Discounting and private labels sustain soft drink sales

Cott Corp. of Toronto – a global leader in private label soft drinks with $1.8 billion in 2007 revenues – is reducing its quarterly losses as intense price competition in the soft drinks market favours retail brands. Interim CEO David Gibbons attributes continued volume declines in the CSD category to heavy promotional activity by national brands in North America as well as poor weather.

Larry Taylor, president and CEO of Dr. Pepper Snapple Group of Plano, Texas (US$1.2 billion in 2007 sales) concurs. He told shareholders this was the toughest market the beverage industry has faced in many years. “With disposable incomes falling, consumers are thinking harder when they buy,” and while the company’s CSD volume was up half a per cent, “our premium-priced products slowed significantly resulting in performance that was below our expectations.”

The Nielsen Company’s Canadian retail data show sales down one per cent to $1.3 billion in the overall sparkling soft drink market (unit volume down 0.5 per cent) for the 52 weeks ending Nov. 22. The only bright spots are in related beverage categories such as RTD iced tea where sales are up 11 per cent to $123 million, sports drinks with sales up 12 per cent to $99 million and energy drinks with sales up 41 per cent to $81 million in 2008 after a 54 per cent jump in 2007.