Dan Murphy’s and BWS owner believes its competitive pubs and Gen Z craze for lemon flavoured drinks will keep its tills ringing

At its hotels, Endeavour is rejigging its menu to meet demand in old-fashioned staples, while a ‘lemon flavour phenomenon’ is also keeping cash registers ringing.

Endeavour Group boss Steve Donohue at the Crows Nest Hotel in Sydney. Picture: Supplied

Endeavour Group has sharpened its menu offer at its pubs network around popular dishes like hamburgers and chicken parma to remain competitive amid cost of living pressures, while at Dan Murphy’s the huge popularity of lemon flavoured drinks, like limoncello, has helped revitalise the wine category.

And while gaming revenue at its gaming machines remained flat as the company moved early on restricted trading hours for its pokies machines rooms at its Victorian outlets, there has been strong growth in pub meals – helped by events like Christmas and the US Superbowl – as well as beverage sales at its Dan Murphy’s and BWS chains.

However, sales for the first seven weeks of the second half of fiscal 2024 were softer and had slowed since the first half, as revealed by Endeavour which also issued its interim results on Monday, with retail outlet sales up 0.3 per cent and hotel sales up 1 per cent.

“The same time a year ago the first five weeks of 2023 were also flat, we grew by 0.2 per cent, and we feel that January is never an outstanding month. It’s always a bit softer for a bunch of reasons,” said Endeavour chief executive Steve Donohue.

“Importantly for hotels we are seeing nice ‘pops’ in some of the smaller and large events, like the Superbowl the other week that was a good event for hotels and a nice one because it was out of normal trading hours. And similarly, Valentine’s Day we had a really strong one for our pubs.”

Mr Donohue said the softer trading for the group was more about the retail arm, but in February both chains – Dan Murphy’s and BWS – had quickened their pace to 2 per cent growth.

“We are seeing the right sort of momentum behind those big brands coming out of January,” Mr Donohue said as Endeavour posted a 2.5 per cent lift in its interim revenue to $6.67bn as net profit fell 3.6 per cent to $351m. The half-year sales performance was inline with market expectations and its profit slightly better than expected.

The pubs and hotels owner, which demerged from Woolworths three years ago and went through a bruising shareholder and boardroom civil war in 2023, kept its dividend flat at 14.3c per share and payable on April 8.

Shares in Endeavour fell 4 per cent on the results to $4.96 as investors became wary about the softer trading outlook provided with the half-year results.

Dan Murphy’s owner Endeavour Group is looking at plans to unlock $1bn in shareholder value by developing or selling parts of its huge property portfolio. Picture: Christian Gilles/NCA NewsWire

The company is trying to excite investor appetite with an aggressive cost-cutting program and the possibility of unlocking hundreds of millions of dollars from its extensive property portfolio. Group earnings increased to $661m, benefiting from a disciplined focus on cost optimisation, including $53m in savings from its endeavourGo program, and gross margin management, Mr Donohue said.

He said Endeavour’s property was stated at book value in its accounts at $650m but could be worth more than $1bn with the company investigating strategies to work with new partners and develop those property assets.

Meanwhile, sales at its retailer operations – Dan Murphy’s and BWS – rose 2.5 per cent to $5.58bn and earnings rose 4.3 per cent to $436m in the half, while at its hotel and pub arm – which has just over 350 pubs – sales lifted 2.7 per cent to $1.084bn and earnings increased 1.6 per cent to $260m.

Mr Donohue said its retail chains had a soft trade for Father’s Day gifts in September, but that was turned around for Cyber Monday and Christmas, with Dan Murphy’s booking a record result for Christmas and BWS having record trading over New Year’s Eve.

In terms of customer trends there was a strong demand for refreshing beverages around lemon flavours, such an alcoholic Hard Solo, now called Hard Rated drink, as well as booming sales for Limoncello drinks which almost doubled in December.

“This lemon flavour phenomenon is really out quite strongly, a popular new wine product called Zoncello … it is an Australian wine product, which is sensational, it is very appealing to Gen Z and is now part of what is driving growth in the wine category again.

We are back in growth in the wine category thanks to that innovation.”

Mr Donohue said across Australia, people continued to enjoy his hotels, particularly during the festive season, where its value offerings resonated strongly with customers in the current higher cost-of-living environment.

But this had taken more work by Endeavour to rework and refresh its pubs meals to ensure value for money for customers as well as remaining competitive with nearby rival pubs and other competing meal offers.

“What we focused on in the half was redesigning our menus, also, we had a renewed focus on our sourcing strategy so that we could stay as competitively priced as what we are.

“We go out and track a lot of hotels across the country, and two to five around the vicinity of our hotel and on those pub classics that people love, whether it’s fish and chips, the chicken parmigiana or a burger, rump steak, we make sure we are $2 to $3 cheaper than our local competitive set.”

Endeavour would also respond to competition with promotions and deals to win over shoppers to its hotels in the second half, he added.