News

The global energy drinks market’s value reached $62.89 billion in 2023, posting a 7.5 per cent compound annual growth rate (CAGR), with the strategic addition of new flavours emerging as a key trend.

According to The Business Research Company, the increased demand on emerging distribution channels, notably e-commerce, is driving the growth of the energy drinks market.

The research firm forecasts that the market, dominated by Red Bull, Monster Beverage Corporation, PepsiCo, and Coca-Cola Company, will further increase to $83.83 billion in 2027 at a sustained CAGR of 7.5 per cent.

It noted that the introduction of new flavours is an emerging trend, such as Red Bull’s launching of Coconut Edition Sugar-free energy drinks in 2021, a mix of coconut and B-group vitamins, taurine, and acesulfame-K as a sweetening agent.

Such innovations, which seek to attract new customers and boost sales, demonstrate the dynamism of the energy drinks industry.

Riverina-based Meditrina Beverages has agreed to acquire the assets of Warburn Estate, Australia’s eighth-largest winery.

The sale, which is expected to close in March, will include Warburn Estate’s land, plant, equipment, cellar door, and trademarks and intellectual property.

“The Sergi family has been an integral and respected leader in the wine industry in this region for over 55 years, and we hope to build on their good work. We wish them well in their future endeavours,” said Anthony Taliano, MD at Meditrina Beverages.

“It is time for us to step back, and to focus on our family. We welcome the Taliano family into the wine industry and know their passion for agricultural-based business in the local region, the brands and history of the company will continue under their family ownership,” added Antonio Sergi, fourth-generation of the Sergi family which owns Warburn Estate.

Warburn Estate, whose brands include Rumours, Gossips, and Droplet, exports to almost 30 countries.

Orlando Rodriguez, the boss of Coca-Cola’s Australian bottling business, is always on the job. Before he even sits down for our interview he notices the cafe’s soft drink and water products are supplied by a rival. That’s how he knows that the lonely can of Coke sitting on the adjacent table is one that a customer must have brought in and left behind.

“It happens everywhere. People prefer a Coke,” Rodriguez said.

“For the last 85 years the brand on the door is what we anchor to,” Rodriguez said. “People often say, ‘doesn’t it sell itself?’ [It’s about] continuing to find those pockets where you can grow.”

One of those pockets is the soft drink giant’s sugar-free options. The manufacturer has been pivoting away from sugar for years: about 45 per cent of its drinks sold in 2022 were low- or zero-calorie. Coke Zero and Coke Classic are neck-and-neck.

“If you live around here [in North Sydney], it’s probably 60 per cent Zero Sugar, 40 per cent Classic. If you’re in Penrith at the Leagues Club, it’s the inverse,” said Rodriguez.

“Unless you’re an absolute fanatical Coke drinker, the taste is becoming really, really close.”

Energy drink Monster has been earmarked as their second-largest growth driver. The focus is to wrest market share away from its closest rival, V, by aligning with high-octane sports players, from motorbikes and surfing to UFC and AFL and e-sports gamers.

“Monster is associated with that. You won’t see them advertise on TV, but they’re really youth-prevalent gaming sports so they’re doing really, really well.”

Meanwhile, sports drink Powerade commands 50 per cent of its market and is riding the long-term growth trend of fitness and performance, while its water brand Mount Franklin is growing through citrus-flavoured sparkling water. CCEP has a presence in the coffee market through Grinders, sold primarily in supermarkets, and until recently, grab-and-go iced coffee Barista Bros, which was discontinued in July this year.

“We thought it was a really strong offering, but it didn’t appeal broadly enough,” Rodriguez said. Australians tend to prefer fresh milk, while Barista Bros was made from long-life or UHT milk. “After eight, nine years, we were still number four and number five player. And when we’re in a category, we want to be number one or number two.”

Keeping the company’s brands front of mind for consumers is crucial. Coca-Cola is said to spend more on global advertising and marketing than any beverages maker, but getting in front of consumers’ eyes is not as straightforward as it used to be.

“When I grew up, the ads on TV had the biggest cut-through, what you heard on the radio had the biggest cut-through. People are consuming differently now. It’s your social media feed that’s playing a much bigger role; platforms like TikTok and YouTube have a much bigger reach,” Rodriguez said.

The beverages giant also will push further into alcohol in the coming years. Suntory Beam’s alcohol brands, which Coca-Cola has been operating under a 16-year contract, is due to end in mid-2025, meaning CCEP will lose the likes of Jim Beam, Canadian Club and Midori from its portfolio.

“What we do know is that we will participate in the alcohol category,” Rodriguez said. “That’s an exciting part of our future growth, but it’s a path we’ve got to navigate through.”

The hardest part of the job, according to Rodriguez, is keeping the team focused on growing brands that already lead the world.

“We have the best read in the market,” he said. “We have a review of every channel, whether you’re at an airport, whether you’re buying from vending machines, whether you’re in a [quick-service restaurant] like McDonald’s, a cafe like this, or in your local supermarket. We have a read of where every movement is.”

After making a number of acquisitions, the focus for Metcash is now selectively looking at hardware stores to buy.

Yet some wonder if the listed company that operates IGA stores could have a purchase of online hardware business HBT soon on its agenda to add to its existing stable of stores trading under brands such as Mitre 10 and Total Tools.

Hardware is the area of opportunity for Metcash, and HBT has been gradually building market share.

HBT describes itself as a buying group for independent hardware, building supplies, industrial, pain, rural, garden and timber retailers.

It started in 1997 with 13 member stores and has since grown to operate over 940 retail stores located throughout Australia.

Generally speaking through the retail market, though, it’s quiet on the deals front, with most battling the headwinds of the tougher economic conditions rather than searching for growth.

Market experts question whether a structural change is occurring in the retail industry that favours the discounting retailers, based on the recent trend with Black Friday.

Anecdotally, Black Friday sales helped large retailers, which experienced a lift of about 10 per cent sales lift over the past year, but smaller retailers were hard hit.

Yet most of the larger retailers are expecting softer trading in the lead up to Christmas.

The Reject Shop has recently been advertising strongly, which indicates its sales are likely up – that company has been flagged as a possible takeover target for some time.

Meanwhile, discount supermarket Aldi is said to be surging ahead, generating sales growth at about 10 per cent as it steals market share from Coles and Woolworths in what is a similar trend to Europe.

Pubs that serve food are also benefitting from consumers scaling down from five start restaurants, while indications of softening sales in Europe of luxury brands such as Louis Vuitton and Prada are also telling.

Aldi’s model is to have 660 products plus fruit and vegetables and will likely use the windfall to roll out more stores, presumably in the Western Australia and South Australia markets where it is under represented.

Meanwhile, Myer and David Jones CBD stores, where they generate about 20 per cent of their business, are thought to be impacted by recent protests in central Melbourne and Sydney which have been keeping shoppers away.

Endeavour, the hotel and liquor retailing group where Bruce Mathieson is the largest shareholder, is opening four Dan Murphy’s superstores in a back-to-basics approach and amid a fractious relationship with the billionaire publican.

Mr Mathieson in October failed in an attempt to force board change at the company, with shareholders at its annual meeting voting down the election of former Woolworths and Dick Smith Electronics executive Bill Wavish as an Endeavour director.

At the heart of Mr Mathieson and Mr Wavish’s argument about Endeavour’s poor management were concerns that the company’s Dan Murphy’s stores were moving too far away from its roots as the operator of superstores, and into smaller, boutique stores.

Endeavour is due to update investors on its strategy on Wednesday, with the focus presumably largely on the company’s hotels division. The company’s chief executive, Steve Donohue, told The Australian Financial Review that Dan Murphy’s had traded strongly over the Black Friday and Cyber Week sales period as customers brought forward purchases they would have otherwise left until the Christmas break.

“It tells us that customers are hunting value,” Mr Donohue said, adding that he had not been distracted by the dispute between Mr Mathieson and the board. Mr Mathieson’s son, Bruce Mathieson jnr, sits on the Endeavour board and the family owns 15 per cent.

“Customers are our hardest markers,” Mr Donohue said.

However, the chief executive of Mr Mathieson’s investment group, Ross Blair-Holt, told the Financial Review earlier this week that Endeavour chairman Peter Hearl should “prepare thyself”, flagging the Mathieson Group would push for an extraordinary general meeting to remove him if he did not step down by the end of February.

“He thinks he is right, and we are wrong,” Mr Blair-Holt said at the time. “So we are saying, ‘if you do not make a call on your future, we’re going to go to an EGM’. We will put up some alternative directors, and try to railroad the chairman out.”

Endeavour shares closed 1.5¢ higher at $5.10 on Tuesday. They have risen 1.7 per cent in the last month, but remain 28 per cent down over the last 12 months.

Endeavour operates 271 Dan Murphy’s stores, 1435 BWS liquor stores and 354 hotels, all of which were split off from Woolworths in 2021 and listed on the ASX. The company plans to open an additional eight to 12 Dan Murphy’s stores next year, with a particular focus on large sites in Australian cities’ growth corridors.

“We look for sites on the left-hand side of the road, for driving home,” said Mr Donohue.

In the last month, Dan Murphy’s stores have opened at Spotswood in the inner west of Melbourne, at Epsom in the regional Victoria centre of Bendigo, and at Rosebud on Victoria’s Mornington Peninsula. A store will open at Woolooware in Sydney’s south in January. Mr Donohue said they were all full-size Dan Murphy’s stores, and it would take two years for them to be trading at close to their potential.

“It takes two Christmases for a Dan’s to reach maturity,” he said.

In a note to clients earlier this week, UBS analyst Shaun Cousins recommended investors buy Endeavour shares, placing a 12-month price target of $6 on the company’s stock. He said fears about regulatory risks from government policy crackdowns on the 12,000-plus gaming machines in the hotels had been overdone.

South Australian-based confectionery maker and retailer Haigh’s Chocolates has revealed plans to build a $130 million manufacturing facility in Salisbury South.

The new project will cover an area of 9000sqm for production facilities and 6000sqm for warehousing to service its 21 stores and online order fulfilment.

Out of the investment, $36 million will go towards purchasing European-made manufacturing equipment. This includes specialised panning, enrobing, moulding lines, and kitchen and packing equipment to complement the site’s artisan chocolate-making capabilities.

“This project represents a significant milestone for Haigh’s, as it will see our current chocolate production capacity double, allowing us to meet increased demand and interstate growth opportunities, including entering new markets,” said Haigh’s CEO Alister Haigh.

CIP Constructions has been appointed to oversee the development of the 36,000sqm site and will engage around 200 people to support the construction of the building designed by Bell Architects.  

“Today commemorates the start of construction on what will surely become one of Adelaide’s premium industrial facilities,” said Mark Hendry, CEO, CIP Constructions.

“Early works to get underway include bulk earthworks and inground services before standing steel early next year.”

Haigh’s expects its Salisbury South facility to be fully operational in the second half of 2025,  hiring up to 400 employees during the growth phase, including creating approximately 150 new jobs.  

“Not only will this project directly create new jobs and opportunities at this site, it will facilitate employment growth across our retail business Australia-wide, creating up to 250 new jobs in the medium and long term,” added Peter Millard, CCO, Haigh’s Chocolates.

Established in 1915, Haigh’s Chocolates is the oldest family-owned chocolate maker in the country. It is currently in its fourth generation of family ownership and employs more than 800 people across two factories, a head office, and retail stores in Adelaide, Melbourne, Sydney and Canberra. 

Guzman y Gomez, the chain of Mexican-themed restaurants, has appointed Erik du Plessis, a Kmart and Target executive, as its chief financial officer.

The company, which is backed by Barrenjoey Capital Partners, Aware Super and TDM Growth Partners, is working toward an ASX listing which its investors suggest could value it at more than $2 billion.

But it has suffered from significant management instability this year. The Australian Financial Review reported earlier this week that TDM had stepped in to run Guzman y Gomez’ legal and human resources functions at after an exodus of senior management over the last 12 months.

Mr du Plessis, currently the commercial and strategy general manager at Kmart and Target, is expected to start in April. The company said he was “a proven finance leader within a blue-chip retail operation with significant scale and complexity which is exactly what GYG were looking for.”

Mr du Plessis will be reporting to Hilton Brett “working closely with co-CEO Steven Marks,” the company added. Mr Brett, a TDM partner, was appointed as co-chief executive after Guzman y Gomez’s founder, Mr Marks, said he would leave in May due to a health scare before changing his mind.

Earlier, a Guzman y Gomez spokeswoman had told the Financial Review that the company would not have announced Mr Marks’ departure in the way that it had, describing it as  “confusing and unsettling for everyone”.

“When Steven was made aware that the health scare was not as serious as originally thought, he was able to ... stay on. If we had our time again, would we have announced this so early? No, we would have waited,” she said.

The company’s previous chief financial officer, Rebecca Lowde, left earlier this year after only 10 months with Guzman y Gomez. When she exited, she told staff in an email that she had been at the company for “a far shorter period of time than what I expected to be”. But she wished the company success, in her email citing her interest in working in the technology sector as one reason she had decided to leave Guzman y Gomez.

Mr du Plessis arrives as the company considers its strategic options, including whether to list on the ASX. Guzman y Gomez posted a 32 per cent increase in network sales to $759 million in the last financial year, and has forecast $50 million in underlying earnings before interest, tax, depreciation and amortisation, up from $33.4 million in the 12 months to June 30.

Guzman y Gomez has more than 200 stores across Australia, Singapore, Japan, and four stores in the United States.

Pharmacy giant Sigma Healthcare is expected to announce a major transaction that will lead to the privately owned Chemist Warehouse listing on the Australian stock exchange.

Sources familiar with the transaction said the final touches on the deal were being worked through on Wednesday afternoon that would mean Chemist Warehouse takes majority control of Sigma which, along with owning the Amcal brand, has a large pharmaceutical distribution business.

Sigma asked for its shares to be paused from trading 30 minutes after receiving an inquiry from this masthead regarding the veracity of the rumours. It said in a statement to the exchange that it requested its shares to be halted from trading pending an announcement regarding a “potential material transaction”.

Chemist Warehouse has been working towards an ASX listing for most of 2023, with its founding families looking to expand the big box pharmaceutical retailer. Since being founded in Melbourne in 2000 by Jack Gance and Mario Verrocchi, Chemist Warehouse has grown into one of Australia’s most recognisable retail brands and is valued at more than $5 billion. The families also retain large property holdings that include several large Chemist Warehouse stores.

The parties had expected to announce the deal on Monday but could bring forward the statement to Friday in the wake of media inquiries about the deal.

The listing of the company is expected to crystallise the wealth of the Gance and Verrocchi families, which has been estimated to be in excess of $2.4 billion each.

Sources speaking on the condition of anonymity due to confidentiality agreements said Chemist Warehouse had been pushing for a deal to take board control of the ASX-listed Sigma and majority ownership in the group. As part of the transaction, shareholders could be tapped for $350 million to help tidy up Sigma’s balance sheet and provide more liquidity, though the final shape of any capital requirements was still being worked out.

Sources said the Sigma board would comprise representatives from Sigma and Chemist Warehouse.

The sources said HMC Capital boss David Di Pilla was involved in the transaction and was expected to take a board seat at the newly merged entity. HMC Capital has been contacted for comment.

Beefy’s Pies may soon be available for franchising after an agreement was reached for the retail chain’s acquisition by listed cafe operator Retail Food Group (RFG) for $10 million.

RFG is a global food and beverage company headquartered in Queensland which owns Gloria Jean’s, Donut King, Brumby’s Bakery, Michel’s Patisserie, Crust Gourmet Pizza, Pizza Capers, Rack ’em Bones BBQ Ribs, Cafe2U and The Coffee Guy brands.

The acquisition is expected to significantly contribute to RFG’s performance with Beefy’s estimated to generate revenue of about $18 million and pre-tax earnings of $2.5 million in FY24.

“RFG is pleased to be in a position where it can look for inorganic growth opportunities. The acquisition of Beefy’s is significant not only because it is a great business that is complementary to our existing brand portfolio but because it marks the beginning of RFG’s next phase of growth,” said Matt Marshall, CEO at RFG.

“Joining the RFG network will help Beefy’s take the next step in its growth journey as we will become part of a team with many decades of retail experience, as well as benefit from being in a group with a larger balance sheet and access to support functions,” said Mark Hobbs, Beefy’s founder and CFO.

RFG clarified that there will be no immediate changes to Beefy’s team, supply partnerships and operations, and Hobbs will continue in an advisory role during the first year to aid the transition.

Beefy’s has nine stores across Queensland and a manufacturing facility on Sunshine Coast employing 180 people.

Meanwhile, RFG agreed to a $20 million facility B senior debt extension to increase its debt facility, with $5 million to be drawn for the acquisition and the remainder reserved for further growth opportunities.
 

Wholesaler Metcash’s revenue grew in the first half of FY24 amid higher sales across its food, liquor, and hardware businesses.

Metcash is known for its supermarket brands IGA and Foodland and convenience brand Campbells/C-Store. It also owns liquor store brands Cellarbrations, IGA Liquor, and The Bottle-O, and hardware store brands Home Hardware, Total Tools, and Hardings Hardware.

During the first half, the group’s revenue increased 1.6 per cent from last year to $9 billion including charge-throughs. This comes as food sales, excluding tobacco, rose 5.7 per cent while liquor sales climbed 2.4 per cent.

Hardware sales rose 2.9 per cent, with growth in Total Tools, which Metcash took full ownership of last month, offsetting a slight decline in the company’s independent hardware group (IHG).

Meanwhile, tobacco sales fell 12.2 per cent due to what Metcash claims was “a rise in illicit trade” and the trend to alternatives. 

“Our food and liquor pillars performed particularly well, delivering increased earnings on the strong comparative period. It was also pleasing to see our supermarkets business return to volume growth in the second quarter as inflation showed,” said Doug Jones, CEO at Metcash.

“In hardware, sales in both our IHG and Total Tools network continued to be resilient in a more challenging market. Sales growth was delivered in both retail networks, however, increased cost pressures and a further reduction of inventory in the IHG retail network weighed on hardware’s earnings for the half.”

Underlying EBIT decreased 3.4 per cent to $246.5 million while underlying profit after tax slid 10.9 per cent to $142.5 million.

For the first four weeks of the second half of FY24, group sales, excluding tobacco, increased 0.8 per cent.