The price of a Greggs sausage roll could go up to £1.50 as the cost-of-living crisis continues to bite.
It comes after the fast-food chain warned of increasing costs in an update to shareholders.
It also said customers will be feeling the squeeze, something that could cause them to tighten their belts.
And Mike Owens, UK Sales Trader at Saxo Markets, has warned that items such as the sausage roll could surge in price.
A Greggs sausage roll
WikiCommons
Mr Owens: “Greggs today reported a 27 percent growth in sales in the first 19 weeks of 2021 in a solid earnings statement that met market expectations. Though they become the latest company to confirm that prices will likely rise due to cost pressures which will affect consumers first hand.
“As the UK is gripped by the rising cost of living, CEO Roger Whiteside warned that some products may go up by 10 percent in the near future, which could see sausage rolls priced closer to £1.50 something that looks likely to become a new normal as wholesale food prices surge.
"Cost of raw materials and labour are rising fast for the bakery and this could be a difficult issue for a value proposition like Greggs, who will want to retain their bargain credentials.
“Another concern for the Newcastle-based chain is its drop in sales in larger cities and office locations, something that could worsen over time as the idea of a four-day working week is tested and thousands continue to work from home in the long term."
He continued: “The country now faces the prospect of daily staple Greggs becoming more of an infrequent luxury purchase for some, however their position as one of the lower cost eating options means we would expect the chain to benefit as customers are forced to turn away from more expensive options.
“However, balancing market share opportunities with margin protection is likely to be a big challenge for Greggs.
“The group will struggle to increase prices while still maintaining its value-for-money proposition in the market. Savoury and breakfast products are the most likely to be priced higher.”
Greggs
WikCommons
While Ross Hindle, an analyst at Third Bridge, said: “The big unknown is how consumers react to the rising costs and tightening of wallets. It is believed that there is an opportunity for Greggs to gain market share from ‘posh’ coffee shops and more expensive food-to-go operators as Britons cut back on their mealtime and beverage spend."
He added: “Eighty percent of Greggs’ range is manufactured in-house, providing some flexibility in how the Group navigates inflationary pressure. However, Greggs will still face intense cost headwinds.”
In March, the business warned that changes to taxes and higher costs for energy, food and staff would push up its costs between six percent and seven percent.
Prices that it charges customers already went up in the early part of 2022, and the firm said in March that it expects more changes this year.
On Monday, Greggs said that like-for-like sales at the shops it manages rose by more than 27 percent in the first 19 weeks of this year, compared to 2021.
But it also pointed out that this was a flattering comparison due to the Covid restrictions in place a year ago.
In the 10 weeks to May 14, a period when restrictions were easing in 2021, sales were up nearly 16 percent, Greggs said.
Its shares were trading down 2.8 percent early on Monday.
The company said: “Sales levels in larger cities and in office locations continue to lag the rest of the estate but transport locations have shown a marked increase in activity in recent weeks.
“Sales of hot food and snacks are showing particularly strong growth, with chicken goujons and potato wedges proving popular.”
It said that expectations for the financial year are unchanged.
