Greggs attributes the £1.35 price of sausage rolls to increases in the minimum wage

Greggs Increases Prices Amid Rising Costs

In January, Greggs raised the price of its sausage roll by 5p to £1.35 and increased coffee prices by 10p, attributing these changes to escalating employment costs and taxes.

The bakery chain pointed to the recent rise in employers’ National Insurance contributions, introduced by Labour, as the primary reason behind a 5.5% surge in costs for 2025. Additionally, a new net zero packaging tax contributed to the financial pressure.

Greggs also noted that ongoing increases in the minimum wage and other employment expenses are expected to fuel further cost inflation into 2026. While the company is working to reduce expenses, it acknowledged that some of the burden is being managed through strategic price adjustments.

Despite a challenging holiday season, the retailer implemented price hikes at the start of the year. Last year’s higher operating costs led to a 4% decline in operating profit for 2025, even though sales climbed nearly 7% to £2.15 billion.

Roisin Currie, Greggs’ CEO, called on the government to provide greater support for businesses and job creation ahead of the Spring Statement. She emphasized the importance of government decisions that foster business growth and help young people enter the workforce, describing the current climate as particularly tough for high-street retailers.

Following these developments, Greggs’ share price dropped by 13%, hitting a five-year low before partially recovering.

Expansion Plans Continue Despite Profit Challenges

Greggs’ rising wage expenses were further compounded by increased production costs and investments in digital infrastructure and new distribution centers in Derby and Kettering.

Pre-tax statutory profits fell by 18% to £167.4 million, a decline attributed to the absence of a one-off gain from a previous supply chain site sale. The 2025 results also included a £4.5 million charge related to a historic VAT underpayment reported to HMRC.

Analysts described the results as disappointing, citing weak consumer confidence and the growing popularity of weight-loss medications as additional challenges.

The retailer reported a significant drop in demand during an unusually hot and prolonged summer, noting that high temperatures in June and July had a noticeable effect on customer visits and purchasing behavior.

Nevertheless, Greggs expanded its presence by opening a net total of 121 new stores in 2025, bringing its UK store count to 2,739.

Looking Ahead: Store Growth and Market Outlook

The company reaffirmed its commitment to expanding its UK footprint, aiming to surpass 3,000 locations over time. Plans for 2026 include approximately 120 net new openings and the introduction of compact “bitesize” formats in high-traffic areas.

CEO Roisin Currie cautioned that profits for 2026 are expected to remain flat compared to the previous year. However, she highlighted a robust pipeline of new store launches, particularly in untapped markets, and confirmed that investments in supply chain capacity are progressing as planned.

Julie Palmer of BTG analysts warned that the retail and hospitality sectors will likely continue to face significant challenges due to persistent inflation, high energy costs, and further increases in the minimum wage. She suggested that these pressures may force businesses to raise prices, reduce staff, or even close locations.