As household budgets tighten under pressure from rising interest rates, Endeavour Groupthe operator of Dan Murphy And BWSturns to AI to combat shrinking profit margins and reluctant consumers.
CEO Steve Donohue revealed that AI and machine learning have become key tools in the company’s strategy to precisely target promotions, drive sales and grow market share despite a broader, long-term decline in alcohol consumption. “We’re targeted and precise. It’s very difficult to drive sales anymore,” Donohue told investors yesterday.
By using AI to analyze vast amounts of consumer data, Dan Murphy’s was able to personalize its offers through its app, leading to a significant increase in customer engagement and sales. For example, Donohue says personalized promotions, such as discounts on frequently purchased items or similar products, led to a 29% increase in sales.
“There are so many permutations between types of offerings that it can’t all be done in a flash,” he explained. “You have to have the machine learning capability to process all the data because it’s constantly moving.”
The effectiveness of these AI-powered strategies is evident in the performance of the My Dan loyalty program. Program members spend 80% 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 cheaper food and beverage options, Dan Murphy’s has focused on maintaining its relevance through dynamic pricing and personalized promotions. This approach has helped the company grow group sales by 3.6% to $12.3 billion and profits by 3.1% to $1.1 billion in fiscal 2024.
Sales of drinks at liquor stores Dan Murphy’s and BWS were up 3.4 per cent. Donohue said draught beer was enjoying a resurgence as smaller wine producers battled larger incumbents. “Small wine brands often get overlooked,” he said. “Brands like Tyrrell’s (Wine) in the Hunter Valley, who have always produced these beautiful, refreshing white wines, are selling like hotcakes,” Donohue said.
Despite the gains, Endeavour Group’s net income fell 3.2% to $512 million, driven by rising debt and interest rates. However, the company has identified significant cost-saving opportunities, with $100 million of savings already achieved and plans to achieve $290 million of savings by fiscal 2026.
Endeavor’s efforts to cut costs extend beyond AI-powered promotions. The introduction of electronic shelf labels has reduced labor costs, contributing to a 5% improvement in productivity at Dan Murphy’s, a model Donohue wants to extend across the company’s hospitality operations.
Investors reacted cautiously to the company’s latest financial results, however, with Endeavour’s share price falling 7% in late trading despite analysts describing figures as “clean” and “strong”. The outlook for hotel and pub sales remains a concern, although the company noted some slight improvements in the first few 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 is helping it weather the storm, even as consumers become more selective in their spending.
