Cott to add more diverse products and packages

by Eric Schroeder
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MIAMI — Despite its large scale as a manufacturer of beverages for others, Mississauga, Ont.-based Cott Corp. does not participate in a number of product categories. Expect that to change, albeit it slowly, the company’s chief executive officer told participants at the Deutsche Bank dbAccess Consumer, Retail, Gaming and Lodging Conference held March 6 in Miami.

“We don’t have any pouches,” said Jerry Fowden, c.e.o. of Cott, which makes more than 200 bottled water, juices, ready-to-drink teas, and energy and sports drinks at approximately 20 beverage production facilities in North America and six overseas. “We don’t have any Tetra-brick cartons. We don’t have any glass lines. We don’t do liquid enhancers, MiO-type products. And therefore, I think people should expect, in no mad panic, in no big rush, in no massive tons of CapEx, because I think you’ve seen our conservative, constrained approach to these things. People should expect that, as time passes, we will continue to add those more diverse products and packages to our manufacturing make-up so that we can be an even better one-stop shop for our customers.”

Mr. Fowden said Cott in recent years has told its customers “no” when they ask whether Cott may make a pouch product or MiO-type water enhancer. Those “nos” soon will change to “yeses.”

He said Cott recently bought its first two pouch fillers from a company that entered bankruptcy a few months ago. The equipment is being refurbished, and Cott hopes to begin offering pouch products by September.

Cott also is installing a liquid enhancer line that should be ready by May or June. Cott’s approach to liquid enhancers should be different than those currently on the market, Mr. Fowden said.

Although the company will be able to make a liquid enhancer similar in size to the 1.5-oz MiO, Mr. Fowden said he believes Cott may capture another market with a “family size” product that offers about four times the amount as MiO at about the same price.

“MiO is what I would call a ‘handbag product,’ but actually what about the gym bag? What about the office drawer? What about the fridge at home for all the kids, etc.? So, we’ll have this available to be sold from around July this year and our smaller size starting around May,” he said.

In addition to new product categories, Cott also plans to launch several new products later this year, including Clear Choice Ice and AquaMist.

“These are different versions of that purified water, antioxidants, green tea extracts, a nice flavor profile across things like orange and mango, strawberry and kiwi, etc.,” he said. “That product will be in 60%, 70% of our customer base by the time we get to the middle of this year.”

Asked by an analyst whether Cott would consider moving away from 2-liter bottles to 1.25-liter bottles, like many of the big branded players have done, Mr. Fowden replied that Cott would “be a little bit careful and cautious.”

“The reason the national brand players are introducing things like 1.25- and 1.5-liter is they no longer want to sell their national brands at $1 or 99c for 2-liter, because they can’t, with inflation, make the kind of margins they need,” he said. “Therefore, seeing their 2-liter up much more often in the $1.25 to $1.50 mark with private label next to it at 84c I don’t think is a bad comparison compared to 84c versus a promoted 98c. So, I can see exactly why they are going for hidden pricing through opaque-pack proliferation. That’s a good strategy for their business I would support, but I’m not so sure that’s something today we need to follow, because there is an advantage in seeing 2-liter private label versus a more expensive 2-liter national brand in terms of very easy consumer price comparison.

“If we do need to do more small-pack and other pack sizes, we can. We did put a load of eight-packs into our largest customer at $1.97, I think, retail just to hit that sub-$2 retail last year. I’m not so sure all of our post-event analysis shows we’ve really gained anything out of that, a la giving less space to more s.k.u.s (stock-keeping units), so some of those we’re going to convert back, some of those we’re going to leave. But, we have the capability to do it. I just don’t think we should rush it.”

Mr. Fowden also was asked whether there is a “magic complete replacement natural sweetener” in the market yet, and whether PepsiCo’s switch in sweeteners earlier this year may be a volume driver for the industry. In his opinion, no “magic” replacer exists yet, and the industry is likely to rely on blends for a while.

“They (new naturally artificial sweeteners) don’t taste the same,” he said. “Therefore, I think this will be an ongoing gradual development, new s.k.u.s, new line extensions, new flavors, where the people that are really interested in that, yes, with a different flavor profile, will have an additional option. I think we’re a ways off from a ‘you can’t notice the difference’ all-natural artificial sweetener.”
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