Sales moderate at Endeavour Drinks and Coles Liquor

Sales growth at major bottleshop chain owners Endeavour Drinks and Coles Liquor is moderating after COVID-19 restrictions were eased in the second half of the year.

Endeavour Drinks, owner of the BWS and Dan Murphy’s chains and Liquorland and First Choice owner Coles Liquor released their half-year results to December 2020 in the past week and reported slowing in sales growth.

The reports come following an ongoing battle between lobbyists on both sides of the alcohol debate regarding the true extent of drinking and at-home consumption during lockdown.

In the most recent clash, the Foundation for Alcohol Research and Education said the alcohol industry’s “predatory instincts” were to blame for the growth in alcohol retail turnover, but Retail Drinks Australia retaliated saying the anti-alcohol organisation had “cherry-picked” its results and purposely omitted on-premise sales to skew its results.

Woolworths’ Endeavour Group

Sales growth at Endeavour Drinks remained strong but slowed modestly compared to the previous six months its parent company told the ASX this morning,

Sales for the half-year at Endeavour rose to $5.7 billion up from $4.8 billion. This was a growth of 19 per cent compared to the previous corresponding period.

Overall, sales at Endeavour’s parent company Woolworths Group (WOW) increased more than 10 per cent in H1 to $35.8 billion.

EBIT meanwhile grew 24.1 per cent to $419 million up from $338 million of 24.1 per cent.

Woolworths said sales at Endeavour continued to benefit from increased at-home consumption, with Dan Murphy’s and BWS both maintaining strong sales growth during the half and achieving record Christmas Eve sales.

In Q2, total sales grew 17 per cent which Woolworths said was at a more moderate level of growth than the previous two quarters as restrictions for on-premise venues were eased.

Spirits and RTDs were the strongest performing categories during its latest half, which it said was driven by ongoing innovation by gin and seltzer producers.

Despite higher costs associated with COVID and investment in its digital arm EndeavourX, which saw sales grow 52 per cent in the period, gross margins were offset by lower promotional activity and “product mix benefits”.

Hotels were also more resilient than expected despite operating restrictions, it said.

At the same time, Woolworths updated the market on the new Endeavour Group’s demerger and separation from the group which was originally announced in 2019.

The separation was postponed when COVID hit in early 2020, but now Woolworths said it expects the Endeavour Group, containing Endeavour Drinks and its hotel business the ALH Group, to demerge from the parent company in June 2021.

Additionally, Endeavour has been invited to join a global partnership from the International Alliance for Responsible Drinking to establish robust international guidelines for online sales of alcohol.

Anti-alcohol lobbyists criticised the alcohol industry for the perceived ease and lack of regulation in the online delivery space despite guidelines from Retail Drinks Australia launched in March last year which members of the organisation are obligated to conform to.

Coles Liquor

Much like its competitor Endeavour Drinks, Coles (COL) said growth in the second quarter in its Liquor business was consistent with the previous three months, but sales tapered off as restrictions around the country eased.

Coles Liquor, owner of the First Choice and Liquorland brands, saw sales rise 15.1 per cent in the half-year to $1.9 billion.

It reported earnings before interest and tax of $104 million for the first half, up from $76 million the previous corresponding half year.

Strong sales in the Liquor segment were bolstered by 90 per cent growth in the eCommerce division.

Sales reportedly remained elevated for the first six weeks of the third quarter with comparable sales growth of 12.5 per cent, taking into account the impact of the bushfires in the prior corresponding period.

It said that elevated sales due to COVID will present challenges “given the fixed cost nature of the liquor business” but investments in services will continue in the second half.

Coles Liquor enhanced its ranges during the period, bringing 126 local lines in the six-month period.

The bottleshop owner oversaw range changes across “key growth categories” such as gin, rose, craft beer and RTDs.

Coles also noted trends including the ongoing preference for larger pack sizes across beer, RTD and spirits categories.

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