Cott’s $1.25B sale adds fizz to stock
Cott’s sale of its legacy soda pop supply business is “bittersweet,” its chief executive said Tuesday, but will allow the beverage company to focus on its more profitable and growing market segments of coffee and water.
The sale of Cott’s traditional beverage manufacturing business to Netherlands-based drinks bottler Refresco for US$1.25 billion cements the Toronto company’s successful and decisive strategic shift away from its longtime business of supplying private label housebranded carbonated drinks, juice and flavoured waters to retailers such as Wal-Mart.
“Over the years Cott has been undergoing a transition from what many investors would historically call a private label soda pop company to a higher-margin business with much lower customer, product and channel concentration,” CEO Jeremy Fowden told a conference call with analysts to discuss the deal. The “new Cott,” will focus on “better-for-you products” in water, coffee and filtration services, he said.
Cott’s beverage manufacturing business accounts for about US$1.7 billion of its US$3.2 billion in annual sales, and also produces drinks for clients on contract such as Monster Energy drinks.
The company began its history in Canadian soda pop in 1952, when Montreal clothier Harry Pencer began importing the Cott regional New England brand of flavoured sodas into Quebec. Pencer acquired a bottling facility in 1955 and began manufacturing the beverages after licensing the Canadian rights to the Cott label, forming Cott Beverages Ltd.
But the deal that cut the bulk of its ties to pop gave Cott’s shares a 6.4 per cent boost on Tuesday — they closed at $19.41 in Toronto — coming after more than a decade of declines in carbonated beverage consumption as newer drinks have usurped the popularity of colas and tonics.
In the U.S., Cott’s biggest market, consumer demand for carbonated soft drinks has fallen for 12 straight years, according the industry tracker Beverage Digest.