Will Cott buy Schweppes?
The demerger of Cadbury and Schweppes has been under serious consideration.
And if Schweppes becomes an independent US beverage company (it has sold its European beverage holdings), it is possible that Cott, the Canadian soft drink company may snap it up.
Cott is the distant #4 in the US carbonated beverage market with about 5% market share, mostly because of supplying house brand beverages to companies like Wal-Mart and Safeway. Cadbury-Schweppes (with 7-Up, Dr Pepper, and Canada Dry among other brands) is #2, behind Coca Cola and PepsiCo, with about 15% market share. Together, the united company could be a more formidable challenger.
Cott has one advantage over PepsiCo and Coca-Cola. It does not have a chain of independent bottlers, so it can deliver beverages wither directly to individual retailers and also to warehouses. Coca-Cola, for example, is embroiled in a battle with its independent bottlers about whether big clients like Wal-Mart will be served locally though individual bottlers or nationally, though a subsidiary of the main company.
Cott is a good fit, if only because the two big players in the sector are unlikely ones. As a Wall Street Journal article ("Canada's Cott Explores Cadbury", 4/13/07) puts it, "Coke and Pepsi, with their already formidable market shares, are unlikely bidders for Cadbury beverages because of antitrust issues, beverage industry experts say." In addition, many Cadbury-Schweppes brands are direct competitors with those of Coca-Cola or Pepsi, and, as the WSJ article notes, "Cadbury is unwilling to consider breaking up its business by brand, people familiar with the matter say." It is also a likely one since Cott has no presence in the non-carbonated beverage area, one where C-S (with such brands as Nantucket Nectars, Snapple, and Moots) is strong.
Nothing sure about this, but Cott shares are way up on the speculation. Cott would need extensive help from private equity groups, but its management (led by a former Coca-Cola exec) has improved profitability and may be ready to take on the challenge of merging #3 and #4.
6:28:02 PM 
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