Woolworths has announced a new merger that will see it become the largest drinks and hospitality business in Australia

Peter Parks/ AFP/ Getty Images.Woolworths has announced a new merger that will create Australia’s largest drinks and retail business
  • Woolworths is merging two of its drinks and retail businesses to create Endeavour Group.
  • The merger is set to create Australia’s largest drinks and retail business.
  • However, Woolworths is planning to separate from the business in 2020 to focus on streamlining its business.

Woolworths is combining two of its businesses, Endeavour Drinks — which owns Dan Murphy’s and BWS — and ALH Group — Australia’s largest poker machine operator, with bars, night clubs and restaurants across Australia — to create Endeavour Group.

The retail giant is then planning on spinning off this newly created group in 2020.

The separation is designed to help Woolworths Group simplify its corporate structure. It is also set to create “a greater focus on its food and everyday needs markets and opportunities to continue to build out the Woolworths Group retail ecosystem”, the company said in a statement.

Woolworths Group CEO Brad Banducci said in the statement the separation is part of the company’s plans for “investing for the future”.

“As we look to build customer differentiation in all of our businesses, and prepare for an agile and digitally-enabled future, we have decided to simplify Woolworths Group through a combination and subsequent separation of Endeavour Group,” he said.

Endeavour is set to create Australia’s largest integrated drinks and hospitality business, with the ability to reach sales of approximately $10 billion. It will include more than 1,500 BWS and Dan Murphy’s outlets and 327 ALH hotels, not to mention Pinnacle Drinks, the fine wine auction and retail company Langton’s, and the wine subscription business, Cellarmasters.

In February 2018, Woolworths came under fire after a Sydney Morning Herald report found staff at 400 ALH pubs were recording and sharing personal information about heavy gamblers in a Google drive and using tactics, such as free drinks, to push them to continue to lose more money gambling.

At the time, Tim Costello, director of the Alliance for Gambling Reform said in a statement, “Woolworths should be ashamed of themselves and should exit the pokies industry before doing any more damage.”

Earlier this year, an investigation into the incident by Liquor and Gaming New South Wales led to calls for Woolworths to exit the poker machine business, according to the ABC.

Stephen Mayne from the Alliance for Gambling Reform told Business Insider Australia in an email that the new spin off company is a significant development for the gambling divestment movement.

“ALH has long been Australia’s biggest, most aggressive and most irresponsible pokies operator, pushing hard on loyalty schemes, offering up free liquor to gamblers and operating for the maximum amount of hours as the laws allow,” he said. “It was also overly focused on running pokies pubs, rather than conventional bars.

“Australia’s biggest retailer has buckled to the public pressure and decided it can no longer risk the reputational damage of running the world’s biggest chain of gaming rooms across 286 different hotel venues.

“Australians are the world’s biggest gamblers with $24 billion a year in losses and Woolworths is responsible for about $1.5 billion of this through its 12,000 gaming machines in 286 hotels across Australia.”

Mayne also commented on ALH’s joint venture partner Bruce Mathieson having a smaller share of Endeavour Group.

“It is good to see Woolworths regularise the corporate structure of its pokies empire, diluting the power currently held by billionaire joint venture partner Bruce Mathieson, who owns 25% of the current ALH structure but has management control,” he said. “Bruce Mathieson will own 14.6% of Endeavour Group and have one board seat, so his days of running it like a private company are over.”

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