Comment: Refresco deal ‘turns Cott into services-led business’

Refresco’s acquisition of Cott Beverages – announced earlier today – is a significant transaction that will transform Cott into a primarily service-driven business, according to the chairman of food and drink consultancy Zenith Global.

Richard Hall said that the $1.25 billion deal is significant for five principal reasons.

He pointed out that Cott, a world top ten player, is exiting traditional soft drinks manufacture as well as fruit juice – both of which are facing volume declines in developed markets.

Refresco will become a new global contract manufacturing leader, with strength in both Europe and the Americas, and will also become a new UK soft drinks leader to challenge the scale of Coca-Cola and Britvic/Pepsi.

The acquisition means that Cott becomes a primarily services business in water, coffee and tea, and home and office refreshment. In filtration services, it has US leadership through DS Services and European leadership through Eden Springs.

Cott retains some substantial soft drinks service interests in concentrate production and Royal Crown franchising, he said.

European bottler Refresco confirmed its intention to acquire Cott’s soft drink manufacturing operation this morning, creating an independent bottler with combined revenue of $4.1 billion in 2016 and volume of 12 billion litres. Refresco will benefit from Cott’s access to the North American market – including 19 production facilities in the US, four in Canada, and one in Mexico.

The Dutch company expects to see resulting synergies of around €47 million by the third year after completion.

Hall commented: “This is a more-than-$1-billion deal between two quoted companies, creating the world’s first really global contract manufacturing soft drinks producer in the new Refresco – and enabling Cott to focus more on building its portfolio of service businesses.

“Refresco’s strength will lie in producing the full range of soft drinks, while Cott devotes its strategy to water, coffee/tea and other refreshment services.”