Weightloss drugs challenge Greggs prospects

In a revealing analysis, Jefferies has indicated that the increasing popularity of weight-loss medications may pose significant challenges for Greggs, the UK bakery chain. As consumers turn to drugs such as Mounjaro and Wegovy, which suppress appetite, investors have begun to speculate about the future of this popular establishment.

Greggs has recently reported a decline in sales, attributed to waning consumer confidence and atypically warm weather conditions that have adversely affected demand. Analysts have expressed concerns that the rapid expansion of Greggs locations could be cannibalising its like-for-like sales.

Jefferies analysts warned that weight-loss injections may represent a long-term challenge for the chain. These medications operate by mimicking the GLP-1 hormone, resulting in feelings of satiety that specifically reduce cravings for high-calorie, ultra-processed foods. Their research estimated that nearly four million individuals in the UK are now utilising these weight-loss jabs, which translates to approximately 7.5 per cent of the adult population.

The impact of these drugs could be particularly pronounced among a demographic that includes Greggs’ most valuable customers. Jefferies suggested that even if a small percentage of GLP-1 users frequent Greggs, they are likely to be high-calorie consumers, drastically affecting sales.

Roisin Currie, CEO of Greggs, acknowledged the influence of these medications, noting that the company is adapting by introducing healthier food options such as egg pots. Despite these efforts, Jefferies has downgraded its forecasts for both sales growth and profit margins, altering its stock recommendation for Greggs from ‘buy’ to ‘hold’.

The evolving landscape of food consumption and health trends may require Greggs to reevaluate its product offerings and marketing strategies in order to remain competitive in a market increasingly influenced by health-focused consumer behaviours.