News

Food delivery firm DoorDash has partnered with BWS, connecting more than 900 of its liquor stores to customers across NSW, Victoria, and Queensland.

This partnership will enable customers to order home delivery of all types of alcoholic and non-alcoholic beverages, including beer, wine and spirits.

“At BWS, we are all about doing drinks your way, whether that’s shopping in-store or being able to access your favourite beer, wine or spirit most conveniently for you at a time of your choosing,” said Scott Davidson, MD of BWS.
 

“We are excited to give our customers across New South Wales, Victoria and Queensland access to our fantastic range through DoorDash just in time for the festive season.”

DoorDash launched its liquor delivery service 2021 in Australia, Canada, and 20 US states.

Coles’ proposed acquisition of two milk processing plants from dairy processor Saputo has cleared a major hurdle, with the Australian Competition & Consumer Commission (ACCC) announcing it will not oppose the deal.

Following the acquisition of the two plants in Victoria and NSW, Saputo will have its raw milk processed by Coles at these facilities. Coles will be the first Australian supermarket to own and operate milk-processing facilities. 

“After careful consideration, we concluded that, compared with the current state of competition where the majority of the capacity at these facilities is already contracted to Coles, the acquisition is unlikely to result in a substantial lessening of competition in breach of section 50 of the Competition and Consumer Act,” said ACCC deputy chair Mick Keogh. 

Saputo’s financial data indicates it has a commercial incentive to continue selling its Devondale milk in NSW. The company also entered into a five-year processing agreement with Coles at the NSW plant.

“We considered that the proposed acquisition would be unlikely to change Saputo’s incentives to continue acquiring raw milk from farmers in NSW for at least the next five years,” Keogh elaborated.

Other dairy companies, namely Lactalis and Bega, will continue to be competitors for raw milk in central NSW, he added.

In addition, the ACCC found that Coles’ commercial incentives to consolidate its milk supply would exist with or without the transaction due to the significant excess capacity at the two plants.

“We are pleased with the ACCC’s findings in relation to this transaction. Once completed, the acquisition of these state-of-the-art facilities will enable Coles to improve the security of our milk supply and supply chain resilience and allow us to continue to build on the strong relationships we have developed with our dairy farmers,” said Leah Weckert, Coles CEO.

The transaction is expected to be completed in the second half of FY24 after all outstanding conditions are met.

The 7-Eleven Australia convenience store chain has been sold for $1.71 billion to 7-Eleven International (7IN) a joint venture of the brand’s Japanese-listed parent Seven & I and the US business.

The Withers and Barlow families which own 7-Eleven in Australia have been looking to sell the business since early this year and there were reports they were hoping to secure as much as $2 billion for it.

Seven & I Holdings owns the global 7-Eleven licence and operates the business in Japan and other markets.

In a statement released Thursday evening, 7-Eleven Stores Pty Ltd said the local business would continue to be operated from its head office in Melbourne and the current management team would continue to lead it on behalf of the new owners.

The convenience and petrol retailer kickstarted the process to sell its entire business earlier this year.
 

The 7-Eleven Stores in Australia is owned by the Withers and Barlow families. In 1976, they  signed the area licence agreement to bring the 7-Eleven brand to Australia, opening the first store in Oakleigh, Victoria in 1977. It has since grown to 750 stores nationwide, processing 250 million transactions annually and employing more than 9000 staff at corporate and franchise levels.

“The company has made significant progress in recent years on a number of fronts and is performing well under a highly credentialed management team,” said Russell Withers, repeating a statement on behalf of the board in May.

“Now is the right time for our families to pass the business to new owners to continue to build and develop this wonderful brand.”

“7IN sees the potential of the 7-Eleven Australia business and shares our vision to be the first choice in convenience retailing in Australia,” added the chairman of 7-Eleven Australia, Michael Smith. “They bring a strong understanding of the convenience market globally and will continue to draw on 7&I Holdings’ capabilities in product development capabilities, digital technology, and environmental, social and governance (ESG) initiatives to further strengthen the 7-Eleven brand in this market.”

7IN co-CEOs Shin Abe and Ken Wakabayashi said the acquisition demonstrates the company’s commitment to growing the brand globally. “We are looking forward to continuing to enhance the 7-Eleven brand in Australia, which enjoys a long-standing presence and unrivalled brand recognition with customers.”

The deal is subject to regulatory approval, with completion expected in the second quarter of next year. Azure Capital and Ashurst acted as advisors.

One of the top executives at California’s Flynn Restaurant Group says the large market share gap between Domino’s and Pizza Hut, which it acquired in June, was part of the appeal in investing.

Flynn acquired the brand’s local master licence from Sydney-headquartered private equity firm Allegro Funds, adding 260 stores to its portfolio – its first international expansion. Flynn operates more than 2000 outlets in the United States including Pizza Hut, Applebee’s, Arby’s, Taco Bell and Wendy ’s-branded restaurants.

Ron Bellamy, Flynn’s chief operating officer, said there weren’t many markets where the gap between the two dominant pizza chains was so large. Part of Flynn’s strategy will be to open more stores, at least 30 next year, to bridge that gap.

“We haven’t got enough stores across Australia at the moment,” said Mr Bellamy. Domino’s, which is listed on the ASX, is estimated to have a market share of about 50 per cent. Pizza Hut, which was owned by Allegro since 2016, had about 10 per cent.

A bigger store network will be accompanied by an increase in advertising in an attempt to wrest business from Domino’s and smaller players. “It’s a market share game. That share has got to come from somewhere. It’s going to come from two places,” Mr Bellamy said, adding that he was buoyed by the growth in Pizza Hut’s local sales in the past year.

Supermarket group Aldi will not enter the bulk-buy space as competition heats up among supermarkets to offer lower prices in a cost-of-living crisis.

Aldi managing director Jordan Lack said the German chain was on average 15-20 per cent cheaper than dominant competitors Coles and Woolworths, with the discounting helping the retailer carve out a 9.5 per cent share of the grocery market.

While Aldi has held internal discussions about the bulk-buying space, the discount supermarket is ultimately choosing not to compete in this area after observing that shoppers typically tend to stick to a certain budget for their grocery spend.

“When customers have that limited amount of money to spend each week, I think it’s really important that they can get the breadth of their goods. We haven’t changed our ranging structures to move to bulk in this time because we actually have the right pack sizes at the best price possible,” Lack said.

Woolworths and Coles, which command about 37 per cent and 28 per cent of market share respectively, have expanded their home-brand and private label ranges as they observe “trading down” behaviour and expect customers to celebrate Christmas at home.

However, Lack said that Aldi’s model doesn’t rely on a high-low pricing strategy, where a retailer initially sells a product at a high price and then periodically offers it at a discount to attract customers.

“Competitors use high-low pricing a lot in their stores … We don’t have the ‘high price this week, low price next week’ where it’s in a catalogue and people have to stock up,” Lack said. 

“We just have that lowest price on an everyday basis, so that’s what customers will see when they come into our stores.”

Treasury Wine Estates (TWE) has agreed to acquire California-based Daou Vineyards and its associates, for $1.4 billion, expected to be completed by the end of FY23.

The acquisition, set to fill a key Treasury Americas portfolio gap, also involves an additional earn-out of up to $156.9 million conditional on certain net sales revenue (NSR) targets delivering growth in excess of pre-agreed thresholds from FY25 to FY27.

Daou Vineyards will boost the ASX-listed winemaker’s luxury-led portfolio and provide a scale to support a future standalone Treasury Americas Luxury division.

“In Treasury Wine Estates, we have found a partner that not only understands the value of our brand and the premium assets we have cultivated but also the importance of ensuring that we maintain a relentless focus on quality and craftsmanship as we step into our future,” said Daou Vineyards founders Georges and Daniel Daou.

Upon completion, the companies expect the luxury portfolio NSR contribution to increase to 53 per cent of Treasury Americas and 49 per cent of the TWE Group.

“We continue to see strong long-term growth trends for luxury wine in TWE’s key global markets, with a significant value-creation opportunity leveraging and building on the strengths today of TWE, Penfolds, Treasury Americas and DAOU to create a multi-brand global luxury wine business of scale,” said Tim Ford, CEO at TWE.

The acquisition will be funded through $825 million equity raising, $157 million placement of TWE shares to the existing owners of Daou, and a $550 million debt facility.

Coca-Cola HBC (Hellenic Bottling Company) has purchased Finlandia Vodka from liquor giant Brown-Forman for $342 million (US$220 million), subject to adjustments related to inventory and other working capital items.

The beverage giant says the acquisition will bolster Coca-Cola HBC’s premium spirits credentials and drive mixability opportunities with premium and super premium non-alcoholic ready-to-drink (NARTD) products, capturing more consumers and strengthening partnerships in strategically important channels such as HoReCa (hotel-restaurant-catering)

Brown-Forman said the sale of Finlandia vodka is another step to its long-term strategic plan to premise its portfolio through brand innovation, acquisition, and divestiture. 

Established in 1970, Finlandia is one of the leading vodka brands in Central Eastern Europe with annual volumes of 2.7 million cases worldwide, of which more than 60 per cent is generated within Coca-Cola HBC’s geographic footprint. 

Anora Group bottles Finlandia in Finland based on a long-term production services agreement and is sold in pure and flavoured versions. 

“We are pleased to pass on the ownership torch of Finlandia to Coca-Cola HBC, who has proven to be a strong and reliable partner to our brands for more than 17 years,” said Lawson Whiting, CEO of Brown-Forman.

“I am confident that Coca-Cola HBC’s growth ambitions and capabilities in premium spirits, its critical mass and execution excellence, and its leading sales and distribution credentials in the markets where it operates will accelerate Finlandia’s growth trajectory.”

Brown-Forman’s roster of brands includes Jack Daniel’s Tennessee Whiskey, RTDs and other Jack Daniel’s-branded products, Woodford Reserve, Old Forester, Coopers’ Craft, The GlenDronach, Benriach, Glenglassaugh, Slane, Herradura, Fords Gin, and Diplomatico Rum.

The company has approximately 5600 employees globally, and its brands are sold in more than 170 countries.

Supermarket operator Woolworths Group saw total sales increase year-on-year during the first quarter – but some operations suffered declines.

Woolworths booked sales of $17.22 billion in the 14 weeks to October 1, 2023, up 5.3 per cent. The Australian food segment rose 6.4 per cent to $13.08 billion, while the New Zealand food segment jumped 5.8 per cent to $1.91 billion.

“Importantly for our customers, inflation in our food businesses continued to moderate over the quarter driven mainly by deflation in fruit and vegetables and meat as lower input costs in these categories have led to lower retail prices,” said Brad Banducci, CEO at Woolworths.

The Australian B2B business segment inched up 1.5 per cent to $1.13 billion. However, sales of Big W fell 5.5 per cent to $1.13 billion.

Woolworths’ other business operations posted a sales slump of $22 million.

“Looking ahead, we have strong plans in place for the key Christmas and holiday trading period and while sales trends in October to date have remained broadly in line with the trend lines in Q1, the trading environment remains uncertain and value for money remains a key focus for our customers across all our businesses,” said Banducci.

Coles chief executive Leah Weckert has shrugged off the marked slowdown in comparative store sales growth in the first quarter of the new financial year, saying shoppers are snapping up cheaper fresh produce and Christmas treats like mince pies heading into the key holiday period.

Ms Weckert told The Australian Financial Review Coles has a strong plan for the holidays when she expects more consumers to eat at home to celebrate. She also flagged that Coles had a strong result with its Magical Builders Harry Potter collectables program a year ago, boosting sales.

“We think it’s a strong [first quarter] result, given what we were cycling last year, and we feel it’s setting us up well going into Christmas,” she said.

“At the moment, it’s all about lots of fresh produce because the prices are so great … with the level of deflation than we had 12 months ago, and that is the area where volumes are up the most.”

Coles posted a 3.6 per cent rise in first-quarter sales to $10.25 billion, underpinned by its supermarket business, with customers eating at home and looking for special offers amid pressure on household budgets.

Supermarkets’ revenue gained 4.7 per cent to $9.2 billion for the 13 weeks to September 24. Excluding tobacco sales – which continued to decline in line with industry trends – sales increased by 5.9 per cent.

Comparable sales grew by 4.6 per cent in the first quarter – a marked slowdown from 6.8 per cent in the fourth quarter of 2023. Rival supermarket group Woolworths on Wednesday reported comparative sales growth of 5.5 per cent down from 6.4 per cent in the June quarter of 2023.

Ms Weckert said that there were improvements in waste and markdowns in the first quarter. New technology such as smart gates and more security to help stem theft in stores is expected to be rolled out in more than 250 of the most affected sites by the end of this year.

Lower price inflation

The retailer in August flagged growing theft as a significant problem at the nation’s second-largest grocery chain.

“The early results from where the technologies are being rolled out are in line with our expectations,” she said. “From our perspective, this is a short-term problem.”

Ms Weckert said she expects the stock loss benefits to come through in the second half, and is looking to introduce other cost and margin optimisation initiatives.

Coles’ prices increased 3.1 per cent in the three months to the end of September, compared with a 5.8 per cent increase in the last quarter of the previous financial year. The lower inflation was due to falling prices of fresh foods, meat, seafood and baked goods.

Shoppers flocked to Coles own-brand products, and a fourth consecutive quarter of growth, with sales reaching $3.2 billion – a 9.4 per cent increase. Customers also continued to shift to healthier options, with sales from Coles own-brand health and lifestyle products growing by almost 30 per cent.

Supermarket online sales grew by 25 per cent in the first quarter, with penetration increasing to 9.1 per cent. Ms Weckert said Coles has made it easier for customers to search for specials online, adding new features in the app such “filter by lowest unit price”, which is popular with shoppers.

Coles’ liquor revenue increased just 1.8 per cent to $851 million in the quarter, helped by new store openings and online sales, which rose 32.2 per cent.

Ms Weckert said shoppers were buying cheaper beer, over craft brands. In wine, the growth in sparkling, prosecco and rose was offset by lower champagne sales. The ready-to-drink category also grew strongly.

Coles shares ended Thursday slightly higher at $14.98. The stock is down nearly 20 per cent in the past six months.

Penn joins board

JPMorgan analyst Bryan Raymond said in a note before the sales results that it was too early for capital investment in cameras and gates to be making an impact on stock loss.

“We would not expect a meaningful underlying shift in shoplifting trends in recent months given cost-of-living pressures are persisting,” he wrote.

MST Marquee analyst Craig Woolford said in a note that comparable sales growth in Coles supermarkets slowed more markedly than for Woolworths and its liquor business had a weak quarter.

“We expect small downgrades to earnings given the weaker trends are likely to continue into [the second quarter] and beyond as industry-wide inflation eases back,” he said.

Former Telstra boss Andy Penn will join Coles board as a non-executive director and be chairman of the audit and risk committee, effective December 1.

Coles chairman James Graham said Mr Penn would bring significant Australian corporate and customer-facing experience to the board.

“As a past chief executive of both Telstra and AXA Asia Pacific, Andy has a strong background in large corporations where the application of technology has assisted the repositioning and strengthening of businesses in competitive markets,” Mr Graham said.

Quick service restaurant Guzman Y Gomez (GYG) has appointed Hilton Brett as co-CEO, effective immediately, as the company plans to launch an initial public offering and further expand in the US.

Brett will be working alongside the restaurant’s founder and CEO Steven Marks, who announced in May that he would be stepping back from day-to-day operations to focus on culture and growth.

Prior to the new appointment, Brett served as a non-executive director on the board of GYG for over five years and worked as an operating partner at TDM Growth Partners – GYG’s biggest shareholder.

He is also a non-executive director at Somnomed Australia and Pacific Smiles Group, and from 2006 to 2018, he held the position of co-CEO at Accent Group.

Marks will keep the food, marketing, and US operations as his responsibility, while Brett will lead the finance, information technology, human resources, legal, real estate, and investor relations departments. Each of them will have a line of sight into all divisions. 

“Hilton has been on the board of GYG for the last five years so his knowledge of GYG’s business model and our company culture didn’t need to be taught or learned. When he joined us in a full-time capacity as acting CFO four months ago, he immediately knew what needed to be done and got to work,” said Marks.

“GYG is a unique business with an opportunity to become the biggest and best restaurant company in the world. The most important thing for me was finding a co-CEO who would bring in the skills we needed for the next chapter of growth for GYG.”

Brett will be leaving TDM in line with his new appointment.