SWOT (e.g. strenghts/weaknesses)

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STENGTHS:

The major strength of the company is its focus on innovation and development of high-quality retail brand beverages and world-class packaging. This has helped the company in becoming the largest retailer brand beverages supplier (as of July 2006) and one of the largest non-alcoholic beverage companies in the world.

WEAKNESSES

The company's sales are concentrated in the US market, which contributed to 71.3% of its total sales in 2005. Furthermore, the company generates about 40% of its total sales from Wal-Mart and 65% from its top ten customers (including Wal-Mart). This indicates a significant concentration of sales in a single customer and region. Such over-dependence could negatively affect the company's topline performance at times of unfavourable market or economic conditions in the US and problems in distribution agreement or in operations of its key customers.

- overdependent on large retailers; eg) walmart phases Cott out in 2008 and Cott's stalk significantly decreases.

OPPORTUNITIES

Due to the increasing demand for non-carbonated drinks, such as energy drinks, sports beverages and bottled water, the company has taken significant steps to tap this market as well. the company's initiatives aimed at improving its efficiency and customer relationship.

- new arising markets as consumer preferences change

THREATS

PET bottles and cans constitute a major packaging material for the company's products. Thus, any increase in the price of this can have a significant impact on the company's costs.About 82% of the soft drinks sales volume (in the take-home category) in the UK and North American soft drinks market was held by PepsiCo, Coca-Cola and Cadbury Schweppes in 2005. This indicates a significant concentration of market share in a limited number of players, and poses a significant threat to Cott's market position. Further, these companies have considerable financial resources, production and sales capabilities such as direct store delivery systems. Hence, the competitors are in a better position to garner retail shelf space, absorb campaigns. The company also faces intense competition from regional soft drinks manufacturers and retailers who selfmanufacture soft drinks. Changing consumer preferences towards health and non-carbonated drinks would negatively affect the company's top-line and earnings growth.

- threat of increase in material prices - strong competition with deeper pockets - new "health first" consumers that are not interested in carbonated soft drinks

Cott Corporation: 2006 company profile edition 2: SWOT Analysis Anonymous. Just - Drinks. Bromsgrove: Nov 2006. pg. 12, 4 pgs (http://proquest.umi.com.ezproxy.lib.ucalgary.ca/pqdweb?index=1&did=1181672981&SrchMode=1&sid=2&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1255714132&clientId=12303)

SWOT #2

 Main Strengths 

Broad portfolio of beverages

Extensive property base helps in reaching more customers

Strong international presence

Main Weaknesses

Customer concentration Continuous down gradation of credit ratings Lack of scale

 Main Opportunities 

Acquisition of water bottling equipment

Growing demand for private label products

Positive market outlook for foodservice industry

Main Threats

Sluggish growth of carbonated beverages in the US

Highly competitive non-alcoholic beverages industry

Continuously evolving consumer preferences

 More on Strengths

Broad portfolio of beverages Cott has a broad beverage portfolio. The company manufactures a wide range of non-alcoholic beverages. It partners with the world's leading grocery and mass merchandise retailers to build their private label or retailer brand programs with high-quality, affordable carbonated soft drinks, sparkling and flavored waters, energy drinks, sports drinks, juices, juice drinks and smoothies, ready-to-drink teas and other non-carbonated beverages. It markets its carbonated under brand names: Cott, Stars & Stripes, Vess, Vintage, Mr. Fizz, Top Pop, City Club, Jarritos, Del Huerto and American Stars. In addition, it also markets energy drinks under the name Red Rain, Red Rooster, Throwdown and Aftershock.The fruit juices and juice based products are marketed under the brand name Juiceful and One. It also offers bottled water under brand name Clear Choice, Stars & Stripes Fruit Mist and So Clear. Tea is marketed under brand names Jasmine Sumana and Oolong Jahini. A broad beverage portfolio gives competitive advantage to the company to address the needs of even niche segments. Extensive property base helps in reaching more customers The company owns an extensive property base across North America, the UK and Mexico. It operates 14 beverage production facilities in North America, 10 of which are company owned and four of which are leased. The company also owns a global concentrate manufacturing facility in Columbus, Georgia. In the UK, the company owns and operates four beverage production facilities. In Mexico, the company operates two beverage production facilities, one of which it own and one of which is on lease. Total square footage of the beverage production facilities is approximately 2.1 million square feet in the US; 0.9 million square feet in Canada; 0.9 million square feet in the UK; and 0.3 million square feet in Mexico. An extensive property base across various regions enables the company to reach more customers and stabilize its revenue performance. Strong international presence The company has strong international presence, with business dealings in more than 60 countries around the globe. The principal markets for its products outside Canada are the US, the UK and Mexico.The company generates majority of its revenue from the international markets. For instance, nearly 86.1% of the company's revenue was generated outside Canada in FY2008. Strong international operations de-risk its business operations from down turn associated with a particular economy.

More on Weaknesses

Customer concentration Cott’s significant revenues are generated by small number of customers. Sales to Wal-Mart, the company's top customer in FY2008 and FY2007, accounted for 35.7% and 39.8%, respectively.The loss of Wal-Mart or other customers will have a material adverse effect on its operating results and cash flows. In January 2009, Wal-Mart had decided to terminate its 10-year old supply agreement with Cott. Under the agreement, Cott was the exclusive supplier of retailer brand carbonated soft drinks to Wal-Mart in the US. The termination is effective on late January 2012. The action allows Wal-Mart to cut Cott products by as much as one-third in the first year and two-thirds in the second year. As the company is highly dependent on Wal-Mart for its revenue, the termination of agreement may have significantly high negative impact on the company's business and financial condition. Continuous down gradation of credit ratings The company's credit rating has been downgraded by several credit rating institutions recently. For instance, in December 2008, Moody’s Investor Services downgraded the company's Notes from Caa1 to Caa2 and the overall company rating from B3 to Caa1. Further, in January 2009, Standard & Poor’s downgraded the notes from CCC to CCC- and the overall company rating from B- to CCC+. These rating downgrades, and any potential future negative change in the company's credit rating, could make it more difficult for it to obtain any necessary refinance or raise additional capital and could negatively impact the price of the company's common stock and have other negative implications on the overall business. Lack of scale Cott lacks the scale, in terms of revenues, to compete with other players in the market. Cott generated total revenues of $1,648.1 million in FY2008, which is relatively lower than that of its competitors, including Coca-Cola and Sara Lee. Coca-Cola and Sara Lee generated revenue of $31,944 million and $13,212 million in FY2008. Cott competes with its competitors in various business segment, it generated significantly lower revenue compared them, in FY2008.The company's small size proves to be a disadvantage as it limits its potential to compete against these larger players having economies of scale in both funding costs and administrative expenses. The company’s competitors have the financial strength to exert pricing pressure on the company and thus affect its margins.

More Opportunities

Acquisition of water bottling equipment Cott entered into a lease financing agreement with GE Commercial Finance for blow molding and water bottling equipment manufactured by Sidel Group. Under the terms of the agreement, GE Commercial Finance will provide $31.4 million in financing for water bottling equipment and lease the equipment to Cott over an eight-year term. In addition, Cott expects to spend approximately $8.6 million on civil works, engineering and other implementation costs. The equipment enhances Cott's ability to compete in the large and fast growing bottled water category by enabling the company to produce water in lightweight bottles at lower cost. It also helps the company to develop additional product offerings that are "green" in terms of the way they are produced. Further, Cott expects to introduce proprietary new bottle designs that are consumer preferred and among the most environmentally responsible packages in the beverage industry. The agreement would help the company to further strengthen its product portfolio in the bottled water category. Growing demand for private label products Demand for private label products are growing in the US since last few years. Amidst the recessionary economic condition in the US customers are increasingly seeking for value for money products. This has encouraged the companies to provide cheaper private label products as an option to the consumers needs. Simultaneously its benefits the retailers as private label products carries higher margin than the national label brands. The trend is expected to continue through 2009 and beyond. The company partners with the world's leading grocery and mass merchandise retailers to build their private label or retailer brand programs with high-quality, affordable carbonated soft drinks, sparkling and flavored waters, energy drinks, sports drinks, juices, juice drinks and smoothies, ready-to-drink teas and other non-carbonated beverages. The expanding demand for private label products will help the company in generating stable revenues in future. Positive market outlook for foodservice industry According to the National Restaurant Association (NRA), restaurant industry sales are expected to reach $565,900 million in 2009, reflecting a growth rate of 2.5% over 2008. Sales are expected to be driven by expanded menu choices; and added off-premise options (takeout, delivery and curbside) to meet Americans' desire for convenience. The overall economic impact of the restaurant industry is expected to exceed $1,500,000 million in 2009. Cott supplies its products to retail channels and food distributors. The company could benefit from the growing foodservice sector by expanding its product offerings especially in energy drinks and functional drinks categories.

 More on Threats

Highly competitive non-alcoholic beverages industry The company operates in the highly competitive non-alcoholic beverages industry. It competes against a wide range of companies that produce and sell non-alcoholic beverages including CSDs, bottled, sparkling and flavored waters, teas, coffees and juice-based beverages. The brands owned by the four major national soft drink companies, Coca-Cola, Pepsi, Nestle Waters North America and Dr Pepper Snapple (formerly Cadbury Schweppes), control approximately 85% of the aggregate take-home volume of the liquid refreshment beverage category in the North America operating segment. These companies have significant financial resources and spend heavily on promotional programs. In addition, the company faces competition in the US, the UK and Mexico from regional soft drink manufacturers who sell aggressively-priced brands and also supply retailer brand products. Such a competitive landscape may require the company to increase its spending on advertising and promotions or reduce prices that may lead to reduced profits and could adversely affect growth. Sluggish growth of carbonated beverages in the US Consumers, particularly in the US, are becoming more health conscious. This trend has led to a decrease in the consumption of carbonated and other sweetened beverages in the US. As shown in the Datamonitor's report on "Carbonated Soft Drinks in the United States" December 2008, the US carbonated soft drinks market generated total revenues of $63,500 million in 2007, representing a compound annual rate of change of (CARC) -0.2% for the period spanning 2003–07. The market consumption volumes decreased with a CARC of -0.3% during the same period, to reach a total of 60,600 million liters in 2007. The performance of the market is forecast to decelerate further, with an anticipated CARC of -0.5% for the five-year period 2007–12, which is expected to leave the market at a value of $61,800 million by the end of 2012. Cott operates with a wide range of carbonated drinks portfolio in the US. Therefore, slow growth in consumption in the region is likely to have a negative impact on its financial performance. Continuously evolving consumer preferences The industry in which the company operates is characterized by rapidly changing consumer preferences. Consumers tend to make regular switchovers to new products and brands, and are always on the lookout for innovative products. Consumers are seeking increased variety in their beverages, and there is a growing interest among the public regarding the ingredients in the company's products, the attributes of those ingredients and health and wellness issues. This interest has resulted in a decline in consumer demand for full-calorie CSDs and an increase in consumer demand for products associated with health and wellness, such as water, enhanced water, teas, reduced-calorie CSDs and certain other non-carbonated beverages. Cott has to continuously introduce new products and brands to keep the customers interested in buying products from the groceries, club stores, mass merchandisers, drugstores and convenience store chains where the company supplies its products.

http://web.ebscohost.com.ezproxy.lib.ucalgary.ca/ehost/pdf?vid=5&hid=103&sid=ae32bf1c-09c8-49a5-892e-0482a2e40c84%40sessionmgr110

Article talking about Cott's weaknesses http://johnappel.com/2009/01/15/mysterious-silence-from-cott-corporation/