Cott Corp. is King of Pop

[Photo: Dan Gaye]

Making sodas for big chains like Walmart and Publix may not be the sexiest business in the world, but Cott Corp. has gotten very good at it.

By the turn of the century, Cott, which is headquartered in Tampa, had become the largest producer in the nation of private-label soft drinks — the beverages that supermarkets offer under their own labels at big discounts to name brands such as Coca-Cola, Dr Pepper and Pepsi.

At Walmart, Cott supplies beverages under multiple names, including Sam’s Cola and Dr. Thunder for as little as 84 cents for a two-liter bottle, about 35% less than name brands. The company’s name is nowhere to be found on the labels.

Cott had enjoyed double-digit revenue growth between 2000 and 2004, but its stock price began declining under CEO John Sheppard, a former Coca-Cola executive who left after two years at the helm. In 2006, the company replaced him with another Coca-Cola veteran, Brent Willis, who has a background in marketing and lots of enthusiasm.

Willis’ arrival — and his new strategy — jolted Cott, a media-shy firm known for a steady, quiet style long on results and short on flash. While it’s the largest private-label drink maker, Cott is tiny compared to giants Pepsi and Coke. Without the brand-name loyalty those firms enjoy, it essentially must compete on price — Cott’s margins suffer if the giants engage in a price war or if raw materials prices for sweeteners, bottles or cans increase.

Willis saw a problem in Cott’s heavy reliance on carbonated soft drinks. Growth in soft drink consumption was declining, and commodity costs were increasing, squeezing Cott’s profits. Willis believed Cott needed to expand into beverages with bigger margins, including teas, juices and energy drinks.

“You have to ask yourself: ‘Where is the money and where is the growth?’ ” says Willis. “You want to have access to more profitable categories.”