Demand for pub fare, favourite tipple still bubbly amid spending crisis, says drinks boss

Shoppers may be starting to trade top-end French champagnes for more affordable Aussie sparkling, but the threat of a worsening consumer spending outlook isn’t worrying the boss of drinks giant Endeavour Group, who says consumers are still determined to spend on little luxuries.

The chief executive of the Dan Murphy’s operator pointed to the strength of the drinks business during previous tough economic climates, such as the global financial crisis, and said the company’s pubs business was currently thriving.

Endeavour Group boss Steve Donohue at the Crows Next Hotel in Sydney.
Endeavour Group boss Steve Donohue at the Crows Next Hotel in Sydney.

“Hotels are really in the sweet spot of consumer appeal around value and comfort. We’ve never sold more food than we are right now in hotels,” he said when discussing the group’s market position two years on from its separation from grocery giant Woolworths.

“Our business is social occasions, helping people be connected … Actually, when things get tough, you want your family and friends around you. You want to find small luxuries.”

Demand for top-end champagnes has changed slightly in the face of rising prices over the past few months, with shoppers starting to switch to locally produced sparkling. But other than this trend, Donohue said there was little evidence that consumers were significantly changing their buying habits in response to surging grocery prices and mortgage costs.

The group’s promise to offer the lowest price in the market to its members is going some way to driving the number of shoppers in-store.

Beyond this, Donohue said consumers were responding well to the investments in personalisation and customer service that the group made since spinning out of the Woolworths business in June 2021.

Over the past two years, the group has bought 16 new hotels, purchased renowned wine brands such as Cape Mentelle and upped its focus on artificial intelligence and analytics to help personalise offers and recommendations for shoppers.


“We are definitely delivering far better outcomes than we were two years ago,” Donohue said.

The business has also expanded its My Dan’s loyalty program in the years since the worst of COVID-19, by hitting 5 million members, or close to 20 per cent of Australia’s population.

Endeavour reported a 3.7 per cent increase in overall group sales for the third quarter of this financial year, coming in at $2.8 billion.

Some analysts remain cautious on the stock, noting that the 1.2 per cent growth that the company enjoyed in its retail sales last quarter was partially influenced by rising product prices. In May, UBS analysts cut the company’s 12-month price target from $7.15 to $6.75.

While the business is optimistic about its market position, the prospect of a deteriorating spending outlook continues to hang over both the discretionary and non-discretionary retail sectors.

UBS said its most recent consumer survey revealed that a further slowdown was coming across several retail categories, as households felt the full effect of consecutive rate rises.

“The long-standing challenges for the Australian consumer, notably higher cost of living as per recent UBS research, have now materialised,” the group said in a note to clients this week.

Endeavour Group shares were trading around $6.20 during Thursday’s session – putting it ahead by 1.5 per cent since the business launched onto the ASX on its own two years ago.

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