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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.

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.
 

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.”

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.

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.

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.