Greggs risks overexpansion as sales growth declines

In recent months, UK-based high street bakery Greggs has continued its expansion, opening 226 new outlets last year alone. The chain now boasts over 2,600 stores across the country. However, this rapid growth raises concerns among key investors who warn that the company may be approaching saturation. Sales growth has significantly declined, with an impressive rate of 52 percent in 2021 plummeting to just 11 percent the following year. Investors are apprehensive, fearing that the company's aggressive outlet openings may lead to cannibalization of its own sales, especially in densely populated areas. The traditional bakery model established by Greggs now includes a diverse menu range that extends far beyond freshly baked bread, with the sausage roll becoming its signature product. In the current climate, Greggs faces challenges similar to those seen with American coffee giant Starbucks, which, despite its initial success, struggled with overexpansion and market saturation. This parallel highlights the importance of a balanced growth strategy. UK investors appear less willing to fund overseas expansion strategies than their American counterparts, which further complicates Greggs' future potential for growth. Without adequate financial backing, UK businesses like Greggs may find themselves at a disadvantage, ultimately motivating younger companies to seek investment opportunities that lead them to international markets. The board members of Greggs recognize that they may be suffering from short-sightedness, considering the proliferation of stores within small geographical areas. This myopic view risks harming their overall brand efficiency and profitability. In cities where multiple branches operate close to one another, it raises the question of whether having several outlets in close proximity serves the business well or if it causes unnecessary market strain. Investors and analysts alike will be watching Greggs closely as it navigates these challenges and balances growth with sustainable business practices.