Greggs' chief aims for unified approach

05 September, 2008
Greggs' new chief executive Ken McMeikan plans to shift the company's regional structure to a more centralised system. He talks to Rebecca Evans about strategy, stores and sausage rolls
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In early June, shortly after becoming chief executive of Greggs, Ken McMeikan went to work at one of the bakery retailers' Leeds shops. Rather than reading reports from the comfort of his new office in Newcastle, McMeikan spent his first week pitching in with shop staff, making sandwiches, baking off savouries and working the till.
"It was a real reality check," the 43-year-old former Sainsbury's retail director says. "It helped me understand the intensity of service that's required at peak times and the challenges of getting the right range within the shops and keeping it on sale throughout peak periods. You've got to be delivering super service, super fast."McMeikan has taken a hands-on approach to his new job, getting stuck into all aspects of the 1,388-shop business since he took over from managing director Sir Michael Darrington, who'd notched up almost 25 years with the business.After a thorough two-month hand-over from Darrington - which saw McMeikan criss-crossing the UK visiting all 10 Greggs and Bakers Oven divisions - McMeikan is now charged with taking the UK's largest bakery retailer to the next level of its development.== Centralised system ==Greggs and McMeikan are a good match. Greggs plc, which has a divisional structure, is 18 months into a three-year plan to create a more unified and centralised operation. McMeikan has almost 20 years combined experience at Sainsbury's and Tesco - national businesses with centralised structures.The plan has so far seen a central marketing team installed and reporting lines moved to head office. McMeikan, who has just upped sticks and moved to the north east from Islington, knows the strategy will yield many benefits."Eighteen months ago the business made the decision to move to a national, unified business. I believe that was the right decision," he says. "Historically, Greggs has been successful by running the business in a devolved, divisional way. As it was growing, that was the right way to grow and when you've got fewer shops and a smaller business it's easier to manage. When you get to a certain scale, there are simpler, better and more efficient ways of running a large business. It was recognised that Greggs had reached that level. For example, each division was deciding not just their range but also the variation in ingredients."McMeikan, with a wry smile, says that in 2000, there were 18 different types of sausage roll sold across Greggs' estate. "Each division felt theirs was the right recipe and best sausage roll and there was a huge amount of pride about it. Clearly, it's simpler and easier if you've only got one sausage roll. That example - but magnified - is the sort of opportunity we have," he adds.An opportunity which could see more Greggs' products produced centrally. "The way that we make some of the products may move," McMeikan admits. "One of the things I can do is help them in terms of how you control your ranging decisions while not losing the benefits of regional ranging. How do you get your marketing so that you're marketing the brand and it is national marketing as opposed to regional? From a bakery point of view, if you look at the whole of the supply chain, how do you make it more efficient? Rather than having 10 bakeries all producing the same thing in small quantities, are there better ways of producing a product?"Head office and regional staff have been supportive of the changes, he says. "What I can help to give them is the confidence that the way we're going is the right one because I've come from two organisations that have been run in this way."He adds: "We don't want to lose their knowledge, enthusiasm or influence on the business. We must not lose our local knowledge and expertise, that should be what informs what we do. We're all here to serve and support the shops."== Loyal staff ==Retaining the loyalty of Greggs' shop staff is important to McMeikan. He describes the employees he has met so far as "wonderful ... very down-to-earth, very warm and very friendly. A lot are long-serving, with 25-plus years service". Greggs is the UK's largest bakery retailer (the closest behind is Subway with 1,200 shops) and has expansion ambitions, but quality is as important as quantity, McMeikan says. "Subway has gone for 2,010 shops by 2010. We will also look to open up shops, but driven by customer demand and where we believe they will be profitable for the future." Greggs has more than five million customers each week, "but there are 60 million people in the UK, so there's a lot of room for growth," he adds."The south-west of England is where we're under-represented at the moment. We're probably under-represented in the north west as well. But there's lots of opportunity across the whole of the UK, everywhere we have shops there's an opportunity for more."As well as plans for structure and stores, McMeikan has also set up the "biggest customer survey that's ever been done in one go at Greggs". He has written to 7,000 customers - "it's a message from me saying I'd value their views" - focus groups are being organised and staff views gathered. He adds: "We're also looking at people who don't shop with Greggs and asking them what it is that would convert them to being a Greggs customer."Range changes must be consumer-led, McMeikan says. "There's no question in my mind that customers are more health-conscious today than they were five or 10 years ago, but we have to follow them as opposed to pre-empting or second-guessing."McMeikan also thinks Greggs needs to shout louder about the freshness, quality and value-for-money of its products if it wants to attract more customers."I don't think we get enough credit at Greggs about how good the products are. The quality of our ingredients, passion around the way we bake and our freshly-made sandwiches. How do we let customers know it's likely to be the freshest sandwich you're going to find on the high street?" McMeikan also has his eye on the competition. Over the past two months he has become something of a bakery sleuth, hanging around other businesses and clocking what they're up to. The competition is wide and varied, including "anyone who's selling sandwiches, savouries, drinks, bread rolls and sweet products. In terms of national chains, everyone from Subway, Starbucks and Costa Coffee through to Boots, Tesco Express and Sainsbury's Local. Also regional, independent bakers. There's Baguette Express in the north, there's one called Baguette du Monde in the Midlands, West Cornish Pasty Company and Upper Crust".Community focusAs he develops Greggs' business, McMeikan is committed to continuing with Greggs' community focus, including children's breakfast clubs and charity giving. He's set up a corporate social responsibility (CSR) working group. Greggs' first CSR report will be published with its full-year results.He is also determined to reduce food waste, a problem for the business since post-BSE legislation led to a steep decline in farmers willing to accept out-of-date food for animal feed (see news pages). And then there's Greggs' second national TV campaign featuring its Paddy character, due to launch in the autumn. There's a lot of work to do. Does he feel that Darrington will be a hard act to follow?"Michael's record speaks for itself," he says. "I'm here to continue to build on the good work that he's done over the past 25 years. We've already got a good relationship and I haven't lost his counsel if I need it. So I don't see him as a hard act to follow, but as a great act to continue from."McMeikan's answer shows an easy confidence, but he's also aware of the challenges ahead for the next year and beyond. While Greggs interim sales were up 7.7% to £276m to 14 June, its pre-tax profits dipped 4.3% to £14.1m year-on-year. Rising commodity prices were blamed, and continue to be a thorn in Greggs' side. McMeikan says he hopes "they might start to ease back as we go into the fourth quarter". Greggs could be forced to raise its prices again."We don't want to pass on the cost pressures to our customers wherever we can avoid it but it's a challenge because of the commodity prices," he says. "The challenge is through better buying and better organisation of the way we do things to reduce the need to pass on price increases, but that won't be an easy one."The single biggest challenge is "knowing how far to buy forward", McMeikan says, with commodity price inflation an almost-daily consideration for Greggs' teams. "You rely on the skill of the teams that you've got. That's why the experience at Greggs is a huge competitive advantage. You also have your suppliers out there. If you've got a good relationship with them then you have their views and insights on what's happening."== Crunch time ==The downturn in the economy could also pose a problem for Greggs, even though it is known as a value-for-money business."There's a challenge around following the customers," McMeikan says. "If they have less discretionary spend we have to continue to ask, 'is what we're offering customers great value and could it be better?' Our customers know we're good value. How do we let other customers know? It's a challenge but also a great opportunity."With that, McMeikan is done with talking and ready to get stuck into the hands-on stuff again, testing Greggs' new Steak Bake recipe against the old version. Production director Nigel Oldham appears at his office door with a platter of browned savouries ready for a blind tasting. Happily for Oldham, McMeikan is pleased with the new recipe. His is a detail-orientated, enthusiastic approach that will surely drive Greggs' business into a new era of success.----=== Want to supply Greggs? ==="Do contact us because I think this is quite an interesting period in Greggs' history," McMeikan says. "Because I'm coming in new, I'm looking at what customers want from Greggs - not what we've already given them, but what they might want in the future."McMeikan is keen to stress he doesn't want to unsettle current suppliers, but believes "it's a wise business that keeps its mind and doors open to making contact with new suppliers. Compared to other retailers we have fewer suppliers because we produce and manufacture our own products, but we've got some brands in there - Walkers, Coke, Irn-Bru." McMeikan suggests interested parties try approaching purchasing director Alan Honeyman "or they could take a chance and write to me directly. I've always been very open-minded, I enjoy meeting new suppliers".



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