TORONTO – Retailer-brand soft drink provider Cott Corp. said it plans to refocus the company on private-label beverages. In recognition of the significant challenges recently experienced by the company, David Gibbons, Cott's interim CEO, working with Cott's senior management team and the board, is refocusing Cott on its private-label business and has already begun to take actions to improve profitability.
Gibbons said he believes that over the last 18 months, Cott has diverted too much energy and resources away from its core retailer customers and toward branded initiatives. "We [image-nocss] will change course," he said. "Through these efforts we will continue to reposition Cott to play a greater role as a champion of private label."
Cott said it recognizes that within the United States, its best growth opportunities reside within its core capabilities in private-label beverages. The company said it believes that there are opportunities for further growth within its current customer base by carefully following consumer trends in new flavors, categories, package types and product mix by geography.
"Our role is not to invent new categories," said Gibbons. "Our role is to be 'fast followers' to leverage the growth of expanding categories and to improve profitability for our retail partners at lower prices to consumers."
The Company has already refocused its marketing efforts on the needs and requests of its retailer partners. "This will be our focus," Gibbons said. "Our existing retail partners will drive our new-product development."
These actions are the results of a 60-day evaluation of all aspects of Cott's business, undertaken by Gibbons upon his appointment as interim CEO. The actions will include combining some executive positions, which will result in the departure of the president of the North American business unit and the Chief People Officer. Their responsibilities will be reassigned among senior management. The company is also eliminating positions throughout the organization, including not filling certain executive vacancies.
The company estimates that total severance costs will be approximately $6 million to $8 million. Overall, Cott is targeting annualized SG&A cost reductions of more than 10% or $20 million to $22 million. The total annual savings, including headcount reductions and manufacturing and supply chain optimization, is anticipated to be between $39 million and $43 million. In the second half of 2008, Cott expects to realize more than $10 million of these savings.
Finally, Cott also announced that, following discussions with Crescendo Partners and in consultation with other significant shareowners, an agreement with Crescendo Partners has been reached. Under the agreement, the Cott board will be expanded in size from 10 to 11 directors. Four new directors, Eric Rosenfeld, Greg Monahan, Mark Benadiba and Mario Pilozzi, will join the board, and Eric Rosenfeld will become Lead Independent Director. Frank Weise, Don Watt and Serge Gouin have offered to resign from the board to facilitate the changes.
Under the terms of the agreement, Gibbons will be appointed chairman and a CEO search committee will be reconstituted.
Toronto-based Cott markets or supplies more than 200 retailer and licensed brands, as well as company-owned brands including Cott, RC, Vintage, Vess and So Clear. Its products include carbonated soft drinks, sparkling and flavored waters, energy drinks, sports drinks, juices, juice drinks and smoothies, ready-to-drink teas and other noncarbonated beverages.
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