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The chief executive of Endeavour Group, which owns the Dan Murphy’s and BWS liquor retailing outlets, says foot traffic in large shopping malls has not fully returned to pre-COVID-19 levels but a “degree of normality” is back in strip shopping and stand-alone stores.

Steve Donohue said on Thursday the group was also experiencing solid demand for the large volumes of new products on its shelves, and that was helping to preserve profit margins at a time when inflationary pressures in the supply chain are rising.

Mr Donohue said the group aims to open between 20 and 30 outlets annually, with emphasis on Queensland and South Australia.

Dan Murphy’s, in particular, has a strong base in Victoria where the business started, while expansion in Western Australia is harder to pursue because of regulations around the granting of new liquor licences.

Endeavour operates 258 Dan Murphy’s stores, 1411 BWS liquor outlets and a hotels business with 340 outlets. It is a large player in gaming through a combined 12,400-plus poker machines across many of those hotels, making it the largest owner of poker machines in Australia, and the third-largest gaming operator in Australia after Crown Resorts and The Star.

About 60 fund managers and investors went on a tour of some of Endeavour’s pubs and retail outlets in Melbourne on Thursday as part of an investor day, and Mr Donohue spoke to The Australian Financial Review by phone mid-afternoon.

Endeavour was demerged from supermarket giant Woolworths and listed as a separate entity on the ASX in June last year. Woolworths still retains a 14.6 per cent stake in Endeavour.

Endeavour shares had gained about 25 per cent in the 11 months since the company became a stand-alone entity, but slid on Thursday by 6 per cent to $7.20.

Mr Donohue said it was difficult to forecast what effect rising electricity prices would have on the group’s retail and hotels operations, with energy prices one of the components of general inflationary pressures. Rising wage pressures in an industry where labour shortages are common, rising rents and increased prices of goods from suppliers were all feeding into costs increasing.

Endeavour is making sure it tailors its product range carefully to local catchment areas.

“People really want locally made products,” he said. This had been starkly evident in the large amount of new gin products on the market, and in the craft beer segment.

“You are getting a very bespoke range in local stores.”

Dan Murphy’s and BWS made huge gains in their online businesses during the pandemic as at-home consumption rose sharply. Foot traffic volumes into bricks-and-mortar stores in stand-alone locations and in strip shopping venues were “returning to a degree of normality”.

But large shopping centres were still some way off, with people still showing some reluctance in those venues.

“I think malls haven’t quite got back to pre-pandemic levels,” he said.

Endeavour Group said its new product development pipeline for the liquor stores was running at about 11,000 new stock-keeping units a year, compared with 5000 in 2015. New products coming onto the shelves generally bring higher margins because they are not subject to the same level of discounting which tends to be prevalent in older brands.

MST Marquee analyst Craig Woolford said a capital spending forecast of between $320 million and $460 million annually may result in some small downgrades to cash flow forecasts. He has a “hold” rating on the stock and a 12-month price target of $7.45.

Australian food tech startup Eden Brew has raised US$5 million in funding to assist in expansion and the retail launch of its animal-free ice cream range.

The company uses fermentation to produce dairy that contains all six proteins identical to a cow’s milk. The capital raised in this round will be used to scale its in-house milk product innovation and launch a new ice cream range within the next 18 months.

Eden Brew co-founder and CEO Jim Fader said the company is making rapid progress toward developing the “holy grail” of dairy proteins.

“While there are numerous milk alternatives, they cannot sustainably meet future demand and don’t achieve the sensory or processability properties of cow’s milk,” he said.

“Our natural method of fermentation future-proofs dairy’s place at every kitchen table, in every cafe, and every ice cream cone.”

The company has been backed by investors including Mars’ US-based Digitalis Ventures and a follow-on from Main Sequence.

Main Sequence partner and Eden Brew chair, Phil Morle, said precision fermentation is already enhancing food production and meeting surging protein demands at a lower cost with less impact on the environment.

He believes the innovation can improve the efficiency of current industrial food production and meet the demands of 10 billion people by 2050.

Nature One Dairy has joined the race to help with the US baby formula crisis and is working with Austrade and the Victorian government to gain approval from the powerful US Food and Drug Administration (FDA) for its infant range.

Nature One Dairy chief executive and founder Nick Dimopoulos said he fielded several requests from the big retailers in the US about supply.

“Being both a manufacturer and brand owner, we can scale up our supply and provide our high-quality Australian-made products to support the current situation in the United States,” he said.

The market valuation of Bubs Australia rocketed $115 million higher on Monday after the company secured a deal to send 1.25 million tins to the US to ease a nationwide shortage after a contamination scare at a plant.

The a2 Milk Company last week also submitted an application to the FDA to supply its a2 Platinum infant formula.

Australian lifestyle brand Frank Green has just launched a shiny new range of reusable cups and bottles in rainbow, gold, silver and blue chrome in an effort to attract a different type of customer: style-conscious shoppers who care more about what a product looks like than its carbon footprint.

“The conscious consumer has played a huge role in our growth as a brand to date and comprises the majority of our existing customer base, however, we’re now increasing our relevance to customers who choose products based on how they align to trends and personal style as the main priority,” Ben Young, Frank Green’s founder and CEO, told Inside Retail.

It’s not that Frank Green is abandoning its values, Young clarified, but rather using style as a vehicle to reach more customers and inspire them to live more sustainably. 

“Our mission is to stop single-use plastic consumption. To do that, we need to remove the perceived barriers that prevent customers from choosing a sustainable product. One of these barriers is style, so by designing an on-trend product, like the chrome collection, we are showing customers that living sustainably can still be stylish,” he said. 

With chrome and liquid metal trends popping up on the runways of some of the biggest names in fashion, Young hopes that customers will view the new range as “wearable fashion accessories” – not just reusable lifestyle products. 

Expanding the product range

Style and functionality have always been an important part of Young’s design process. He launched Frank Green in 2014 after spending three years trying to create a reusable coffee cup that people would actually want to use. 

“I was always trying to understand why people didn’t use them, and it was quite simply that they didn’t look very good and didn’t make consumers’ lives easier,” he recalled in a recent interview for Klarna’s new video series, Bold Moves. 

His solution – the Frank Green SmartCup, a sleek cup with an innovative push-button lid – won the Good Design Australia award for product design in 2015.

Over the years, the brand has expanded into reusable water bottles, reusable bags, insulated food storage containers and coffee and tea accessories. Further product launches are in the pipeline for 2022. 

“We’ll continue to target the single-use products that are most devastating to the planet. Any items that have single-use plastic in them, watch out,” Young said. “We’re going to create a beautifully designed consumer product that you’ll love to use forever instead.” 

Last year, Frank Green brought its manufacturing in-house with the opening of a 6000-square-metre warehouse in Melbourne’s inner west. 

Getting suppliers on board

As part of Frank Green’s fashion pivot, Young has also appointed a new PR agency, MCMPR, whose clients include Zimmermann, Tory Burch, Net-A-Porter and Oroton.

“As a carbon-neutral agency, MCMPR is focused on a sustainable future. We believe that the communications industry has a responsibility to influence and drive positive change, so we jumped at the opportunity to work with Frank Green,” Marie-Claude Mallat, the agency’s founder, said in a statement. 

“The products are incredibly well designed and complement the latest fashion and beauty collections from our other global clients. The team and I are thrilled to support Frank Green’s stylistic vision and deliver results that move the dial.”

The move is in keeping with Frank Green’s growing focus on the environmental impact of its supply chain.

“At Frank Green, we’ve spent a lot of time putting together a supplier code of conduct that is so many things, but importantly, it’s about sustainable practices in business,” Young said in the Bold Moves video.

“The energy that our suppliers use, where they get their materials from and their carbon footprint has been mapped out…because we need to be able to show our customers that we’ve done that due diligence.”

Beauty and wellness company BWX says it expects to deliver strong underlying revenue growth based on unaudited internal accounts year to date.

The group owns brands including Sukin, Nourished Life, Flora & Fauna, Go-To, Andalou Naturals and Mineral Fusion. 

The business expects underlying revenue to range between $240 and $250 million for this financial year. Underlying EBITDA should range between $34 and $37 million.

The impact of higher operating expenses, ongoing elevated freight and supply chain costs due to Covid and recent acquisition investments failing to meet revenue growth expectations dulled performance during the company’s second half.

Group CEO Rory Gration said the business will achieve approximately $5 million in cost-out initiatives in the next financial year. 

“BWX’s in-store revenue performance has accelerated from the first half of the year and the business is supported by strong brands and an ability to scale distribution in key markets and sales channels.

“Initiatives for reducing our cost base are a key priority, supported by improved visibility and cost controls to ensure sustainable revenue growth,” he added.

The group is focused on centralising its digital warehouse in its Clayton manufacturing facility. The new centre boasts automated packing and storage processes and margin benefits from private label manufacturing. Inventory will also likely remain elevated as manufacturing increases but it is expected to normalise in the first half of next year.

The chief executives of Australia’s two largest private employers have thrown their support behind an increase in workers’ wages amid persistently rising inflation and a tightening labour market.

Woolworths boss Brad Banducci and Wesfarmers managing director Rob Scott both made comments on Tuesday supporting wage rises, with Banducci backing calls from industry body the Australian Retailers Association for an increase in the minimum wage in line with the underlying rate of inflation.

Scott, who oversees the operation of major retailers Bunnings, Kmart and Target, told the Macquarie Australia Conference he expected to see rising wages “across the board” in the year ahead, something he welcomed in light of the rising level of inflation.

“From a Wesfarmers point of view, I see real wage growth as a very good thing. Real wage growth is a good thing for the economy, and if it’s good for the economy, it’s generally good for Wesfarmers,” he said.

Banducci, whose company employs about 200,000 Australians, was also supportive of wage rises, though noted that there was no “silver bullet” that would fix Australia’s inflation woes. The retailer said shoppers could be facing a double whammy of price rises from suppliers in the next 12 months.

“We’re very clear that while we need to deliver value for our customers, we also need to make sure that our team can have salaries and wages that keep pace with the underlying increase in the cost of living,” Banducci said.

The supermarket boss said so far around 40 per cent of the company’s supplier base had requested price increases, and the supermarket was in negotiation with an additional 20 per cent. At Woolworths’ third-quarter sales results on Tuesday, the company reported inflation across its food business of 2.7 per cent, lower than rival Coles’ 3.3 per cent.

“There are indications from some of our larger suppliers that within 12 months, they will come back for a second cost increase,” Natalie Davis, Woolworths’ head of supermarkets told analysts. “That’s really reflecting the ongoing cost pressures they’re seeing on commodity prices, manufacturing costs and international freight.”

Banducci’s remarks supporting wage rises are at odds with other retail bodies and fellow supermarket executives, with Coles’ boss Steven Cain warning last week of the danger of wages rising in tandem with inflation, as he called for an increase in immigration rates to offset rising prices.

The comments come as Woolworths reported a strong start to the new year, with sales from January to March rising 9.7 per cent across the business to $15.1 billion. This included comparable growth of 4.4 per cent at the company’s key supermarket division to $11.4 billion, ahead of analyst estimates.

Despite these strong sales results, Banducci said the quarter had been challenging, with floods, supply chain disruptions and high levels of COVID-related absenteeism hurting the supermarket’s standing with customers.

However, the company said trading had been strong so far in the fourth and final quarter of the financial year, with the business now focusing on “returning to a more stable operating rhythm.”

Costs relating to COVID-19 have continued to fall, coming in at $66 million for the quarter, with the business saying it is continuing to look at cutting additional pandemic-related costs where possible.

On Tuesday, the Reserve Bank raised interest rates by 0.25 percentage points to 0.35 per cent, the first-rate rise since 2010. Speaking ahead of the decision, Banducci would not comment on what this might mean for shoppers, saying instead the supermarket was focused on “delivering value for customers”.

Shares in Woolworths had gained 0.6 per cent on Tuesday by mid-afternoon but fell in line with the broader market following the RBA’s decision.

Australian consumers now have more plant-based options after Coles added the alt-meat brand Get Plant’d into 800 stores.

The range features six variants: Bacon, Deli-Style Pepperoni, Deli-Style Chicken Slices, Roast Chicken Fillets, Roast Duck and Roast Pork. All the Get Plant’d products are sourced from plant-based ingredients such as wheat (seitan) and soybeans (texturised soy protein).

Founded by Cale Drouin, an Australian restaurateur and food creator, Get Plant’d aims to offer delicious flavours and more simple but functional plant-based choices for customers.

“The whole Get Plant’d range places an emphasis on delicious taste and ease of functionality,” Drouin said.

“Our goal is to make it simple for shoppers to pick up plant-based meat, and to enjoy this product as part of their favourite meals or snacks. People can Get Plant’d without having to commit to specific dietary choices full-time.”

Drouin has more than a decade’s experience in the plant-based sector. He said the demand for vegan food is rising in Australia and plant-based protein has a larger role in Australia’s future food security, especially when the global supply chain is being affected by the pandemic.

“Australia’s national food security strategy relies heavily on subsiding the meat and dairy industries, even though animal agriculture requires enormous natural resources to operate,” he added.

“Shifting government policies to prioritise plant-based protein would help to ensure Australians have consistent access to safe, homegrown crops that are more environmentally and economically sustainable.”

Kate Thomson has been appointed as Ampol’s new executive GM for its Australian retail business.

She takes over from Joanne Taylor who has resigned after six years with the company.

Thomson has been with Ampol for three years, holding key roles including GM of retail operations and head of retail excellence. Prior to that, she held senior positions in leading consumer brands including ANZ Banking Group and McDonald’s Australia.

“Kate has consistently delivered operational excellence and strong risk management to the team and has successfully built sustainable structures and governance across risk, safety and environmental management, whilst leading the field operations team,” said Matt Halliday, Ampol MD and CEO.

He said she played an important role in the company’s delivery of its convenience retail growth strategy during the past three years.

“With over 6000 fantastic retail employees and a national network across key demand centres, we seek to evolve our retail offering to support the changing needs of customers and leverage the growing convenience market,” said Thomson.

Woolworths Group has overcome the impact of Omicron and severe flooding to post a 9.7-per-cent increase in like-for-like sales during the third quarter to $15.123 billion. 

The growth rate was significantly higher than the 3.9-per-cent increase reported by archrival Coles Group last week. E-commerce sales soared 33.4 per cent year on year reaching $1.456 billion. 

In the company’s core Australian food business, sales rose by 5.4 per cent, however average prices rose by 2.7 per cent reflecting the “widespread industry cost pressures,” said CEO Brad Banducci. Online food sales rose by 38.1 per cent. 

Banducci said the ongoing impact of Omicron, as well as widespread flooding, resulted in another challenging quarter for the business. 

“Despite the unfailing efforts of our teams, high levels of Covid-related team absenteeism and the disruption to our broader supply chain resulted in inconsistent customer shopping experiences and negatively impacted our customer metrics,” he said. Last month, entering the final quarter, there was more stability across the group but store stock service levels remain below normal levels.

The Big W discount department store business reported a 3.5-per-cent decline in sales, due to customers either being restricted from shopping in stores due to state government Covid-related rules or a reluctance by consumers to venture out in public. However, the business had shown an 18.3-per-cent increase in the same quarter last year and the chain’s three-year compound annual growth rate is running at 7.7 per cent. Online sales increased by 21.2 per cent. 

“Trading momentum in Q4 to date has continued in Australian Food and Big W with strong Easter seasonal trade,” said Banducci. 

Challenging quarter for New Zealand

Across the Tasman, the New Zealand business, trading as Countdown, experienced “a very challenging quarter” Banducci said. 

“The impact of Omicron, which was felt later in the quarter, led to supply-chain disruption and out of stocks that peaked in March.”

While total sales increased by 3.8 per cent, average prices increased by 3.6 per cent. Online sales rose by 18.3 per cent.

The company expects the New Zealand food business to record a pre-tax profit in the range of NZ$120 – $140 million for the second half, which would represent a decline of 16-28 per cent on year. 

“The expected reduction in profit is largely a function of higher Covid costs associated with keeping our customers and team safe and minimising disruption to our supply chain.”

Company-wide, Woolworths is focusing on “returning to a more stable operating rhythm and delivering consistently good shopping experiences for our customers” during the current fourth quarter.

Coles Group weathered what it described as significant Covid and flood-related disruptions during the third quarter to post a 3.9-per-cent lift in sales to $9.295 billion. 

The company said staff absenteeism related to isolation requirements during the Omicron outbreak led to “availability challenges and short-term impacts on Coles’ promotional program and disruptions to stores and distribution centres”.

Floods in South Australia caused “severe road and rail logistics disruptions into Western Australia, while flooding in NSW and Queensland saw the suspension of trading at 130 stores across its supermarket, liquor and convenience store networks. Twelve stores remained closed when the quarter ended on March 27. 

Coles warned cost price inflation was impacting suppliers as raw materials costs rose, along with shipping and fuel costs.  

The supermarket division recorded $8 billion in sales, also up by 3.9 per cent, while liquor division sales of $781 million were up by 2.9 per cent. The company’s Express c-store division saw a sales decline of 2.2 per cent to $269 million which the company says was related to Covid isolation and state Covid-19-related regulations. 

E-commerce sales soared 45 per cent as people chose to – or were forced to – avoid shopping in stores and the company invested in expanding its digital infrastructure and services.

“Traffic flows increased with workers returning to offices and children returning to school later in the quarter which was partially offset by the flood events and global fuel price increases.”

The company said it incurred around $65 million of Covid-19-related costs during the quarter, peaking at $30 million in January as requirements for team members to isolate in stores and warehouses, “the operation of shift bubbles and costs associated with administering rapid antigen testing in distribution centres”.