Under pressure Cott to close soft drinks factory
would close its Ohio factory in the US next year as part of its
plan to cut costs and get back on track with consumer trends.
Cott, the world's largest private label soft drinks supplier, said it would cut 70 jobs when it closes the factory next March.
The move is part of the group's North American realignment plan, which it launched in September after warning 2005 profits would be badly hit by low fizzy drink consumption, rising PET costs and poor performances from own-label bottled water.
The Ohio closure is expected to constitute $13m of the $60m-$80m in charges that Cott said it would incur from realignment. Production will be reallocated elsewhere.
John Sheppard, Cott president, said: "While it is never easy to take decisions that affect our employees in this way, closing our Ohio facility is part of our plan to improve operating income and help us bring our production capacity more closely in line with the needs of our customers in a rapidly changing beverage market."
Cott withdrew its earnings forecast for 2005 in September and said it would only post revised estimates once it had completed a review of cost-saving initiatives.
Cott's warning to the market indicated that the firm had struggled to cope with the shift to non-carbonated drinks led by health-conscious consumers.
Branded soft drinks players PepsiCo and Coca-Cola have also struggled with their carbonated ranges this year and have spent a lot of their time pushing forward juice, water and sports drinks.
Cott fared worse than these two in the first half of 2005 with a one per cent drop in fizzy drink sales overall. The firm's shares have fallen by more than a third since September.
The firm had grown impressively until then, consistently recording double-figure sales growth for private label fizzy drinks from 2001 to 2004, while both Pepsi and Coca-Cola averaged less than one per cent increases.
Cott's problems this year now place even greater importance on its planned takeover of UK rival Macaw.
The deal, worth £75.7m, would give Cott a first inroad into aseptic drinks production, a fast-emerging technique among soft drinks producers because of its ability to satisfy growing consumer demand for non-carbonated and healthier products.
But, Cott may have to hold the deal until May next year after Britain's Office of Fair Trading (OFT) decided to refer the case to the Competition Commission, due to market monopoly fears.
Cott UK and Macaw combined supply 57 per cent of private label soft drinks in Britain. "Most customers raised concerns that the merger would lead to higher prices," the OFT said.
