© Refresco Gerber/Richard Sinon
Refresco has agreed a deal to acquire the soft drinks business of Cott Corporation.
It could create the world’s first truly global beverage co-packing business, combining Cott Beverages’ position in North America with Refresco’s strong presence in Western Europe.
Here we take a look at some of the figures that define the deal and assess what impact it will have on the industry, as well as the two parties concerned.
ABOVE: Relative size of the net revenue between Cott Beverages and Refresco.
As you would expect, Refresco’s net revenue in 2016 was greater than that of Cott’s beverage operations. But it’s still more of a merger of equals than FoodBev, which was aware of this impending announcement last week, initially anticipated. Cott Beverages turned over $1.7 billion with EBIDTA of $136.5 million, while Refresco generated $2.41 billion.
ABOVE: Relative size of a combined Refresco-Cott, and other large beverage companies.
If you compare that with larger soft drinks companies, you begin to get a sense of the closing gap between a combined Refresco-Cott and other major soft drinks groups, like Dr Pepper Snapple. Combined revenues for 2016 would have been $4.11 billion – roughly within $1.4 billion of both Red Bull and Dr Pepper Snapple. But what is most significant about this deal is its potential to create the world’s first truly international co-packing business, and the addition of Cott will add 70% in revenues to Refresco’s annual results, based on last year’s figures. That’s a sizeable leap forward.
ABOVE: Markets accounting for more than 2% of Cott Corporation’s (left) and Refresco’s (right) net revenue. Click to enlarge.
Refresco and Cott offer each other complementary geographies: nearly three-quarters of Cott Corporation’s revenues originate in the US, while Dutch-based Refresco is most active in Western Europe. Its biggest markets are Germany and the Benelux countries (19.7% and 24% respectively).
As well as the US, Cott’s North American presence includes Canada and Mexico.
Both companies have a considerable presence in the UK; for Refresco, the country accounted for 18% of all revenue in 2016, or about €433 million. For Cott Corporation, that figure stood at about 15% – water and coffee activities included. And while Refresco does have a US presence, it’s insignificantly small: 1.8% of group revenue last year, or about €43 million, the company said. Therefore, the rationale behind acquiring a drinks bottler that is so active in this space – and a large drinks bottler too – is clear.
The two companies’ complementary geographies are also well represented in the two maps below, which show Cott Beverages and Refresco facilities across North America and Europe. Refresco has three facilities in the US, while Cott operates a total of five in Europe – all of them in the UK.
ABOVE: Compare Refresco’s production facilities and bases, mainly in Europe… (© Refresco)
ABOVE: …with that of predominantly North American-based Cott.
It’s plain to see how a deal for Cott Beverages will increase Refresco’s capabilities in North America. Likewise, the deal is going to increase the Cott unit’s access to markets in mainland Europe, including France and Germany.
Then there’s the matter of volumes. Refresco produced 6.5 billion litres last year.
ABOVE: Refresco’s product mix
Meanwhile, a breakdown of Cott’s product categories, provided by the company, show the importance of retail water, coffee, and home and office delivery (HOD) water – areas not included in today’s deal.
ABOVE: Cott’s product mix, including categories not being bought by Refresco
In its 2016 annual report, Cott noted that “four major national non-alcoholic beverage companies – Coca-Cola, PepsiCo, Nestlé Waters North America and Dr. Pepper Snapple – control 60.8% of the total CSD and alternative beverage category within the United States.”
It suggested, with much of its business elsewhere, it was unable to compete effectively in the soft drinks category.
“These companies have significant financial resources and spend heavily on promotional programmes,” Cott said.
© FoodBev Media Ltd 2022
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