Citi's Global Consumer Seminar November 29, 2016 - Cott Corporation
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Citi’s Global Consumer Seminar
November 29, 2016
Safe Harbor Statements
Forward Looking Statements: This presentation contains forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, Section 21E of the Securities Exchange Act of 1934 and applicable Canadian securities laws conveying management's
expectations as to the future based on plans, estimates and projections at the time the Company makes the statements. Forward-looking
statements involve inherent risks and uncertainties and the Company cautions you that a number of important factors could cause actual
results to differ materially from those contained in any such forward-looking statement. The forward-looking statements contained in this
presentation include, but are not limited to, statements related to expected future operating results of the Company, anticipated market
trends, and the execution of the Company’s strategy. The forward-looking statements are based on assumptions regarding management's
current plans and estimates. Management believes these assumptions to be reasonable but there is no assurance that they will prove to
be accurate. Factors that could cause actual results to differ materially from those described in this presentation include, among others:
(1) changes in estimates of future earnings; (2) expected synergies and cost savings are not achieved or achieved at a slower pace than
expected; (3) integration problems, delays or other related costs; and (4) unanticipated changes in laws, regulations, or other industry
standards affecting the companies. The foregoing list of factors is not exhaustive. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date hereof. Readers are urged to carefully review and consider the various
disclosures, including but not limited to risk factors contained in the Company's Annual Report in the Form 10-K for the year ended
January 2, 2016. The Company does not, except as expressly required by applicable law, undertake to update or revise any of these
statements in light of new information or future events.
Non-GAAP Measures: The Company routinely supplements its reporting of GAAP measures by utilizing certain non-GAAP measures to
separate the impact of certain items from its underlying business results. In this presentation, we use non-GAAP measures such as
EBITDA, adjusted EBITDA and adjusted free cash flow and certain ratios using these measures. With respect to our expectations of
performance of S&D and Eden as they are being integrated, reconciliations of first year free cash flow accretion and adjusted free cash
flow accretion are not available, as we are unable to quantify certain amounts that would be required to be included in the relevant GAAP
measures without unreasonable effort. We expect that the unavailable reconciling items, which primarily include transaction and
integration costs and phasing of capital expenditures, could significantly affect our financial results. These items depend on highly variable
factors and any such reconciliations would imply a degree of precision that would be confusing or misleading to investors. We expect the
variability of these factors to have a significant, and potentially unpredictable, impact on our future GAAP financial results. Since the
Company uses these non-GAAP measures in the management of its business, management believes this supplemental information,
including on a pro forma basis, is useful to investors for their independent evaluation and understanding of the business. Any non-GAAP
financial measures used by the Company are in addition to, and not meant to be considered superior to, or a substitute for, the
Company's financial statements prepared in accordance with GAAP. In addition, the non-GAAP financial measures included in this
presentation reflects management's judgment of particular items, and may be different from, and therefore may not be comparable to,
similarly titled measures reported by other companies. A reconciliation of this non-GAAP measure may be found on www.cott.com.
1
Cott is a Diversified Beverage Company with a Strong Better For
You, Product Mix and Broad Channel Penetration
Cott is a leading provider in the direct-to-consumer beverage services industry with $4 billion in sales, over
$400 million in EBITDA, and strong projected free cash flow growth.
Total Cott Pro Forma Adjusted EBITDA (1)
The Company operates through two major business segments: (Inclusive of DS Services, Aquaterra, Eden Springs and S&D Coffee and Tea)
Better For You Beverage Platform: provides direct-to consumer bottled water, coffee, tea and water
filtration services to customers across 20 countries. Includes DS Services, Aquaterra, Eden Springs and
S&D.
Other CSD
14% 12%
Leading, scale platforms in home and office water delivery, coffee, tea and filtration services Juice / Juice
within North America and Europe Drinks
8%
Coffee & Tea
Products
Large categories with low single digit growth across HOD Water, Custom Coffee Roasting and 16%
Sparkling
Tea Blending Waters
8%
Growing coffee manufacturing, distribution and services channels Water
7%
Growing water filtration businesses HOD Water
35%
Fragmented diversified customer base with good retention rates
Traditional Cott: one of the largest producer of beverages on behalf of retailers, brand owners and
distributors. Stable overall volume despite mature market dynamics/decline in CSD’s. Key drivers:
Other
Distribution 19% Private Label
Sparkling water and mixer product category growth in the high single/low double digits 1% Retail
28%
Channels
Convenience
Growing contract manufacturing channel growth in the high single/low double digits Retailing
2%
Carbonated Soft Drinks “CSDs” and Shelf Stable Juices “SSJs” continue with low /mid single
digit declines Foodservice
5% Branded
Retail
10%
Customer base includes world’s leading brand owners and retailers in the grocery, mass- HOD Water
merchandise and drug store channels 35%
___________________________
Note: Financials based on FY 2015. Source: Company information, Management estimates
Terms: Home and Office Delivery (“HOD”), Office Coffee Services (“OCS”) and Carbonated Soft Drinks (“CSD”).
Other product category includes concentrates, Eden Springs’s filtration services and other. Sparkling waters includes mixers.
Other channels include contract packaging, OCS and other 2
(1) 2015 Adjusted EBITDA allocated based upon pro-rata revenues by product category and channel between DS Services (HOD Water, OCS, Water and Other), Traditional Cott (CSD, Juice/Juice Drinks, Sparkling Waters and Other), Eden (HOD Water, OCS,
Water and Other) and S&D (Coffee & Tea).
Significant Revenue Diversification Across Products and
Channels.
Cott + DSS + Eden + S&D Pro Forma
Traditional Cott Revenue Cott + DSS Revenue
Revenue
CSD + Juices = 55% Traditional Cott = 100% CSD + Juices = 36% Traditional Cott = 65% CSD + Juices = 27% Traditional Cott = 49%
Other CSD Other CSD
19% 21% 15% 16%
CSD
Other 33% Juice / Juice
Products
24% OCS
4% Drinks
Juice / Juice Coffee & Tea 11%
Water 20%
5% Drinks
15% Sparkling
Sparkling Waters /
Sparkling Mixers
Waters Water
Juice / Juice HOD Water Waters / 10%
21% 5%
Drinks 22% Mixers HOD Water
22% 14% 23%
Contract Other Other
Other
Packaging 3% 17% Distribution 17%
12% 2%
Channels
Convenience Private Label
Branded Retailing Retail
Retail Private Label 4% 36%
15% HOD Water Retail
22% 48% Foodservice
8%
Private Label
Branded Branded
Retail HOD Water
Retail Retail
70% 23%
13% 10%
Better For
You
21%
Better For You
Better For
You Other
45% Better For
45%
Other You
55% 55%
Other
79%
___________________________
Note: Financials based on FY 2015.
Other product category includes concentrates, Eden Springs’s filtration services and other. Sparkling water includes mixers
Other channels include contract packaging, office coffee services and other
Better For You platform includes HOD Water, Water, Coffee & Tea and Sparkling Waters / Mixers
Source: Company information, Management estimates
3
Significant EBITDA Diversification Across Products and Channels.
Cott + DSS + Eden + S&D Pro Forma
Traditional Cott Adjusted EBITDA Cott + DSS Adjusted EBITDA
Adjusted EBITDA
CSD + Juices = 55% Traditional Cott = 100% CSD + Juices = 26% Traditional Cott = 48% CSD + Juices = 20% Traditional Cott = 37%
Other CSD
Other CSD 12%
14%
16% 16% Juice / Juice
CSD Drinks
Other 33%
Products
24% OCS Juice / Juice 8%
6% Coffee & Tea
Drinks
16% Sparkling
11%
Water Waters
8% Sparkling 8%
Sparkling Waters Water
Waters 10% 7%
21% Juice / Juice
Drinks HOD Water HOD Water
22% 33% 35%
Contract Other
Packaging 3% Other
Other Private Label
12% 19% Distribution 19% Retail
1%
Channels
Private Label 28%
Branded Retail Convenience
Retail 37% Retailing
15% 2%
Private Label Foodservice
Retail 5% Branded
HOD Water
70% Retail
33% Branded 10%
Retail HOD Water
11% 35%
Better For
You
21%
Better For You
Other
34%
Other
43%
Better For
You
Better For
57%
You
66%
Other
79%
___________________________
Note: Financials based on FY 2015.
Other product category includes concentrates, Eden Springs’s filtration services and other. Sparkling water includes mixers
Other channels include contract packaging, office coffee services and other
Better For You platform includes HOD Water, Water, Coffee & Tea and Sparkling Waters / Mixers
Source: Company information, Management estimates
4
Primary Geographic Presence In North America & Europe
Revenue(1) and Adj EBITDA(1) Geographic Mix
USD
72%
68%
GBP
CAD 14% 15%
EUR OTHER (1)
7%
5% 5% 4% 5% 5%
North America Europe Other
Revenue EBITDA
Note: Includes ILS (Revenue 3% and EBITDA 3%) and the aggregate of other currencies with individual concentration of 2% or less (CHF, RUB, PLN, and MXN).
(1) Includes estimated full year 2016 financial data for Cott Corporation, Eden Springs and S&D Coffee, Inc. as of August 4, 2016. Financial estimates are subject to change.
5
Key Business Performance Metric to Drive Compound Growth in
Free Cash Flow
We focus on free cash flow generation and anticipate a strong CAGR in growth from 2016 to 2019.
Adjusted Free Cash Flow (1) Free Cash Flow Drivers
($ in millions)
Traditional business continuing to generate
good free cash flows from well invested
business and asset base
$225 - $275 Beneficial corporate structure (low cash
taxes annually 2016 to 2021)
HOD water, coffee, tea and filtration platform
$135 - $145* top line growth is expected to generate
incremental EBITDA and free cash flow
Additional synergy capture across HOD,
Coffee and Tea platforms.
Small overlapping highly complentary tuck-
2016 Cott 2019PF in acquisitions with the goal of generating
incremental EBITDA
*2016 adjusted FCF in the $135 to $145
million dollar range with Eden and S&Ds part
Refinance/Remove (high 10% coupon) DS
year contributions more than offsetting the
further weakness in Sterling (11-10-16)
Notes in September 2017 which is expected
to generate significant interest savings
___________________________
Source: Company information
(1) Adjusted free cash flow calculated as cash flow from operations (excluding acquisition, integration and transaction costs) less capital expenditures. 2019 range incorporates S&D Coffee and Tea and Eden Springs
transactions as well as foreign exchange rates as of 8/4/16. 6
Cott’s Strategic Vision – A More Diversified Higher Margin and/or
Growth Company With Strong Free Cash Flow
Stable, strong cash
generation from • HOD Water, Coffee and Tea
traditional business Service Businesses of Scale.
through 4Cs and growth • Continue to generate top
in contract line organic growth
manufacturing and Traditional • Small HOD/OCS tuck-in
Value Added Water Business Better For You
acquisitions in North
offsetting PL CSD and Beverage Platform
America and Europe
SSJ declines Growth
Shareholder Value
Creation
A more diversified higher
margin and/or growth-
oriented company with
annual EBITDA and free
cash flow expansion to
drive increased
multiple/stock valuation.
Free Cash Flow
and Rapid Acquisition
Synergy capture and
Deleveraging Synergy
Compound Free integration across
Capture water, coffee, tea and
Cash Flow Growth
and Rapid filtration platforms
Deleveraging
7
Traditional Business – Leading Beverage Platform with
Extensive Manufacturing Footprint for Private Label, Contract
Manufacturing and Own Brands
Traditional Business Overview Diversified Manufacturing Capabilities
Industry-leading beverage manufacturer and distributor focused on CANADA
private label, contract manufacturing and own brands with revenues of
approximately $1.9 billion which provides procurement and scale
leverage UNITED STATES
Leader in private label shelf stable juices and CSDs in North
America with a rapidly growing contract manufacturing business
for top tier brand owners and growing positions in attractive
segments (sparkling waters and mixers) Sangs
Sangs
Sangs
Sangs(McDuff)
Sangs
Sangs
Sangs
Sangs(McDuff)
(McDuff)
(McDuff)
(McDuff)
(McDuff)
(McDuff)
(McDuff)
Ownership of RC Cola Brand outside North America MEXICO
MEXICO UNITED KINGDOM
Nelson
Nelson
Nelson
Nelson
Nelson
Nelson
Nelson
Nelson Bondgate
Bondgate
Bondgate
Bondgate
Bondgate
Bondgate
Bondgate
Bondgate
Merseyside
Merseyside
Merseyside
Merseyside
Merseyside
Merseyside
Merseyside
Merseyside
Fully integrated concentrate facility with strong R&D capabilities and Puebla
Puebla
Puebla
Puebla Cold Fill
Wrexham
Wrexham
Wrexham
Wrexham
Wrexham
Wrexham
Wrexham
Wrexham Kegworth
Kegworth
Kegworth
Kegworth
Kegworth
Kegworth
Kegworth
Kegworth
vertical integration with high service, low-cost production model Hot Fill
Other
supplying quality concentrates and exports to customers outside of
North America Industry-leading Manufacturer with Global Footprint 532904_1.WOR (NY007LA7)
Customer relationships with over 500 leading retailers in the grocery, Strong beverage manufacturing footprint in US, Canada and UK with
mass-merchandise and drug store channels strategically located beverage manufacturing and fruit processing
facilities providing a substantial competitive advantage to service
national and super-regional accounts, with high service levels (98%+)
Low cost philosophy concentrating on Customers, Costs, Capex
and low freight costs.
and Cash resulting in a highly cash generative business
High quality facilities (SQF / BRC certified) with multiple product and
Highly recognized award-winning services (manufacturing excellence, on package capabilities offering a diversified product portfolio beyond
time in full service, supply chain partner, Grocer Gold) traditional CSDs and shelf stable juices
Building value through stable free cash flows generated through Leader in R&D capability in the development and production of value
growing value added water and contract manufacturing as well as cost added sparkling waters and mixers
down initiatives in order to offset the structurally declining categories of
carbonated soft drinks and shelf stable juices Efficient and highly utilized facilities producing industry leading asset
turnover with low capex demands (~2% of revenues)
___________________________ 8
Source: Management
Traditional Business - Cash Flow Stability through 4Cs, Contract
Manufacturing and Value Added Water Growth
4C’s Philosophy Drives High Cash Generation Cott North America Contract Manufacturing Volume
Serving equivalent cases (in millions)
Strengthen customer relationships 120 70+
100
Continue to lower operating costs 80 68
50+ million
60 45 case
Control capital expenditures 40 growth
21
20 ----------------------------
Deliver significant free cash flow 0
2013 2014 2015 2016E
Value Added Water Opportunity Copack Advantages
Capitalize on consumer movement to healthier products Provides gross margins that are consistent with Cott’s historical rates
such as sparkling and flavored water as well as ice type Dollar profit (operating income per case) is equivalent to Cott’s other
beverages which are generating high single digit to low products
double digit growth annually
Brand owners normally supply the ingredients and packaging materials
Resources have been allocated to this beverage category
which have retailer support and where the private label Limited commodity exposure drives stable margin contribution
segment controls a larger percentage of the market relative Lowers working capital requirements and improves line efficiency
to other categories such as CSDs
Capitalizes on outsourcing trends by brand owners
Target high single to low double digit compound annual
volume growth in value added water Increases asset utilization and offsets PL CSD and SSJ decline
Over 25% of North American revenues are generated from Recent 7.5 million case hot fill contract starting in 2017 driving further
the value added water category. copack growth
Q3 2016 19% actual case volume growth in value added
and sparkling watersDS Services - A Leading North American Direct-to-Consumer
Services Provider Across HOD Water, Office Coffee and Filtration
Services
Water Delivery Services(1) Office Coffee Services (“OCS”)
2015 Revenue(2):
$1,021mm
Filtration
2015 Revenue: $724mm (71%) OCS 2%
2015 Revenue: $121mm (12%)
12%
Retail
Retail 15% Filtration Services
Water
Delivery
Services
71%
2015 Revenue: $149mm (15%) 2015 Revenue: $27mm (2%)
___________________________
1. Other revenue included in Water Delivery Services revenue
2. Excludes Aquaterra revenue 10
Source: Company informationDS Services - Share Growth from Market Leading Brands with
Strong Regional Heritage
Highly-recognized brands with long lived heritages in both HOD water and OCS
Largest or second-largest HOD water provider in 39 of 43 largest cities
Offers customers products under other leading brands, which include:
Ferrarelle and Voss water, Starbucks Coffee, Keurig Green Mountain, Caribou Coffee, Peet’s Coffee & Tea and Mars Alterra
Customer growth combined with improved consumption and strong pricing drives HOD volume/revenue growth
Organic Net Customer Growth Leadership in Regional Brands
(thousands)
80 #1
60 #1
40 #3
#1 #1
20 #2
#2
#1 #1
0 #1
Q1 YTD Q2 YTD Q3 YTD #2
-20 #1 #1 #1
#1 #3
2015 2016
#1 #2
DSS HOD Volume share (1)
#1
#2
(HOD Bottled Water Volume Only)
53rd week impact
31.1%
30.6%
0.4%
29.5%
29.2%
30.7%
2012 2013 2014 2015
___________________________ 11
Source: BMC and Cott managementAquaterra – Acquisition in January 2016 of Canada’s Oldest and
Largest Home and Office Water Delivery Business
First year objective to implement all DS Services
systems and processes
Synergies planned to be phased in 2017-2019
Expansion of DS Services revenue program into
Aquaterra phased over 2017/2018
Retail Booth Program
New Customer Acquisition Program
AquaCafe (R) Rollout
Potential Synergistic Tuck-ins Acquisitions from
2017
Integration going to plan and tracking in line with
acquisition model. 2016 First Half revenues of C$41
million
12Eden Springs – Acquisition in August 2016 of Europe’s Leading
Direct-to-Consumer (Home and Office) Water and Office Coffee
Services Provider
Water Services Office Coffee Services
2015 Revenue:
€367mm ($408mm)
Filtration
2015 Revenue: €238mm ($266mm) Retail 6% 2015 Revenue: €70mm ($77mm)
10%
Office
Filtration Coffee Retail
Services
19%
Water
Services
65%
2015 Revenue: €22mm ($24mm) 2015 Revenue: €37mm ($41mm)
___________________________
Note: Figures converted at EUR:USD rate of 1.11
Source: Company information
13S&D Coffee and Tea – Acquisition in August 2016 of Leading U.S.
Foodservice Coffee and Tea Manufacturing and Services Company
State-of-the-Art Production Capabilities Distribution Platform
Attractive Synergy and Distribution Opportunity with DS Services OCS Business
Third-Party Distribution Direct Route & Third-Party Distribution
Direct route sales
accounted for ~20% of
2015 revenue
3rd Party Distribution sales
accounted for ~80% of total
2015 revenue
Coffee Production Tea Production
Differentiators Differentiators
Hyper-Efficient Thermal Transfer Superior Sourcing
S&D Segment Growth
Custom Coffee Engineering Tea Blending Systems
Coffee Tea
Cupping & Q Graders Dedicated Laboratory
Four production facilities: two dedicated coffee facilities, one tea facility and one extract
and ingredient facility
Production capacity: 130-150 million pounds of coffee and 40-50 million pounds of tea per
year
Maintains stringent quality standards and is only ISO 9001:2008 certified roaster in U.S.
Multiple new customer agreements signed in back half of 2016 to benefit 2017 growth
'13A '14A '15A '16E '13A '14A '15A '16E
Complementary supply chain with distinct coffee and tea manufacturing capabilities
and direct-to-consumer delivery infrastructure
___________________________
Source: Company information 14Cott’s Extensive Better For You Beverage Services Platform - Cott is
a Leading HOD Water, Coffee, Tea and Filtration Services Provider
Across 20 Countries
Eden geographic presence
BWC water position(3)
DS Services – U.S. Market Leader Eden Springs – European Market Leader
HOD Water(1) OCS(2) HOD Water OCS
DS Eden Company A
Smaller Services
DS Services 20% Eden
~3% 6% 4%
Competitor ~31% Company
s A
Remainder of
~39% 3%
Top 5
~17% Company Other
Other B
61% 89%
3%
Smaller
Competitors Next 5
Nestle 13%
~80%
~30%
S&D Coffee and Tea – U.S. Leader Aquaterra – Canadian Market Leader
S&D has approximately 20% share of the continuously growing foodservice channel
and is the largest supplier of fresh-brewed iced tea to the U.S. foodservice industry Aquaterra is Canada’s oldest and largest HOD Water business with a leading
with four production facilities (two coffee, one tea, and one extract and ingredient) position, over 70,000 customers and over C$70 million in annual revenues.
serving the U.S. with national and regional route distribution
___________________________
Note: 2015 market shares based on management estimates.
(1) Source: Beverage Marketing Corporation. Category size of $1.7 billion reflects only bottled water and excludes items such as cooler rent, cups, etc.
(2) Source: ‘Coffee sales rise, so do costs: State of the Coffee Service Industry’, Automatic Merchandiser, September 2015. 15
Source: Company information, Management estimates
(3) BWC represents total bottled water coolers but is not a market in and of itself as the HOD water business consists of coolers, bottled water as well as other products such as case pack water and single serve productsCott Corporation - Strong Adjusted Free Cash Flow and Rapid
Deleveraging
Proven track-record of quickly deleveraging after acquisitions
Significant free cash flow conversion allows for accelerated deleveraging
Anticipated leverage of low 3x by 2019 leaves ample debt capacity to execute tuck-in acquisitions
Pro Forma Net Debt to Adj. EBITDA (1) (2016E – 2019E)
4.8x
Low 3x
Cott PF 2017E 2018E 2019E
___________________________
Source: Company information 16
(1) Expected debt balance at closing of S&D Coffee and Tea projected for August 2016 less expected cash balance divided by combined 2015 adjusted EBITDA.You can also read
