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Too Much Coffee in the High Street May Impact on Greggs

By Malcolm Stacey | Tuesday 15 May 2018

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Hello, Share Swipers. I may have commended Greggs (GRG) to you in the past. I think I might have changed my mind. This high street baker seems to be everywhere these days. It’s not only in busy areas but has also moved into transport terminals, housing estates and the like.

This is a good move. When you sell the kind of snack, where people can buy a bag of it to eat on the hoof, you are catering for a busy working population that becomes busier. For the days are gone when enlightened employers gave you an hour or so to replenish your tum for the afternoon.

But there’s growing competition. Greggs sells a lot of mobile coffee and sandwiches. But Costa, Starbucks and Caffe Nero, as well as a few indys, are proliferating. And when I survey the wares in the window of my nearest Greggs, I sometimes feel that they may not be doing quite enough for the healthy-eating brigade.

There’s perhaps a little too much sweet stuff there for my liking. And my branch has just stopped selling a very tasty and healthy looking bread. No demand, we were told. However, the chain is growing its healthy options, too. It’s recently launched two new salads for the summer, feta and beetroot dip with lemon and herb chicken with roasted veg and grains.  But then it’s also launched a ‘Belgian Chocolate Pot.’

I’m not sure the German bank Berenberg shares my sentiments, but it’s still cut its advice from buy to hold. And it reduced its share price target, too. And in a recent trading update, Greggs said that growth fell from 3.2% in January and February to an overall 1.3% in the first four and half months of this year. It partly blamed that nasty weather in the late winter.

But, as I said earlier, I worry about strong competition in the high street from other purveyors of coffee and buns. The reason other caterers are spreading in urban settings is that you can’t buy a coffee, tea or sticky cake on the internet. So the usual technological threat to many retailers doesn’t apply.

See you in the Punter’s Return.

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