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Cott looks to energy drinks for boost

April 28, 2008
By Canadian Vending


TORONTO – Troubled soft-drink maker Cott Corp. says its focus on the
U.S. bottled-water and energy-drink businesses will help it turn around
the company's North American operations this year.

TORONTO – Troubled soft-drink maker Cott Corp. says its focus on the U.S. bottled-water and energy-drink businesses will help it turn around the company's North American operations this year.

After a difficult 2007 because of high costs and low consumer demand, Cott says it is even more sure of its “belief that water and new age beverages really are the future of this company.''

This year "simply is the year when Cott North America will restore profit momentum and build a platform for sustainable growth in the future,'' Rick Dobry, Cott's president North American operations, said Monday during a webcast of the company's investor day in Florida.


Cott, he said, hopes to improve profits in the water segment by using new, more efficient equipment and lightweight bottles.

It has also had good results with "Inked," its energy drink for 7-11, North America's largest convenience store operator.

"We are in full national distribution and we're seeing lots of trial by consumers. This is a great example of what Cott can do in `new age'.''

Dobry's comments came after disappointing fourth-quarter results last week, which furthered analyst and investor frustration as ongoing soda-pop declines in North America hurt Cott's bottom line for yet another quarter.

The company is the world's third-largest producer of carbonated soft drinks, after better-known Coca-Cola and Pepsi. All have encountered a long-term decline in demand for their traditional soda pop products in established markets and have responded by diversifying their product lineups and moving into new geographic areas, with varying success.

Dobry said one of the biggest issues in 2007 was the rapid rise in the price of commodities used by Cott.

Chief financial officer Juan Figuereo also acknowledged the company, which is hedged for increases in aluminum costs, made some mistakes when it came to costs.

"We lost ground on gross profit margin and it's all related to one issue, which is the commodities,'' Figuereo said.

About 70 per cent of Cott's costs relate to ingredients and packaging, making it exposed to the price of commodities such as corn, oil and aluminum.
The company, he said, “made a bet on the advice of the experts on aluminum that turned out to be wrong; we learned the lesson, we took three rounds of pricing.''

Cott has now fixed the prices of some of its commodities in order to have more stability in pricing and be able to set prices with customers earlier on.

"We cannot afford to wait and see which way commodities are going,'' he said.

In a separate announcement Monday, aluminum producer Novelis Inc. announced price increases on aluminum sheet products sold in North America because of rising cost of alloying ingredients. The price increases are effective for all new orders booked on or after Feb. 12, although orders currently under a fixed contract are excluded from the increase.

On Friday, Cott reported a loss of US$76.8 million or $1.07, compared with $29.6 million or 41 cents a year ago, in a quarter that included a $55.8-million writedown of goodwill and a $9.7-million asset impairment charge.

Revenue for the quarter was $412.4 million, up 3.1 per cent from $400.1 million in the year-ago period, largely thanks to currency exchange effects as North American revenue declined 2.5 per cent.

The company is the world's largest producer of store-branded soft drinks for groceries and other retailers in its core markets of Canada, the United States, the United Kingdom and Mexico. It has been restructuring to adjust for declining consumer demand for carbonated drinks as well as high material and energy costs.

Source: The Canadian Press