Starring role for doughnuts helps Greggs to defy the downturn

The business, which has more than 1,500 stores, said like-for-like sales increased 0.8 per cent in the 13 weeks to October 1, up from 0.4 per cent in the previous six months.

Greggs said promotions such as a sandwich and a drink from £1.89, four sausage rolls for £2.30 and two steak bakes for £2 are proving popular in the current economic climate.

It has also sold more than 1.4 million Superstar Doughnuts since it introduced the range five weeks ago, including flavours such as Jaffa Cake, strawberry milkshake and triple chocolate.

Chief executive Ken McMeikan said: “We have received a lot of feedback that customers were finding life tough so we have invested more in promotions and range innovation.”

The bakery chain started selling breakfast products alongside its more traditional pies and pasties about a year and a half ago, and pain au chocolats, porridge and coffee are now among its best selling items.

Sales of coffee are up 18 per cent to 12 million cups so far this year after it rolled out freshly ground beans to all its stores, while sales of bacon and sausage rolls are up more than a third, with 10 million sold so far this year.

Mr McMeikan admitted investment in promotions would have a “small impact on margins” but added it was the right thing to do to help customers.

There were some “encouraging signs” that recent hikes in inflation may be easing, with a good wheat harvest set to help the price of flour although this may be offset by rising sugar prices.

He still expects the price of goods to rise in 2012, but at a lower pace than in 2011.

Greggs is also trialling a new cafe-style store in Newcastle, called Greggs Moment, which offers gourmet square pies and deli-style sandwiches.

Mr McMeikan said Greggs was watching the store closely, but thinks it has potential to compete with big coffee chains by offering cheaper prices.

He said he has already received feedback asking him to open the new concept in cities across the UK.

Darren Shirley, analyst at Shore Capital, said: “The management states the driver for the resilient like-for-like sales growth is a number of small things adding up, such as ‘coffee, breakfast, new doughnut range etc’ which we are encouraged by, but the sales performance has undoubtedly benefited from a step up in promotional activity which has centred around the lunch-time ‘meal deal’.

“Such activity has increased basket spend from existing customers though we believe it has come at the cost of some modest margin investment.”