Endeavour Group buys Margaret River’s Cape Mentelle as it expands high-end winery portfolio

The Endeavour Group wants to be a major player and investor in the local wine industry after buying the famed Margaret River winemaker Cape Mentelle from French giant LVMH.

Endeavour Group boss Steve Donohue has added Cape Mentelle to his company’s growing portfolio of wineries it now owns. Picture : David Geraghty , The Australian.

Endeavour, the ASX-listed owner of Dan Murphy’s, BWS and a slew of major pubs, will expand winery portfolio after agreeing to acquire Cape Mentelle in Western Australia’s Margaret River.

Steve Donohue said the company, spun out of Woolworths in June 2021, wanted to be a larger player in the local wine industry.

The Cape Mentelle purchase – at an undisclosed price – takes to eight the number of wineries in the Endeavour portfolio, which now includes operations in premium growing regions including McLaren Vale in South Australia and the Yarra Valley in Victoria.

“I think what we have demonstrated a track record of doing is investing in these brands and that means investing in the vineyards, investing in the people that produce the wine and investing in the route to market,” Mr Donohue told The Australian.

“We’ve always had a very big reliance on the wine category as a retailer and we are a material participant in the wine industry.

It’s just an extension of that connection and responsibility we have to improve outcomes for Australian wine domestically and internationally,” he added.

Cape Mentelle, one of the first five wineries in Margaret River, is currently owned by Paris-listed luxury conglomerate LVMH. The winery was established in 1970 by David Hohnen and is best known for its Cabernet Sauvignon and Zinfandel varieties.

Cape Mentelle, which started with 16ha of vineyards, has grown to take in more than 130ha at four separate areas in Margaret Valley.

Endeavour is the nation’s largest pubs and hotels operator, with 344 pubs, and also owns the leading liquor retailing business with a portfolio of 258 Dan Murphy’s and 1417 BWS liquor outlets.

When part of Woolworths, the business has a small number of wineries in its portfolio. But that number has grown quickly, with a string of deals announced since its demerger. In August, Endeavour acquired McLaren Vale operator Singhelback, paying some $10m.

In April, it added Tasmania’s Josef Chromy Wines to its portfolio in a joint venture with agricultural funds manager Warakirri in a deal worth $55m.

In early 2021, when it was still part of Woolworths, it purchased Yarra Valley winery Oakridge Wines – at that time adding to holdings that included Chapel Hill in McLaren Vale, Isabel Estate om New Zealan), Krondorf in SA’s Barossa Valley, and Riddoch in SA’s Coonawarra region.

“We have, I think, been on the record for a while now saying that we were lacking something in WA and our preference was something in Margaret River so this has very much completed the picture for us,” said Mr Donohue.

“We feel a degree of privilege in having custody of a brand that is as important as Cape Mentelle for Australia and for Margaret River. And the other thing that is important to recognise is that having it back in an Australian organisation, I think this is a nice thing to do,” Mr Donohue said.

Cape Mentelle Winery in the Margaret River wine region, Western Australia. Picture: Supplied

A winemaker in the Margaret River “was strategically the one piece missing” for Endeavour and the company will hold off from additional purchases for now, Mr Donohue told The Australian.

The entire winery portfolio it has acquired now sit within its Paragon Wine Estates division, part of a broader beverages business which has seen a 30 per cent sales growth for the company.

And it has proved a good business for Endeavour with 7 out of 10 of its retail customers in 2022 purchasing a company owned beverage product – which includes wine, beer and seltzer.

Mr Donohue said Margaret River was a tightly held winemaking region producing quality wine and value for its owners.

He said Cape Mentelle, in particular, was long recognised for its cabernet sauvignon and equally its chardonnay while it also had one of the only plantings of zinfandel which was a preferred wine style for US consumers.

“Anyone who has tried a Cape Mentelle cabernet or chardonnay knows just how special this winery is,” he said. “Traditionally they have also produced a lot of semillon and sauvignon blanc and blended it … and Cape Mentelle founder David Hohnen of course was one of the founders of both Cloudy Bay and Cape Mentelle.

“So he has a long history in producing those beautiful aromatic white wines in both the Margaret River and in Marlborough, New Zealand, to international acclaim.”

Mr Donohue said recent trading for the group – over the holiday period – had been strong for both the company’s liquor outlets and for the pubs business.

“What we saw was people relishing the opportunity to get back into those social occasions,” he added. “Australians are inherently social people and they really took advantage of the degree of normality that we‘ve been able to enjoy for the first time in about three years and we’ve seen that manifest in pubs through lots more pub meals and all the pub classics being really popular again, and our regional networks across both retail and hotels are really hopping at the moment.”

Endeavour shares rose 0.8 per cent, or 0.5c, to close at $6.303 on Wednesday. Shares have fallen 2 per in the last 12 months.

Woolworths retains a stake of some 9 per cent in Endeavour, but sold $636m in shares – or 5.5 per cent – in December as it moved on investments in pet foods and services, with a $586m acquisition of 55 per cent of Petspiration Group.

“We expect the selldown to generate short-term share price pressure and also comes at a time when retail growth is likely to be muted given high prior year comps and the hotels business is challenged by regulatory tightening expectations,” wrote Goldman Sachs brokers at the time. “We expect underlying (Christmas) trading to be strong, with the hotels sales/property back to above pre-Covid levels and that implementation of tighter gaming regulations to ultimately be slower than market anticipation.”

Originally published as Endeavour Group buys Margaret River’s Cape Mentelle as it expands high-end winery portfolio