As household budgets tighten under the strain of rising interest rates, the Endeavour Group, the operator of Dan Murphy’s and BWS, is turning to AI to combat shrinking profit margins and reluctant consumers.
CEO Steve Donohue revealed that AI and machine learning have become crucial tools in the company’s strategy to precisely target promotions, drive sales, and expand market share despite a broader, long-term decline in alcohol consumption. “We are targeted and precise. It’s very forensic now to drive sales,” Donohue told investors yesterday.
By utilising AI to analyse vast amounts of consumer data, Dan Murphy’s has been able to personalise offers through its app, leading to significant increases in customer engagement and sales. For instance, according to Donohue, tailored promotions—such as discounts on frequently purchased items or similar products—have driven a 29 per cent boost in sales.
“There [are] so many permutations of the types of offers that you can’t do it on the back of a manila folder,” he explained. “You have to have the machine learning capability to crunch all the data because it’s moving constantly”.
The effectiveness of these AI-driven strategies is evident in the performance of the My Dan’s loyalty program. Members of the program spend 80 per cent more per transaction than non-members, and “Appy Deals” have doubled the number of monthly app users.
As consumer habits shift due to economic pressures, with customers increasingly opting for less expensive meals and drinks, Dan Murphy’s has focused on maintaining its relevance through dynamic pricing and personalised promotions. This approach has helped the company achieve a 3.6 per cent increase in group sales to $12.3 billion and a 3.1 per cent rise in group earnings to $1.1 billion in the 2024 financial year.
Drinks sales at liquor store chains Dan Murphy’s and BWS grew 3.4 per cent. According to Donohue, draught beer is seeing a resurgence, while smaller wine producers are taking the fight up to the more prominent incumbent brands. “Small wine brands often fly under the radar,” he said. “Guys like Tyrrell’s [Wine] in the Hunter Valley that have always made these beautiful, refreshing styles of white wines are selling like hotcakes,” Donohue said.
Despite these gains, net profits for Endeavour Group fell by 3.2 per cent to $512 million, driven by higher debt and interest rates. Nonetheless, the company has identified significant cost-saving opportunities, with $100 million already saved and plans to reach $290 million in savings by the 2026 financial year.
Endeavour’s efforts to cut costs extend beyond AI-driven promotions. The introduction of electronic shelf labels has reduced labour costs, contributing to a 5 per cent improvement in productivity at Dan Murphy’s, a model that Donohue is keen to expand across the company’s hotels business.
Investors, however, reacted cautiously to the company’s latest financial results, with Endeavour’s share price falling 7 per cent in late trading, despite analysts describing the numbers as “clean” and “solid.” The outlook for hotel and pub sales remains a point of concern, though the company noted slight improvements in the early weeks of the new financial year.
As the $9.2 billion entity continues to navigate the challenges posed by economic uncertainty, its innovative use of AI to drive sales and efficiency positions it to weather the storm, even as consumers become more selective in spending.
