Greggs has handed a 10% pay increase to workers as it warned of “material cost inflation” that prompted a third rise in the price of its sausage rolls in a year.
The bakery chain said its shop workers would be paid at least £10.60 an hour from 1 January, up from £9.62 rate brought in last year.
The new rate is being introduced three months earlier than the usual pay review and is above the legal minimum wage for people aged 23 and over, which will increase from £9.50 to £10.42 on 1 April.
The Greggs pay rise comes in just days after the company said it had been forced to increase the prices on a number of its products by between 5p and 10p, taking the price of its sausage rolls to £1.20 each, up from £1 a year ago. Greggs said it expected its overall costs to rise by about 9% this year, in line with 2022 as inflation on energy and food continued.
Roisin Currie, its chief executive, said the pay rise had been brought forward as Greggs always tried to “look after people”. She said there were no plans to put the price of its goods up again but warned that with continued high energy costs, food inflation, which was “significant throughout 2022”, would continue in 2023.
The company plans to open 150 more stores this year – including several more Tasty outlets in Primark – as the chain benefits from the search for bargains during the cost of living crisis.
Greggs said sales surged by 18% in established outlets in the run-up to Christmas as it shrugged off the impact of rail strikes and the cold weather to bounce back from a poor year, when Omicron prompted many people to avoid high streets and offices.
Total sales rose by 23% to £1.5bn in the three months to 31 December, helped by the opening of new stores as well as strong trading in established outlets.
Greggs said its festive bakes, mince pies and salted caramel lattes had sold particularly well, with early evening experiencing the fastest rise in sales as it opens more outlets for takeaway dinners such as pizza. It said use of its app, which offers discounts, had also increased.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said Greggs was benefiting as shoppers “flock to value” during the cost of living crisis.
“Greggs is so confident its strong trading will continue, it’s planning to open 150 shops this year, and is continuing with extended opening hours at over a fifth of its sites,” she said.
“Essentially, Greggs has a lot going in its favour because it exists at the end of the value spectrum, and the group is capitalising on this. However, it will be crucial to closely monitor how out-of-home spending shapes up, because any worse-than-expected drop offs would be bad news for profits when combined with soaring costs.”
