Endeavour Group reported a quarterly sales decline today (21st April) but highlighted the growth of Pinnacle Drinks, which has made $1.3 billion in annual revenues to date.

For the 13 weeks to 3rd April, sales at the BWS and Dan Murphy’s owner declined 3 per cent from $2.4 billion in the same period last year to $2.3 billion.

Adjusted for the timing of Easter this year, which is normally included in its third quarter results, sales declined 0.7 per cent.

This reflected the shift of customers returning to on-premise venues as COVID-19 restrictions began to ease.

This was partially offset by growth in its hotels business revenue, which grew 3.8 per cent during the period.

Online sales continued to grow, with annualised online sales of $1 billion achieved.

However, a major takeaway from the investor call this morning was that Pinnacle Drinks is a major contributor to revenues at Endeavour Drinks.

Pinnacle, which creates, manufactures and manages a portfolio of drinks brands, has in the year to date made $1.3 billion in revenues.

This includes retail sales but also other areas of the business including exports and services, such as packaging at Vinpac International, which provides specialist wine packaging, bottling, winemaking, laboratory and warehouse services.

To put this in context, and while the periods do not overlap, in its first annual results as a listed business last year Endeavour returned group sales of $11.6 billion, of which $10.2 billion was returned by its retail business.

Pinnacle exclusively supplies the brands it commissions to BWS, Dan Murphy’s and The ALH Pub Group, thus making it a major competitor of breweries and other alcohol manufacturers nationwide.

Endeavour Drinks Group and Coles Liquor have launched a spate of private-label craft beer brands in recent years, mimicking the huge range of categories and styles manufactured by both Australia’s independent and major brewers.

For the first three months of the year, Endeavour Group had 47 trademarks in the process of registering with IP Australia, covering everything from lager to spirits as well as brewing companies such as Beastly Brewing.

These private label beers are often placed in proximity to their independent counterparts, at lower price points.According to Endeavour’s most recent half-year results, 325 Pinnacle products have been launched and it has won more than 370 awards for its brands as 10 ‘best in class’ trophies.

Private label brands have in increasingly come to the attention of brewers and other alcohol manufacturers as a result of this growth.

In the Independent Brewers Association’s submission to the ACCC relating to the acquisition of Fermentum by Lion last year, the organisation called out Endeavour Group as one of the largest beer producers behind Asahi-owned Carlton & United Breweries and Kirin-owned Lion.

It acknowledged that Coles Supermarkets is also expanding its private label range, and highlighted, as a result of this and other competition pressures, the increasingly difficult and challenging conditions for independent brewers in the marketplace.

Endeavour results

On the investor call this morning, Endeavour Group managing director and CEO Steve Donohoe said that while the group was aware of the rising costs of living, it had not yet seen that pull through or impact on premiumisation trends.

There was still an appetite for new products though, he explained, suggesting that one of the biggest surprise successes has been Mighty Craft and The Inspired Unemployed’s Better Beer.

“[It] launched into the market in recent times but accelerated to a high level…and comes through a non-traditional route as it is supported by the Inspired Unemployed [and it’s] a great product in and of itself.”

While sales have declined incrementally from the high period of COVID when alcohol consumption moved to at-home rather than on-premise, Donohoe called the results “very pleasing” given the alleviation of COVID restrictions and lockdowns.

“[There’s] a lot more consistency to our sales pattern at the moment,” he said.

This was despite the impacts of flooding which forced the closure of and damage to stores in South East Queensland and the Northern Rivers region of NSW.

Endeavour Group suffered approximately $9 million in damages in the quarter from flooding. It reopened the majority of its venues, but five stores and one venue remained partially or fully closed.