2009 barclays capital leveraged finance consumer ... · • #1 private label csd producer in the...
TRANSCRIPT
Cott Corporation
2009 Barclays Capital Leveraged Finance Consumer Conference
New York, June 16, 2009
Jerry Fowden, CEOJuan Figuereo, CFO
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Forward-Looking Statements
This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995
and applicable Canadian securities legislation, including certain plans, expectations, strategies, and goals. You are cautioned that
all forward-looking statements involve risk and uncertainty. These statements include plans, objectives, goals, strategies, future
events or performance and all other statements which are other than statements of historical fact, including without limitation,
statements containing words such as “believes,” “anticipates,” “expects,” “estimates,” “projects,” “will,” “might” and words of a
similar nature. The forward-looking statements are based on assumptions regarding interest and foreign exchange rates,
expected growth, results of operations, performance, business prospects and opportunities and effective income tax rates.
Although Cott Corporation (“Cott”) believes that the assumptions underlying the forward-looking statements contained herein are
reasonable, any of the assumptions could be inaccurate. Accordingly, there can be no assurance that the forward-looking
statements included in this presentation will prove to be accurate. Our operations involve risks and uncertainties, many of which
are outside our control and any one or any combination of these risks and uncertainties could affect whether the forward-looking
statements ultimately prove to be correct. These risks and uncertainties include, but are not limited to, those described in Cott’s
Annual Report on Form 10-K for the year ended December 27, 2008 (the “Form 10-K”) and those described from time to time in
Cott’s future reports filed with the Securities and Exchange Commission and Canadian securities regulatory authorities. In light of
the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should
not be regarded as a representation by Cott or any other person that Cott’s objectives and plans will be achieved. If all or some of
such forward-looking statements turn out to be inaccurate, this may have a material adverse effect on Cott’s business, financial
condition, and results of operations. These forward-looking statements are based on current information that is likely to change
and speak only as of the date hereof. Cott undertakes no obligation to revise or update these forward-looking statements.
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- Cott’s Capabilities and Opportunities
- Status of “Refocus” Plan
- Sustainability of Recent Private Label Gains
- Key Business Drivers
- Q&A
Agenda
4
Leading Producer of Retailer Brand Carbonated Soft Drinks (“CSD”)
• #1 Private Label CSD producer in the U.S., UK, Canada and Mexico with $1.6 billion in total sales (2008)
• 60+% share of retail brand CSDs sold in North America / UK
• Substantial R&D capability and vertical integration with own concentrate production
• Concentrate sales to 60 countries outside manufacturing base
Strategic Importance to Retailers
• Offers customers a dedicated, full-service, vertically-integrated, low-cost production platform (20 plants)
• Delivers improved margins vs national brands to the world’s leading retailers
• High product quality & blind taste preference scores
• Proven service and supply chain with +/- 98% on-time, in-full service scores
Favorable Macro-Economic Environment for Private Label
• Current economic environment drawing consumers to private label
• Retailers increasing their focus on private label given current economic environment
Cott Enjoys a #1 Position in Private Label CSDs in Four Core Markets
Current Perspective: While we have seen recent progress due to macro-economic conditions and our refocus plan, momentum may moderate due to likely national brand
competitive activity and other challenges.
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Cott
65%
Other Private
Label
35%
Coke
31%
Other Branded
4%
Dr. Pepper
Snapple
20%
Other PL
5%
Cott
9%
Pepsi
31%
Strong Position in North America
Cott North America
• North American business generated 70+% of total Cott revenues (2008)
• Leadership in North America supported by extensive manufacturing network and flexible production capabilities
Fort Worth
San Antonio
San Bernardino
Sikeston
St. Louis
ColumbusBlairsville
Concordville
Wilson
Tampa
Surrey, BC
Calgary, AB Mississauga, ON
Point-Claire, QC
Scoudouc, NB
North American Manufacturing Network
Leading Position in Private Label CSDs North America
___________________________1. Source: ACNielsen, Total US-Food and Mass Incl. Wal-Mart, 192oz Eq Volume for 2009 YTD ending 4/18/2009.
CSD Food & Mass US Market Share 2009 YTD (1)
Private Label CSD US Market Share 2009 YTD (1)
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Retailer Value Proposition
Strategic Importance to Retailers - Aligned with Cott’s Mission
• Partner with retailers to enhance private label programs and capabilities
– Leverage a vertically integrated, highly flexible, low cost production platform
– Deliver customized products at highly competitive prices to enhance retailer margins
– High quality product / innovation with strong blind preference scores
• Establish long term relationships on a global basis
– Continue longstanding partnerships with the world’s leading retailers in the grocery, mass and drugstore channels
– Provide category expertise to develop plans with retailers to drive consumer awareness & increase their own retail brand loyalty
“Mission: To be the lowest cost, preferred supplier of a broad range of attractive and innovative private label soft drinks to aligned retailer partners.”
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Agenda
- Cott’s Capabilities and Opportunities
- Status of “Refocus” Plan
- Sustainability of Recent Private Label Gains
- Key Business Drivers
- Q&A
8
Our Strategy is to Focus on Our Core Private Label Business & the 4 C’s
Key Elements of Refocus Strategy
Rebuild Customer Relationships����
Reduce Costs����
Optimize Capex����
Improve Cash Flow����
Status
“Focus: 4 C’s; Further strengthen customer relationships, continue the push for lower
operating costs, control capital expenditures and rigorously manage working
capital, all of which should continue to improve cash flow.”
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Customer Relationships are Improving, But There Remains Work To Be Done
Rebuild Customer Relationships����
Reduce Costs����
Optimize Capex����
Improve Cash Flow����
10
While our Variable Costs Remain Volatile, We are Reducing Fixed Costs
Rebuild Customer Relationships����
Reduce Costs����
Optimize Capex����
Improve Cash Flow����
Corp & North America SG&A Headcount
200
250
300
350
400
450
Q4
2007
Q1
2008
Q2
2008
Q3
2008
Q4
2008
Q1
2009
11
Capex Target for 2009 is Well Below Recent Trend
Rebuild Customer Relationships����
Reduce Costs����
Optimize Capex����
Improve Cash Flow����
Recent Capex History
56
68
35
0
10
20
30
40
50
60
70
2004-2007Average
2008 (Incl. Water)
2009 Target
$ M
illio
ns
12
Improving Cash Flow Will Be Used to Pay Down Debt
Rebuild Customer Relationships����
Reduce Costs����
Optimize Capex����
Improve Cash Flow����
-10
-5
0
5
10
15
20
25
30
35
40
Q2 Q3 Q4 Q1
$ M
illi
on
s
Year Ago Latest 4 Qtrs
Cash Flow from Operations vs. Year Ago
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Our Refocus Plan Includes Stabilizing Mexico & Recovering UK and RCI
UK
Actions / OpportunitiesChallenges
RCI
Mexico
• Heavy national brand promotions
• Consumer adjustment to NAFNAC
• Negative growth in premium segment
• Lagged impact of economic slow-down in developing economies
• Visibility into customer ordering patterns
• Softer consumer demand at retail
• Ramp-up of down-the-street
• Credit control issues
• Close gap with category volume performance
• Substantially reduce costs
• Shift mix - margin vs volume
• Expand portfolio of offering at existing customers – flavors
• Enter energy concentrate sales
• Improved pricing
• Continue to improve controls
• Reduce cost base
• Support retail commitment to private label
• Expand co-pack
• Management change
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- Cott’s Capabilities and Opportunities
- Status of “Refocus” Plan
- Sustainability of Recent Private Label Gains
- Key Business Drivers
- Q&A
Agenda
15
Favorable Market Conditions Strong Value Proposition
Increasingly cost-conscious consumers������������
Attractive retailer value proposition
Growing commitment of retailers to private label brands
Cott Retailer Brands Have Outpaced the Category (Nielsen Grocery Channel)
$2.90
$4.88
$0.00
$2.00
$4.00
$6.00
Average Cott RB CSD Average National Brand CSD
US$ Price per 192 fluid oz
Favorable Macro-Economic Environment Helping Private Label
Average Cott RB Price Gap: 41%
(8%)(4%)
4%11% 13%
20% 17% 17% 10%6% 6%
(4%) (6%) (4%) (4%) (5%)(9%) (9%)
(5%)(10%)
(5%) (2%)(9%)
6%
(5%)
(3%)
14%5% 4%
(12%)-20%
-10%
0%
10%
20%
4 WE
4/19/08
4 WE
5/17/08
4 WE
6/14/08
4 WE
7/12/08
4 WE
8/9/08
4 WE
9/6/08
4 WE
10/4/08
4 WE
11/1/08
4 WE
11/29/08
4 WE
12/27/08
4 WE
1/24/09
4 WE
2/21/09
4 WE
3/21/09
4 WE
4/18/09
4 WE
5/16/09
Cott Retailer Brands CSD Category
___________________________Source: ACNielsen, Total US-Food Excluding Wal-Mart, 192oz Eq Volume
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Nielsen Grocery Channel - Volume Change vs. Prior Year
Within Private Label, Recent Share Shifts Have Been Driven by High Price Sensitivity
(4%)
5%
11%13%
20%
14%
(3%) 1% 0% (0%)
4%
10%
14%
15%
17%
10%
(8%)
17%
4% 4%
6% 6%
19% 19%
(6%)
17%13%
18%
-10%
0%
10%
20%
4 WE
5/17/08
4 WE
6/14/08
4 WE
7/12/08
4 WE
8/9/08
4 WE
9/6/08
4 WE
10/4/08
4 WE
11/1/08
4 WE
11/29/08
4 WE
12/27/08
4 WE
1/24/09
4 WE
2/21/09
4 WE
3/21/09
4 WE
4/18/09
4 WE
5/16/09
Cott Retailer Brands Total Retailer Brands
___________________________Source: ACNielsen, Total US-Food Excluding Wal-Mart, 192oz Eq Volume
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$0
$50
$100
$150
$200
$250
4Q2008 January February March 1Q2009
($ millions)
0%
4%
8%
12%
16%
20%
YoY Growth
Prior Current Growth vs. Prior Period
Continued Momentum in Core U.S. Market
Cott US Sales
• For YTD 2009 ending 4/18/2009, Cott retailer brands were up 12.2% (80bps of share gain) in the ACNielsen Grocery Channel over the prior year
• In the first quarter, Cott US sales improved 10.5% over the prior year, while US beverage case volume (8oz) grew 7.0%
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Agenda
- Cott’s Capabilities and Opportunities
- Status of “Refocus” Plan
- Sustainability of Recent Private Label Gains
- Key Business Drivers
- Q&A
19
Long-Term Drivers for PL CSDs
Increasing Retailer Focus on Private Label
Price Gap to National Brands
Potential for Increasing PL Penetration with
New SKUs
Opportunities
International Recovery
Commodity Volatility
Sustainability of Price Gap with National Brand Promotions
Risks
20
Summary
Recent Progress
• Positive macro-economic environment for private label
• Results of our Refocus plan
Momentum May Moderate
• Potential increase in national brand competitive activity
• Uncertain competitive environment
• Future commodity volatility & macro-economic inflationary pressure
We Remain Focused on Our Opportunities
• Continue our focus on superior customer relationships
• Maintaining tight management of costs
• Ongoing vigilance on Capex and cash management
• Improving our financial position
21
- Cott’s Capabilities and Opportunities
- Status of “Refocus” Plan
- Sustainability of Recent Private Label Gains
- Key Business Drivers
- Q&A
Agenda
Q&A
2009 Barclays Capital Leveraged Finance Consumer
Conference
New York, June 16, 2009