Cott branches out

by Monica Watrous
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BOSTON – The declining carbonated soft drink market has one of the world’s largest beverage makers trickling into other segments.

With 41% of revenue from carbonated soft drinks, Toronto-based Cott Corp. has been expanding its products and capabilities in more “attractive categories” of flavored waters, energy beverages and sports drinks through bolt-on acquisitions and organic growth initiatives, the company said during a Sept. 3 presentation at the Barclays Back-to-School Conference in Boston.

Carbonated soft drink volumes in North America have slipped nearly 5% in recent quarters, according to the company. Meanwhile, Cott said it has been “climbing a commodity hill” over the past two years for aluminum, resin and sweeteners.

To offset losses, the company is branching out beyond its core offering.

“Now, while retail brand C.S.D.s is Cott’s history and what most people associate us with, we have broadened our product and portfolio offering in recent years,” said Jerry Fowden, chief executive officer. “This is a focus area where we have further opportunity to diversify and expand over time.”

The company’s June acquisition of United Kingdom-based Calypso has broadened product and package options. This year, Cott plans to introduce liquid enhancers, pouches, freezable formats and its first lunchbox-size carton, as well as flavored alcohol beverages in the United States, slim cans and preservative-free brewed teas and other products. Additionally, Cott continues its efforts to exit the case pack water category.

“Our mission is to build shareholder value by managing our core business — that is 2-liter and 12-oz cans of C.S.D. and family-size fruit juice very tightly, with a focus on cash generation, while slowly and progressively diversifying our product, package and channel offering to provide a more robust, diversified and growth-oriented business over time,” Mr. Fowden said.

Cott also remains focused on building its contract manufacturing and value beverage businesses, as well as entering new channels.

“We are not trying to pretend we can be all things to all people in all channels given the (direct-store delivery) network that many of the national brands have here in the U.S., but participation in contract manufacturing, participation in food service, participation in the healthier channels — Whole Foods, Fresh Market, Trader Joe’s, historically where we haven’t placed much effort or concentration, in addition to a few fringe areas like military, are all areas where our business model is well-equipped,” Mr. Fowden said. “So, when you add the product and the package capability to that greater focus on contract manufacturing and those new channels, we believe by driving that even more aggressively we will be in a much better position to offset that slightly accelerated category decline.”

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