Dan Murphy’s customers pivot to mainstream beer brands

Endeavour Group has reported increased shopper focus on value at Dan Murphy’s and BWS during the first quarter of FY24.

Retail liquor sales rose 1.9 per cent to $2.54billion, with cost-of-living pressures leading to increased demand for classic mainstream beers over craft labels. Top sellers were Great Northern and other classic beers, such as VB, Tooheys, Hahn.

Endeavour Group Managing Director and CEO Steve Donohue, said: “Customers are searching for value and discovery, which is reflected in shifting category trends, including higher demand for mainstream beer, rosé and pre-mixed drinks.”

He said there had been a slowdown in sales in August and in the lead-up to Father’s Day in stores, but trading at Dan Murphy’s and BWS had started picking up again.

“Momentum trended up again through the last two weeks in September, and this has continued into the second quarter,” he said.

Donohue’s insights echo those shared by Coles, which reported last week that its customers had shifted back to mainstream brands smf away from craft beer. The retailer also saw growth in sparkling, prosecco and rose wines, offset by lower champagne sales. The ready-to-drink category also grew strongly as customers traded out of full bottled spirits into more affordable ready-made drinks.

Winning with owned brands

Endeavour Group said its the Pinnacle Drinks (owned and exclusive) brand portfolio has seen success due to its focus on keenly priced innovations, with products such as the carbon neutral ‘Largo’ beer range, launched in partnership with Australian music act Lime Cordiale, and ‘Ovata by Oakridge’, a premium Yarra Valley sparkling wine crafted from select parcels of Chardonnay and Pinot Noir, launched in time for Spring Racing and the festive season.

It also noted the awards success of its Pinnacle brands.

“We are delighted that our Paragon Wine Estates [part of Pinnacle Drinks] winemaking teams have continued to be
recognised for their industry leading achievements,” the company said.

“Cape Mentelle in Margaret River was awarded this year’s Old Vine Trophy in the International Wine and Spirits Competition, for their dedication to preserving and protecting old vines. Oakridge Wines in the Yarra Valley achieved the number one spot in the inaugural Halliday Wine Companion Top 100 Wineries list.”

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Endeavour celebrates the ‘Matildas effect’ on pub sales

Hotels’ sales revenue grew 2.8% in the quarter, driven by food and bars sales as patrons gathered in our venues for major sporting events and Father’s Day in particular, “more than offsetting softer gaming revenue”.

“The ‘Matildas Effect’ saw 1.2 kegs of beer sold every minute in our Hotels during the semi-finals and final in August, and we
welcomed a record 65,000-plus guests on Father’s Day. On a comparable basis hotels’ sales increased 1.2%, cycling
an additional public holiday long weekend in September last year,” Donohue said.

Donohue told analysts the group will cut back the purchase of new pubs as it aims to lift shareholder returns.

“We recognise that we’ve got some work to do improving, particularly our hotel network, and the returns there from it and that’s the real focus for us right now,” Donohue told investors.

“We’re going to be very, very careful. The real opportunity is to deploy that capital back into our network and leverage those up because as we said in that investment material we shared a couple of weeks ago, the returns from hotels sits below those of our retail businesses.”

Strong Christmas outlook

Donohue said Christmas bookings in hotels were already breaking records.

“At the end of Q1, bookings are at 40% of capacity across 266 hotels nationwide that are hosting Christmas Day events,” he said

“We anticipate that close to 46,000 Australians will enjoy festive celebrations at our hotels.

“Looking ahead, we have strong plans in place across the Group to ensure we are the destination of choice for Australians again this festive season, as customers seek out our brands to help them enjoy memorable social occasions with family and friends. Q2 is always an important quarter for the business, with key events such as Black Friday and Cyber Monday adding to the traditional peak associated with Spring Racing, entertaining and gifting at Christmas.

“We remain focused on profitable growth and delivering long-term value for our shareholders, while offering the very best prices, service and experiences for all customers.”

Bill Waivish fails in board tilt

War broke out in September, when high-powered shareholders including former Woolworths chief executive Roger Corbett, former Myer Chairman Bill Wavish and billionaire Bruce Mathieson Snr took public aim at Endeavour Group and its board.

Wavish announced he wished to join the Endeavour Group board and said he believed he could contribute towards “turning it around” as a director.

The group’s largest shareholder, billionaire publican Bruce Mathieson backed his campaign.

“We need people on that board who can turn the company around from just bad management,” Mathieson Snr told The Australian.

However, shareholders voted against Waivish joining the Endeavour Group board. Wavish only received around 27.8% of votes in favour of his election.

Endeavour Group shares were down 2% early yesterday afternoon, trading at $4.92, and Mathieson has called for Chairman Peter Hearl to resign.

He told the Australian Financial Review the trading update “once again vindicated my questioning of strategic direction and calls for Hearl to go. Another quarter of revenue not even near to keeping pace with inflation”.

 “When I said get back to everyday low prices I didn’t intend for Hearl to start with the share price,” he said.

Corbett demanded during the shareholder meeting that Hearl immediately resign.

“You need to go forthwith. I call for your immediate resignation,” he said.

Corbett said if Hearl only thought that Endeavour’s problems were minor, then “you indeed become the problem”.

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