of as in the UK they have the vertical supply chain integration. Would they be able to replicate that anywhere else? Tough…let alone the different tastes across Europe. For instance, Zorbas bakery in Cyprus easily beats Greggs.
"Greggs has cemented its position as the UK’s leading food-on-the-go retailer, holding a 19.6% market share in the food-to-go breakfast segment. Its strengths lie in strong brand recognition, affordable pricing, and an extensive network of over 2,600 shops nationwide."
It has been an excellent growth story, but is the market now saturated in the UK? I don't think you'll catch foreigners buying British stodge and this would explain the stock's derating.
A great point, Matt, on saturation—I agree that there is plenty of competition. However, I see Greggs covering three distinct markets:
"Effectively, Greggs is fighting a three-way battle—against bakery chains, fast-food chains, and coffeehouse chains—making its positioning in the market both challenging and opportunistic."
If Greggs continues to increase its market share across all three segments while maintaining competitive pricing, I still see plenty of opportunities for growth.
Regarding your point about foreign ownership, Greggs' largest shareholders are primarily British and American:
Thanks for the article. I'd like to point out that their level of reinvestment - if future average ROCEs of 20% can be achieved like in the past - implies ~130% of PBT are reinvested. This should fuel an intrinsic value compounding machine, but of course depresses cash flow and the future is always uncertain...
Yes, great point! The future is uncertain, but when I look at the fundamentals of the business and its double-digit growth compared to a fairly low P/E, I remain optimistic.
For context, one competitor, McDonald’s, saw only a 1.67% increase in its 2023 annual gross profit, while Greggs achieved an impressive 11.3% growth. If Greggs can continue expanding—both domestically and into new markets—I believe its growth trajectory could continue.
How do you think about growth beyond the UK? Seems like Greggs is already close to their 3,000 store target, so long-term growth will have to come from elsewhere
Great question, and one I’d love to see Greggs expand on. In the UK, they’re already profitable and are continuing to improve efficiency and cost-effectiveness to drive even greater returns. For example, they’re focusing on high-footfall areas while closing underperforming locations.
However, for long-term growth, I’d like to see Greggs explore international expansion. The US seems like a logical next target, offering a large market with significant growth potential.
Greggs is one of our favorites! We also covered the company pretty extensively. The only issue in investors’ minds is the slowing organic growth over the past few quarters and the uncertain UK macro environment.
Nonetheless, over the long term it should be fine.
I’ll give it a read!
The growth is impressive. It would be interesting to see if they could expand into another country, although I doubt other European nations have quite the same love for sausage rolls as we do. Maybe America!
It is indeed impressive yet it is slowing down. Nonetheless, the company has levers to maintain its growth (delivery, evening trade, new stores etc.).
As for international expansion we think it’s more difficult than what one can think of as in the UK they have the vertical supply chain integration. Would they be able to replicate that anywhere else? Tough…let alone the different tastes across Europe. For instance, Zorbas bakery in Cyprus easily beats Greggs.
"Greggs has cemented its position as the UK’s leading food-on-the-go retailer, holding a 19.6% market share in the food-to-go breakfast segment. Its strengths lie in strong brand recognition, affordable pricing, and an extensive network of over 2,600 shops nationwide."
It has been an excellent growth story, but is the market now saturated in the UK? I don't think you'll catch foreigners buying British stodge and this would explain the stock's derating.
A great point, Matt, on saturation—I agree that there is plenty of competition. However, I see Greggs covering three distinct markets:
"Effectively, Greggs is fighting a three-way battle—against bakery chains, fast-food chains, and coffeehouse chains—making its positioning in the market both challenging and opportunistic."
If Greggs continues to increase its market share across all three segments while maintaining competitive pricing, I still see plenty of opportunities for growth.
Regarding your point about foreign ownership, Greggs' largest shareholders are primarily British and American:
Schroder Investment Management Ltd. (UK) – 5.0%
Royal London Asset Management Ltd. (UK) – 4.9%
Fiduciary Management, Inc. (US) – 4.2%
The Vanguard Group, Inc. (US) – 3.8%
MFS International (UK) Ltd. (UK) – 3.5%
Thanks for the article. I'd like to point out that their level of reinvestment - if future average ROCEs of 20% can be achieved like in the past - implies ~130% of PBT are reinvested. This should fuel an intrinsic value compounding machine, but of course depresses cash flow and the future is always uncertain...
Yes, great point! The future is uncertain, but when I look at the fundamentals of the business and its double-digit growth compared to a fairly low P/E, I remain optimistic.
For context, one competitor, McDonald’s, saw only a 1.67% increase in its 2023 annual gross profit, while Greggs achieved an impressive 11.3% growth. If Greggs can continue expanding—both domestically and into new markets—I believe its growth trajectory could continue.