Baking a profit but is the future product or market (or both)?

In our last blog entry we discussed the impact of the “lipstick factor” on the performance of some cosmetic companies in the recession. Another company that has performed well in the current challenging business environment is Greggs bakery.

Those of you that are in the UK have probably heard of the Newcastle based bakery chain, Greggs. Despite there being a recession the chain has achieved impressive results. Yesterday they announced their results for the 53 weeks to 2 January 2010 with sales up 5% to £658 million and profits up 8% to nearly £50 million.

Greggs were reported as saying that their success was down to “great quality, great taste and great value” and it’s no doubt that customers wanting value in this recession have helped them achieve their impressive results.

Greggs would make a great case study for ACCA paper P3 and the papers in the enterprise pillar of the CIMA exams. For example, Ansoff’s Matrix (or the product-market mix as it is commonly known) could be discussed (click here for our ExPress notes on P3 which provide more details on Ansoff’s matrix).

Highlighting a couple of areas within the product – market mix we can see:

1.    Present product, present market.

Greggs is predominantly UK based but they also had operations in Belgium. In other words, they were selling their existing products in an existing market (Belgium). The options in Ansoff’s matrix for this area are withdrawal, consolidation and penetration. The operations in Belgium were loss making and the view was that this would not change in the foreseeable future so Greggs decided to withdraw from the Belgium market.

2.    New product, present market.

Greggs has said that they have removed all artificial colours and trans fats from their products. In other words they are introducing new healthier products in their existing markets. This is an example of product development.

3.    Present product, new market.

There are currently in excess of 1,400 Greggs stores in the UK. Greggs are planning on opening another 600 stores in the next few years. This is a classic case of market development where existing products are released in new markets.

Bakeries can very much be considered to be a traditional industry but if Greggs has anything to do with it then it will become a growth industry as well.