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Will rising profits continue to bolster the Greggs share price?

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It was hard to imagine, not that many years ago, that a seemingly meat-loving, old-fashioned and perhaps even cheap bakery like Greggs (LSE: GRG) would be able to move with the times. Trendy, artisan bakeries and shops were becoming the norm, while a growing market of vegetarian and vegan consumers seemed highly unlikely to be the backbone of a company whose number one product – the sausage roll – was king.

Of course we know how this went. As well as outfitting some of its stores in a more café-like, sit-in-and-enjoy style, the introduction of the vegan sausage roll has taken on an almost cultural significance. It’s perhaps a sign of Greggs’ overall popularity that just one addition to its product line could garner such interest.

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Greggs delivery

Yet another modern arena it now seems to be making moves into is delivery service. Specifically, it recently announced it would be partnering with Just Eat to offer its products exclusively – much to the chagrin of UberEats and Deliveroo. The company is also trialling electronic pads that allow for click & collect.

I think from an investor’s standpoint these are good signs. Greggs has so far managed to move with the times, and yet somehow maintain, for better or worse, its previous image. 

Interestingly, I think in terms of its products at least, in many ways Greggs can be compared to the US giant McDonald’s. The original concept behind McDonald’s was that a consumer could walk into a store anywhere in the US (and now, of course, the world), and know exactly what they were getting – a Big Mac in New York tastes the same as a Big Mac in Hong Kong.

Greggs’ food is very much the same. When you go into a Greggs in any part of the country, you know exactly what you’re getting – it will taste identical to the Greggs you had the week before in a different city. This is a very successful business model.

As long as we like pasties…

As I said, a few years ago, I couldn’t have imagined Greggs being able to move with the times with the success that it has managed. The fact that it has been able to do this encourages me on two major fronts for the future of its shares.

Firstly, the management of the company has shown a willingness to change and adapt – always key to the success of any firm. What’s more, it has seemingly done this in the right way, with well-picked choices regarding what to change and what to preserve.

Secondly, and perhaps more importantly, has been its continued sales growth in a period when more people are more health-conscious, as well as more vegan and more interested in ‘artisan’ products. Most people know Greggs’ baked products are not the healthiest, but we like them just the same. I can’t see this changing any time soon.

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The Motley Fool UK has no position in any of the shares mentioned. Karl has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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