A Cheap, Ubiquitous, High-Return Business with Temporarily Ugly Numbers
Greggs ($GRG) Investment Thesis
Greggs is the second-largest food retail chain in the U.K.—a £2 billion powerhouse with over 2,600 locations and a plan to hit 3,500. It dominates breakfast food-to-go. And yet, free cash flow has collapsed from £183 million in 2021 to just £29 million in 2024.
But the business isn’t deteriorating. It’s reinvesting heavily. Store count keeps rising, and revenue is compounding at nearly 10% annually. But margins have been declining—a result of significant cost inflation—and the stock has been punished, down 50% in the last year.
To understand Greggs, you have to understand British breakfast. The Full English, with bacon, sausage, eggs, and beans, is British culture. And Greggs does it at scale.
This is a case of high reinvestment, high returns, and temporarily ugly numbers. Investors see decline, but Greggs is growing faster than ever.
What You’ll Read Today
History
Business Model
Industry Overview
Moat
Key Financials
Capital Allocation & Management
Valuation
History
Greggs traces its roots back to 1939, when John Gregg began delivering fresh eggs and yeast by bicycle in Newcastle. In 1951, he opened the first Greggs shop, thereby ditching the bike.
From the start, the mission was clear: offer quality baked goods at affordable prices. And the model worked.
When John died in 1964, his son Ian took over. At the time, Greggs was still a single bakery in Newcastle. But Ian saw national potential, and he had a plan to get there: scale through acquisition, while building a supply chain that could support it.
Greggs expanded across the North East region first (where Newcastle is located), using a model it still relies on today: a central bakery serving a cluster of nearby stores. The setup allowed for fresh daily delivery, standardized product quality, and materially lower store-level costs. Stores didn’t need full kitchens, just ovens to finish the baking.
In the 1970s, Greggs expanded outside its home region, acquiring bakery chains in Glasgow (1972), Leeds (1974), and Manchester (1974).
By the time the company went public in 1984, it had 261 shops across four regions. Growth continued through the next decade. By 1994, Greggs operated 502 shops in seven regions. That same year, it acquired Bakers Oven, a 424-shop retail bakery chain owned by Allied Bakeries. The two brands coexisted until 2009, when Bakers Oven was rebranded to Greggs, allowing for national advertising and operational consistency under one name.
The late 2000s marked a turning point. Greggs began its pivot from traditional bakery to food-on-the-go retailer. Store layouts were modernized, seating was partly removed, and hot drinks and breakfast items were added. Volume and speed became key.
The strategy worked. Greggs expanded its addressable market and began opening in non-traditional locations: train stations, industrial parks, airports, and more.
Today, the business still runs on Ian Gregg’s model: centralized production, decentralized retail, and tight control over unit economics. What’s changed isn’t just scale, but also execution. Greggs has expanded its menu, extended opening hours, added drive-thrus, and gone multi-channel with delivery and app ordering.
In other words, Greggs is like a British McDonald’s—just growing faster.
Business Model
Greggs makes money by selling food and drinks.
It’s best known for one item in particular: the sausage roll. Greggs has crowned itself the “King of Sausage Rolls,” and while I haven’t tried one myself (I don’t live in the U.K.), the product was immortalized in Madame Tussauds, right next to Shakespeare and David Attenborough.
According to Greggs themselves, they sell over one million of them per day.
That must count for something.
Beyond sausage rolls, Greggs offers a mix of bacon, omelette, chicken, tuna, and cheese sandwiches, porridge, sweet treats, hot drinks, salads, and hot food like pizzas, potato wedges, and fried chicken. For the full menu, check their website. But the bottom line is: high-volume, low-priced, broadly appealing food for people on the move.
The products are sold through a wide range of channels: traditional shops, travel hubs (train stations, airports), drive-thrus, supermarket concessions, food delivery apps (Just Eat, Uber Eats), and franchised locations. In other words, Greggs fits into nearly any real estate footprint. It’s why despite operating only in the U.K., scaling to 3,500 shops is feasible.
As of today, Greggs runs 2,649 shops, of which 564 are franchises. Franchise partners are used to access restricted locations, such as motorway service areas, petrol stations, and hospitals.
Greggs competes on price, leaning heavily into a value-for-money positioning. Some of the current prices reflect that:
A sausage roll is £1.25
A steak or chicken bake is £2.00
A cappuccino is £2.00 (coffee from Costa typically starts around £4.00)
A bacon breakfast roll is £2.40 (versus £4.09 at McDonald’s)
A sausage & omelette roll is £2.60 (versus £3.79 for a McMuffin)
This isn’t a perfect like-for-like comparison—quality, portion size, and branding all differ—but the value gap is clear. The average Greggs transaction is just £4, and I doubt transactions at McDonald’s or Starbucks are any lower.
Greggs achieves this pricing through vertical integration. It owns its own supply chain: manufacturing, logistics, and regional distribution. Large regional bakeries supply clusters of stores, which only need to bake off and serve the products. That reduces store-level complexity, keeps labor costs low, and enables pricing competitors can’t easily match. (More on this in the Moat section.)
The stores themselves perform well. From 2015 to 2024, revenue per shop has grown at over 5% annually.
Furthermore, new shop economics are strong. Greggs targets a 25% annual cash return on invested capital and usually exceeds it after two to three years as shops mature. The hurdle rate to approve a new location is 22.5%.
All told, Greggs combines simplicity with strong unit economics and a growing footprint.
To better understand Greggs’ positioning, it helps to look at the broader industry in the U.K.