This document discusses financial planning challenges in uncertain economic times for Greggs, a UK bakery chain. It outlines Greggs' business structure with over 1,500 shops and 19,000 employees. The current economic environment on the high street is challenging, with falling like-for-like sales, lower foot traffic, higher inflation, and shrinking consumer spending power. For financial planning, there are uncertainties around factors such as economic forecasts, commodity prices, fuel costs, and weather. Greggs must take a conservative approach to sales forecasting and focus on efficiency while balancing short and long-term capital spending. Advanced systems and scenario modeling are needed to facilitate coordinated, multi-horizon financial planning across the complex business.

1. Financial Planning
in
Uncertain Economic Times
DUNCAN SMITH
Head of Finance

2. Contents
 The Greggs Story
 Business Structure
 The High Street
 Financial Planning Challenges
 Summary
 Questions
2

3. The Greggs Story

4. Bakery Heritage
 1930s Bike delivery – yeast, eggs, flour
 1951 First shop in Newcastle
 1960s Bakery, vans and shop expansion
 1970s Scotland, North West and Yorkshire
 1984 Business floated on Stock Exchange
 1980s Midlands, Wales and the South East
Acquired Bakers Oven
 1990s Cumbria and savoury plant. Re-
branded Greggs
 2009 Business Centralisation
4

5. The Business Today
 1,500+ shops – high street and ‘smart’
 19,000 employees
 10 regional bakeries
 375 delivery vehicles
 Central savoury plant
 2 distribution centres
 6 million customers / week
 Turnover £662m, PBT £52m (2010)
5

6. Product Focus
 Bakery - making and baking
 Bread and cakes in early days
 Supermarket strength
 Growth of FOTG
 Growth of hot and cold drinks
 2011 - coffee, breakfast, hot sandwiches
6

7. Changing Sales Mix
7

8. 8
The 1960s

9. 9
The 1980s

10. 10
The 1980s

11. 11
Today

13. University

14. Petrol Filling Station

15. Business Structure

16. Structure & Planning
 1,500 shops->150 area managers->30 regional
managers ->7 heads of retail->retail director
=> Multi tiered, week by week plan
 Hundreds of SKUs->30 sub categories->5 categories
=> Multi tiered category forecast & margins
 10 bakeries, 3 production plants and 2 distribution
centres
=> Supply chain a series of cost centres
 Overhead costs at head office and across the country
=> Top down v bottom up
16

17. Structure Challenges
 Vertical Integration – 1 P&L
 Structural Complexities
 2 views of sales
 Large quantity of data
 Manufacturing
17

18. The High Street

19. Like-for-like sales: % change year-on-year
-8
-6
-4
-2
0
2
4
6
8
D J
2009
F M A M J J A S O N D J
2010
F M A M J J A S O N D J
2011
F M A
%changeonayearago
3-months
ended:
Non-food
Food
All sales
Source: BRC-KPMG RSM (food & drink data from IGD)

20. Footfall – town centres & retail parks

21. Inflation - CPI 4.5%, RPI 5.2%
Annual inflation rates - 12 month percentage change
Source: Office of National Statistics

22. Average Weekly Earnings

23. The High Street
 Retail like-for-like growth
 Town centre footfall
 Competition tough
 Consumers facing higher inflation with
lower pay rise
 Family spending power ↓7.1% in April
(Asda)
23

24. Financial Planning
Considerations

25. Uncertain External Factors
 Economic forecast
 interest rates?
 inflation?
 unemployment?
 Consumer squeeze
 Commodity prices - harvests & World supply
 Fuel and energy prices - Middle East stability
 The weather…
25

26. Volatile commodity markets
Coffee
Electricity
Oil
Wheat
Last
six
years
price
trends

27. The Weather
Source: Met Office website

28. Planning Considerations
 Retail – consumer wealth
 Conservative sales forecast?
 Efficiency improvement
 Capital spend
 Long v short term…
28

29. Planning Horizons
 Long term (3-5 years) – directional
 Annual budget – commitments
 1/4ly forecasts – adjust for changes
 Monthly – detailed sales and margin
 Weekly – ad hoc modelling & scenarios
29

30. Systems & Processes
 No more spreadsheets!
 Business wide co-ordination
 Fast data crunching
 Scenario building
 System integration
 Focus on management insight not accounting
processes
30

31. Summary
• Complexities in business structure
• Uncertainty in the economy
• Need for multiple plans and
scenarios
• Backed by great planning systems
• Focus needs on management
insight not finance process
31

32. Questions?