Bakery chain Greggs has come a long way from its days as a family bakers in the 1930s. Business Correspondent Jonathan Jones speaks to the group's North-East managing director, Graham Randell.

IT may have its roots as a traditional bakery, but Greggs now counts not only supermarkets, but the likes of fast-food chains McDonalds and Burger King among its major competitors.

That underlies the business's move into takeaway food, principally sandwiches and savoury products such as pies, pasties and sausage rolls, plus sweet lines, such as doughnuts and drinks.

Greggs North-East managing director Graham Randell said: "These product categories have driven the growth of the group for many years.

"Although we still sell traditional bakery lines like bread and rolls, these are a steadily declining proportion of our business because of the growth of supermarket bakeries."

Greggs was founded as a family bakery on Tyneside in 1939 by John Gregg, the father of the present chairman.

When John Gregg died in 1964, the current chairman Ian Gregg gave up plans for a legal career to take over the business, which at that stage consisted of a single shop with a small bakery at the back.

Mr Randell said: "Under the leadership of Ian Gregg, the chain expanded in the North-East, established on the principle of serving a cluster of stores from a single central bakery, achieving efficiencies that could be passed on to the consumer in value-for-money pricing."

The business expanded out of its North-East heartland by acquiring established regional bakery chains in Glasgow, Leeds and Manchester in the 1970s.

By the time of its stock market flotation in 1984, Greggs had 261 shops in four regional divisions.

By 1994, it had acquired regional operations in Birmingham, South Wales and North London, swelling its empire to 502 shops in seven regional divisions.

But it was in 1994 that a real boost in size came for the business, when it acquired the Bakers Oven chain, including all 424 shops, from Allied Bakers Limited.

Mr Randell said: "The Bakers Oven format complemented Greggs, since many of the shops had in-store bakeries which enabled the chain to operate efficiently in areas of lower population density, where the Greggs formula of large central bakeries and satellite shops was less appropriate.

"Many of the shops also had seated catering facilities, which Greggs shops did not."

The last of the nine Greggs divisions was formed by the acquisition of Birketts, a family-run business in the Lake District, in 1996.

Mr Randell said: "We constantly have to develop new products and upgrade our established lines to keep us one step ahead of the competition.

"In 1998, we opened a central savories unit at Balliol Business Park in Newcastle, which has helped us to produce quality products at reduced cost.

"Our capacity to innovate was further enhanced by the opening of a £2m group technical centre, next to the savories plant, in 2001."

He added: "Despite our roll-out as a national, and now international brand, with our first forays on to the continent, the siting of these two facilities in the North-East, proves that we are still dedicated to this region."

Greggs, which dropped the "of Gosforth" part of its name to make the brand more palatable for a UK-wide audience, has just opened two shops in Belgium.

Mr Randell said: "The opening of the shops in Antwerp and Leuven will enable us to explore the potential for our trading format in a typical continental European market."

But while Greggs will look to the European market for growth, it will not be at the expense of its UK operations.

The group still believes there is plenty of scope to increase the number of shops, including the Bakers Oven chain acquired from Associated British Foods in 1994, to more than 1,700 by 2010.

The company operates 1,100 Greggs shops and 200 Bakers Ovens. It has a turnover of more than £400m and employs about 18,000 staff.

The North-East division turns over about £50m and employs 1,700 staff, including 300 at its Gosforth headquarters.

Mr Randell said: "We believe there is plenty of scope to expand within existing trading areas where we are under-represented, such as the South East, and by moving into new regions.

"The markets we operate in are large, fragmented and growing. Even though we are the largest specialist retailer of sandwiches, our national market share is only around 2.5 per cent."

Looking to the future, Mr Randell said: "Our aim is to be recognised as Europe's finest bakery-related retailer, by achieving excellence in everything we do.

"We recognised many years ago that the supermarkets were likely to take an increasing share of the market in bread and rolls, which is why we have repositioned ourselves to become primarily a takeaway food business.

"It is the growth of our shops in convenient locations, in the high streets and suburbs where people live and work, that will give us a real competitive advantage as we look to the future."