Analysts: Cott Diversifies With Acquisition

In a move that signals Cott Corporation is aggressively extending its reach into other private label beverage categories, the Canadian store-brand soda supplier announced it was gulping down Cliffstar for $500 million.

The decision to take over Cliffstar, the leading producer of shelf-stable juices and juice blends in North America, was lauded by analysts as a bold move that allows Cott the potential to grow rather than continue to fight out an increasingly tough battle for declining CSD shares. Taking Cliffstar’s expertise on board will allow Cott, a company with LTM 4/3/10 combined revenue of $2.3 billion , to grow both its product offerings and company operations, according to J. Ross Colbert, Managing Director for Zenith International. “I think this is a great strategic deal for both companies,” he said. “This [move] gives Cott a broader platform of products to offer retailers.”

Colbert cites Cliffstar’s hot fill capabilities as a significant way in which Cott can expand its offerings. By adding hot filled products Cott will have a better shot at increasing its in-demand items like functional beverages, which are currently estimated to represent seven percent of the company’s output, post-deal.

Increasing bottom-line product sales is also a bold decision that helps position Cott – which had foundered in recent years, replacing its CEO and taking a beating in the stock market –in a way that it can grow in new channels and add customers, according to Marion B. Glover, President and Chief Executive Officer, Glover Capital

“[The acquisition] gives them the ability to talk to customers with a bigger selection of products,” he said, adding that the merger “will help them with their selling – not only the new juices, but carbonated soft drinks as well.”

The acquisition was the largest beverage deal since the acquisition of Anheuser Busch by InBev – and may mean that the deal space is heating up slightly. Six weeks ago, legacy beer brand Pabst Blue Ribbon was sold to investor C. Dean Metropolous for $250 million.

Regardless of the overall market, Colbert believes that Cott’s “compelling synergy,” with Cliffstar will benefit retailers who will be able to deal with fewer suppliers. In the end, Cott will become a “much more balanced company,” according to Colbert.