Subject: Greggs PLC (GRG.L)
I have been buying UK listed Greggs PLC of late.

Why? From memory, please do your own fact checking.

This is a true Warren Buffett type situation. Too small for Berkshire these days but that’s not an issue for me.

If you live in the U.K. you will be very familiar with Greggs. If you don’t live in the U.K. you probably have never heard of it. On first inspection you might dismiss Greggs as a simple ‘nothing to see here’ bakery. That would be a mistake. That would be like dismissing McDonalds because it sells burgers. McDonald’s took a commodity burger and turned it into a global brand. Greggs have done the same with the humble sausage roll in the U.K. (not scalable outside U.K. unfortunately, however.)

This is what you get with Greggs:

One of the strongest brands in the U.K. (this is supported by empirical evidence and my personal local knowledge here in the U.K.).

The lowest cost provider in the ready to eat market, which is passed onto consumers with unparalleled value and quality offering. This is the key competitive advantage.

A network of shops supported by high tech food production facilities.

Super management with operational excellence, brand building and unusually astute capital allocation.

Highly motivated staff due to smart incentive structures.

A long history of growing revenue and profits.

50% payout, equating to a 4% dividend yield.

20% ROIC and a laser focus on returns. Check out the recent CFO presentation. Major growth opportunity is behind it but there remains significant opportunity to deploy further capital at high returns.

Zero debt and large cash pile.

Recently completed major investment in production facilities leading to efficiency.

The stock is down significantly over the past year, as the market has proceeded a few headwinds which are outside of management’s control and do not effect the quality of the business. These are:

U.K. government has increased employer national insurance taxes from April 2025.

Food cost inflation.

Reaching the end of existing 5 year plan of expansion capex and gradually moving closer to a cash cow saturation situation.

These factors have cut the PE from 20 to 13. I have it trading at around 13 times my 2025 earnings estimate which reflects each of the above challenges e.g. higher U.K. national insurance taxes.

Greggs is a highly profitable business with a strong moat and great management. It’s hard to appreciate from outside the U.K. but it’s a special company. If you read the reports on the company’s website, which are excellent in describing the economics and competitive position of the business, you will see what I mean.

Really there are a couple of things that make this a company I believe Buffett would have no hesitation in buying.

Greggs occupies a little place in the minds of British consumers. (Like Sees, Coca-Cola, McDonalds).

It is a highly predictable business, that is incredibly hard to compete with on price and quality.

Humans have been craving fat and sugar sine our time on the African savanna, millions of years ago and that is never going to change. Buffett likes simple things like that (e.g. we have to drink every day. Half the world wakes up and needs a shave, the other half shave their legs).

Because of its boring predictably and reasonable price, a large allocation can be made with little risk. That is really important to me personally and is a Munger thing and a whole other post.

I would expect an investor today to double their money over 8 years, with a large slice of that return coming back in dividends.

Market cap is £1.84 billion. Could be a target for private equity if it does not re-rate soon. Not something that would suit me personally. I’d rather a double over 8 years than a 25% bump from a takeover premium.

Anyway, there you go. That’s my contribution to this Non-US Stocks board. Thank you to Manlobbi for facilitating and I look forward to any comments you might have, particularly that challenge any of my assertion.

Apologies to any U.K. investors who are no doubt already very familiar with Greggs and may well understand it much better than me.

Evbigmacmeal