News

Woolworths was selling a $636 million stake in pubs and bottleshops business Endeavour Group on Tuesday night, in a capital recycling trade via investment bank UBS.

Woolworths is expected to use proceeds for investments and general corporate purposes, according to terms sent to potential buyers, instantly sending thoughts to Woolworths’ imminent move on pet goods retailer PETstock, as revealed by Street Talk on Monday.

Having got out of pubs and pokies (at least as far as business lines go) and petrol in recent years, pets are emerging as a growth engine for Brad Banducci’s team.

The country’s biggest and most valuable grocer has been pushing further down the pets route, trying to capitalise on increased pet ownership and owners’ propensity to spend more on their animals.

It is understood to have cut a deal to buy a more than a 50 per cent stake in PETstock for about $600 million. The deal would value the pets business at about 11-times EBITDA.

Rapid grocery start-up Milkrun held talks with global transportation giant Uber about a strategic partnership in one of several moves it considered during a tumultuous year for loss-making delivery companies.

The closely watched Sydney-based start-up also had preliminary discussions with supermarket chain Coles and gig economy food delivery firm Deliveroo about potential ways to co-operate. Those talks did not result in any agreements, and Deliveroo pulled out of Australia last month.

Milkrun’s predicament has been a hot topic in Australia’s close-knit start-up scene, with widespread rumours swirling about a possible deal with Uber, the dominant player in food delivery. Multiple sources said the two companies held talks earlier this year, but cautioned that there is no guarantee that they will result in any formal agreements.

It is common for fledging firms to discuss partnerships or seek investment from larger rivals, and for larger firms to meet with smaller companies to better understand the market.

Company documents obtained by this masthead earlier this year showed Milkrun was bleeding cash, which it planned to stem by ditching ultrafast deliveries and reducing riders’ average hourly pay.

The food delivery sector has been hit by turmoil this year with investors increasingly unwilling to fund loss-making businesses as the economy sours. In recent months two of Milkrun’s rivals, Voly and Send, both ran out of money and ceased operating.

This masthead can also reveal that DoorDash, the US-based gig economy giant that launched a Milkrun competitor in Australia called DashMart last month, laid off some of the employees who worked on the initiative as part of a round of global job cuts.

“The positions do not affect any single team,” a DoorDash spokeswoman said. “While some of the affected employees are based in Australia, this does not affect our presence or commitment to DashMart in Australia overall.”

Several industry sources said Milkrun had briefly held talks with Deliveroo and Coles about ways to potentially collaborate, including by getting Milkrun’s products on Deliveroo’s app. But its discussions with Uber were more substantial, the sources said.

In a wide-ranging interview in October, Uber’s global chief executive Dara Khosrowshahi was sceptical about the prospects of firms like Milkrun, which had sprung up on several continents only to flounder.

“I think that the business model can work but it will be very expensive in order to build up a customer base,” Khosrowshahi said. “And right now, markets are penalising expensive business models. So I think that those companies are going to be challenged right now.”

Uber already has a presence in the grocery delivery market via a partnership with Woolworths called Metro60.

But the company has used the Australian market as a breeding ground for global product initiatives. Earlier this year it acquired Australian start-up Car Next Door, which is now forming the backbone of an international expansion into vehicle sharing.

Milkrun is the best-funded local delivery start-up, and raised $75 million from a host of prominent backers in January. It used the money to build a network of mini-warehouses in Sydney and Melbourne, enter new product areas such as alcohol, and create a confident, irreverent brand in a distinct shade of blue.

Filings with the Australian Securities and Investments Commission indicate Milkrun has not raised any fresh equity since then.

Milkrun chief executive Dany Milham did not respond to requests for comment. In June Milham said the company was in a “comfortable” financial position, growing rapidly, and predicted some of its stores would soon be profitable.

Milkrun’s total headcount, according to figures from the professional social network LinkedIn, which relies on users to update their employment status and is therefore useful as a guide only, is down 6 per cent in the last six months. But Milkrun is still advertising for a handful of open roles.

Uber and Coles declined to comment. Deliveroo no longer has Australian spokespeople.

From champagne to whiskey and alcohol-free spritzes, Australians are buying up beverages in bulk ahead of the festive season at a rate bottle shop owner Dan Murphy’s hasn’t seen for years.

Dan Murphy’s managing director Agi Pfeiffer-Smith says trading across the Black Friday and Cyber Monday weekend shows consumers aren’t looking to cut their drinks budgets in the lead-up to Christmas - if anything, they’re searching for deals at the premium end of the market.

“We’re not really seeing any indications of customers trading down at the moment. They are definitely taking advantage of offers, we keep seeing that come through. But it’s the time of year when we normally actually see people trade up, more than anything else,” she said.

Trading in the last week of November suggests shoppers are increasingly buying up booze in bulk to last them the next four or six weeks - and more so than last year, Pfeiffer-Smith said. Customers are also getting a jump on their Christmas gifting, brushing off concerns about the economic outlook for 2023. 

“This will be the first Christmas in a couple of years where people really get to gather with family and friends that they might not have had the chance to connect with,” Pfeiffer-Smith said. “There is a bit of confidence to plan, which might not have been there in prior years.”

Champagne will be the star of the show, but premium Japanese and Australian whiskeys are also in high demand. Meanwhile, the drinks retailer saw its biggest-ever sales week for non-alcoholic products during this year’s Black Friday sales period.

Yet while shoppers are clearly still willing to spend on booze, the price tag matters. Dan Murphy’s will step up its aggressive price beat policy in December as it works to coax shoppers away from competitors.

Like hardware giant Bunnings, the company promises shoppers it will beat the price of competitors on the spot if they find an identical item stocked elsewhere at a lower price. Dan Murphy’s has also grown a team of staff dedicated to check competitors’ prices and beat these across the store for members of its loyalty program.

The inflationary environment has led the company to lift its investment in technology, so it can track and lower prices across its stores in real time. This includes the roll-out of electronic shelf labels that let its workers update prices the minute their systems identify the need to beat a rival.

Australia’s topline inflation slowed to 6.9 per cent in October, but alcoholic beverage prices are up 3.6 per cent for the year and the recent surge in fresh food prices has left households with less room in their budgets for booze.

Pfeiffer-Smith says price drops are most common throughout the festive season, and she expects these to surge in the lead-up to Christmas, when 2,200 seasonal staff will join stores across the country to help meet customer demand.

While making predictions about overall Christmas spending is tough this year, Pfeiffer-Smith says the promise of having the lowest prices puts the company in a strong position.

“Early indications for us is that it will be a good festive season. People seem to be in the mood, and they want to celebrate.”

Delivery service Jimmy Brings has launched a range of convenience products to augment its liquor line-up.

The range includes condoms, chips and dips, painkillers, drinks and more, and spans 231 inner-city suburbs across Sydney, Melbourne and Brisbane. 

Aiming to provide customers with convenient services, Jimmy Brings said Australians can place their orders and follow Jimmy’s activities via the app.

Luke Calavassy, head of Jimmy Brings, said Jimmy’s entry into the convenience market is a “natural step” toward elevating its “ultra-convenience services”.

“From impromptu family pop-ins to parties with your friends, our new non-liquor range makes it easier for our customers to get more of what they want from us,” said Calavassy. 

Customers can order all the essentials by visiting Jimmy Brings’s website or downloading the Jimmy Brings app. 

Multibrand food chain franchisor Retail Food Group says sales across its domestic network have grown 16.5 per cent in the first 21 weeks of this year.

The company owns and operates Gloria Jean’s, Crust Gourmet Pizza, Donut King, Brumby’s Bakery, Cafe2U Michel’s Patisserie, Pizza Capers and The Coffee Guy.

In August, the business reported that its tax-paid profits increased threefold to $5.3 million in its full-year results.

Continuing into the new financial year, same-store sales are up by 20 per cent with Donut King performing particularly well, up by 47.6 per cent.

Customer visits to stores have grown by 20.6 per cent during the quarter to date, although staffing shortages are an ongoing issue for many outlets.

To alleviate operational pressures, the company says it has launched a baker recruitment program in partnership with the state-based TAFEs to create career opportunities.

For the first half of this year, 32 new outlets were opened while an additional 50 stores are planned across 16 countries in the remainder of FY23 (which includes four new US-based Gloria Jean’s drive-thru outlets).

In its international division, the company has reported that restructuring activity and improved trading conditions boosted underlying EBITDA by 35.5 per cent last financial year.

Metcash chief executive Doug Jones says the second half of fiscal 2023 has started well, with group sales up 6.2 per cent.

Mr Jones said shoppers were still supporting neighbourhood stores, which helped the wholesaler distributor hold its ground against larger supermarket rivals.

He also said lost sales in the hardware business after months of heavy rain along the east coast – for items including paint, garden tools such as lawn mowers and outdoor barbecues – would only be made up if better weather prevailed in summer.

What was once dubbed a temporary gain amid COVID-19 lockdowns as shoppers stayed away from malls, Mr Jones told The Australian Financial Review that independent supermarket IGA and Foodland network’s refurbished stores and investment in price was paying dividends – and winning share.

“It’s simple math if you’re growing faster than the others, you must be taking share. Now we are very small in comparison to them (Coles and Woolworths), so it’s going to be small numbers in terms of the share,” said Mr Jones, who took the helm in February.

“But what we’ve disclosed is that our volumes and our sales numbers are holding up well. And our retailers are telling us that the local shoppers are enjoying what they’re experiencing, and we think it’s now beyond just being locked down. They found that the experience is good, and they found that they do not have to pay any more for that.

“As a wholesaler ... we are keenly aware that our responsibility is to keep the network competitive. Our primary value driver, as a wholesaler, is volume.”

Inflation crunch

Metcash shares rose 3¢ to $4.26 each by 3pm AEDT, after it said food sales grew by 4 per cent in November. This was underpinned by supermarket sales and a return to volume growth as wholesale price inflation marched upwards, averaging 8.8 per cent last month.

Wholesale price inflation reached 6.2 per cent in the first half, boosting supermarket and convenience store sales in the six months to October 31.

Mr Jones’ comments came after Metcash posted a first-half revenue gain of 7.8 per cent to $8.86 billion against lockdown-fuelled sales a year earlier. This includes charge-through sales, which are direct sales from suppliers to retailers invoiced via Metcash.

Earnings were up strongly in the first half, although its reported bottom line was pulled lower by one-off costs and adjustments to $125.7 million. Underlying profit after tax increased 9.1 per cent to $159.9 million.

The board declared an interim dividend of 11.5¢ per cent a share, up 9.5 per cent from a year ago. It will be paid on January 30. Dividends are up 92 per cent over the past three years.

All divisions topped consensus expectations. The Total Tools hardware business was the standout, making up 20 per cent of group sales and 44 per cent of profits.

Hardware sales surged 16.8 per cent to $1.7 billion in the first half, supported by growth in both the Independent Hardware Group and Total Tools. Trade constitutes most of the hardware business amid a growing DIY market. Total Tools is aiming for 130 stores by 2025, up from its present 104 sites.

Mr Jones said although underlying demand was high in the second quarter, the growth was cut short because of poor building conditions in the final six weeks. Wet weather and flooding in NSW and Victoria restricted access to building sites and dampened spring sales of outdoor, garden and paint items.

Hardware sales were up 8 per cent in November, but IHG sales fell slightly.

Inventory was more than $100 million higher at $1.23 billion for the half, mostly due to hardware goods and Metcash beefing up its position to insure against any supply chain delays. Mr Jones said he did not expect to have to discount much to move stock.

IHG chief executive Annette Welsh said the business would not be able to recoup the lost sales due to weather through Christmas trade, but the length of builder times would become longer. She added that the trade pipeline remained strong, and weather seemed to be the main issue in Queensland and NSW rather than a more general slowdown.

Chief financial officer Alistair Bell, who planned to leave Metcash, called the results “stellar” with record profits. Mr Bell added that Metcash’s “Project Horizon” spend remained inline with guidance of $95 million to $105 million for the 20 months ended calendar year 2023.

Metcash, which has an April 30 year-end date, is the second-largest player supplying independent liquor stores including Cellarbrations, The Bottle‑O, IGA Liquor and Porters Liquor.

Sales gained 8.9 per cent in November, supported by customers returning to on-premises drinks post-lockdowns. The gains came after sales increased 11.6 per cent to $2.4 billion in the first half.

Mr Jones warned that supply chain risks have eased but remain a challenge for all parts of the business for the second half, as do additional fuel, freight and labour costs.

Total Tools was forced to pay millions to fund additional transport and handling costs for products sent direct from factory in Shanghai in the first half because China’s lockdowns, which crimped EBIT margins.

Estee Lauder has acquired luxury fashion label Tom Ford for US$2.8 billion, marking Estee Lauder’s biggest acquisition yet. 

Once the deal is completed next year, Estee Lauder will become the sole owner of the Tom Ford brand and all of its intellectual property. The company expects to fund this transaction through a combination of cash, debt and $300 million in deferred payments to the sellers that become due beginning July 2025.

“As an owned brand, this strategic acquisition will unlock new opportunities and fortify our growth plans for Tom Ford Beauty,” said Fabrizio Freda, president and CEO at Estee Lauder. 

“It will also further help to propel our momentum in the promising category of luxury beauty for the longer term, while reaffirming our commitment to being the leading pure player in global prestige beauty.”

Under the agreement, Tom Ford, founder and CEO of Tom Ford International, will continue to serve as the brand’s creative visionary after closing and through the end of next year. Domenico De Sole, chairman of Tom Ford International, will stay on as a consultant until that time.

The owner of the Zegna and Thom Browne brand, Ermenegildo Zegna Group has also signed an agreement to enter a long-term license for Tom Ford fashion with Estee Lauder. As part of this transaction, Zegna will acquire operations of the Tom Ford fashion business necessary to perform its obligations as a licensee. The brand’s current license with Marcolin will also be substantially extended.

Shoppers should expect to pay more for premium steak as Australia’s biggest beef producer seeks to continue raising its meat prices to boost profits.

Just don’t expect that to translate into juicy payouts for shareholders, with the stock closing nearly 5 per cent lower on Thursday after the company signalled no end to its 14-year dividend drought.

The Australian Agricultural Company (AACo) reported a 27.7 per cent increase in operating profits to $38.3 million in the six months to September 30, compared to the same period last year, which newly installed chief executive David Harris said was the result of a 19 per cent rise in meat prices per kilogram during that period. And he flagged prices will continue to climb.

“We’ll keep pushing until we potentially find [the price ceiling],” Harris told this masthead.

The half-year results were Harris’ first in his new role of chief executive, which he stepped into only a month ago after former CEO Hugh Killen resigned suddenly in June. Harris has been with the company since 2016, and has been its chief operating officer since 2020.

Over the first six months of the year, AACo raised its prices for premium wagyu beef by 26 per cent to $22.06 per kilogram compared to the same time in 2021 and nearly doubled its proportion of meat sales to Europe and the Middle East (9 per cent to 17 per cent) as those regions recovered from COVID and dining out increased. Meanwhile, the percentage of sales in Asia and Australia dwindled slightly and sales in North America remained steady.

AACo will continue to rotate its focus between markets depending on where they are in the post-COVID recovery, Harris said.

“There’s still such an untapped opportunity, so many markets we haven’t been to yet, so many places that haven’t experienced wagyu, and that’s why you saw some movement between markets,” he said.

Even as consumers tighten their belts amid the rising cost of living, Harris expressed confidence that meat lovers would not turn away from its products. “I think consumers still value quality ... so instead of consuming [beef] three or four nights a week, you might go for higher quality, but you’ll only consume it twice a week.”

While operating profits were up, net profit slumped 38 per cent to $51.6 million, due to a lower valuation of the company’s herd as cattle prices came down from previous highs.

AACo’s investors appeared disheartened by the company’s outlook that acknowledged the rising cost of living, pointed to high inflation, cited the IMF’s lowest global economic growth forecasts since the global financial crisis and discussed the prospect of foot and mouth disease or lumpy skin disease in the next five years. AACo’s shares closed 4.96 per cent lower at $1.63.

The results also failed to mention any dividend payments. The company hasn’t paid out profits to shareholders in 14 years, and Harris gave no indication it would do so again in the near term.

“The dividend questions, in particular, I think are a matter for the board,” Harris said, adding that the company had been reinvesting back into the business.

“14 years is a long time,” he acknowledged. “I think what we also have to remember is the things and the conditions that we went through in that storm, we had some very significant droughts and floods, and we’ve got to build the business back.”

Brisbane-headquartered AACo is the country’s largest cattle herd operator, and also owns about 6.4 million hectares, or 1 per cent, of Australia’s total landmass.

More than half of the company (nearly 51 per cent) is owned by billionaire Joe Lewis, a British investor with a net worth of $7.7 billion who owns Premier League soccer team Tottenham Hotspur.

Iron ore billionaire and mining magnate Andrew ‘Twiggy’ Forrest owns a 17.4 per cent stake.

Liquor company Craft Revolution has named Campbell Speers as its new CEO. Speers will join Vaughan Thompson, sales and marketing director, to ensure the current portfolio’s strategic, financial, and operational leadership and work closely to acquire the distribution of new labels. 

The company has several liquor brands under its belt, including Estrella, Curatif, Tromba Tequila, Patient Wolf, Kona, Nusa Cana and High West Whiskey.

Speers’ most recent role was GM for Paramount Liquor, and during this time, he oversaw the development of the supplier relationship, national customer experience, national purchasing, and Victorian sales teams, along with the logistics and operations of the Victorian warehouse. 

Speers said he’s excited about the opportunity to join the company and continue its growth as one of the country’s leading alcohol distributors. 

“Craft Revolution is in great shape, and I look forward to expanding the portfolio and continuing to grow the current brands and to build on the outstanding knowledge and skills of the excellent, well-established team,” he said.

Mark Winter has been named permanent CEO of meal-kit delivery service My Food Bag, effective immediately.

Winter joined My Food Bag in 2019 as the CFO of the business and took over operations as interim CEO after the departure of Kevin Bowler on October 14 this year.

My Food Bag chair, Tony Carter, said the board is “extremely pleased” with the appointment.

“After careful consideration of the needs of the role and the desired attributes of our next CEO, the directors unanimously agreed Mark was the ideal candidate.”

He added Winter has in-depth knowledge of the business and continues to show leadership and commercial skills.

Winter added despite a number of challenges ahead, My Food Bag remains an exceptional business and he is “looking forward to leading it through its next phase and the initiatives already underway”.

The company has commenced a search for a new CFO while Jeremy Edmonds continues as interim CFO for the time being.