COTT, NICHOL PLANNING UPSCALE STORE BRANDS

RICHARD TURCSIK

TORONTO -- Cott Corp. here has teamed up with David Nichol, the former president of Loblaw International Merchants and mastermind of the President's Choice label, to develop a line of retailer-specific upscale private-label products.

Officials involved with the project said Cott and Nichol are working with several retailers in the United States and around the world to introduce products that are expected to start hitting store shelves sometime next year.

The products will bear the name of the retailers involved. Several thousand stockkeeping units may be offered, and Cott will assist with in-store marketing and signs.

Cott already has extensive private-label experience, having helped Loblaw Cos. here develop the soft drink segment of its popular President's Choice line of upscale private-label products.

It also makes private-label soda for many other retailers, as well as the syrup for RC (Royal Crown) cola. Cott also has helped Wal-Mart Stores with 3,000 private-label items, and Safeway in the development of its Safeway Select grocery program.

Cott's new venture is being headed by Nichol and Don Watt, chairman and chief executive officer of Cott's Retail Brands division and head of Cott's Watt Group design firm. Nichol left Loblaw earlier this year and is now head of David Nichol & Associates, which operates out of Cott headquarters.

Nichol could not be reached for comment, but Watt said Nichol has already conducted meetings with several retailers in the United States, Europe and Asia. He said the venture would not target

Canada, out of deference to Loblaw.

"Our stated mission is to help the retailer build his own identity and to build premium product programs for retailers," he told SN.

"The very large retailers certainly deserve their own names. There may be a series of small retailers for whom we develop what would be a controlled brand, but by and large it will be [individual] retailer branded names," he said.

"Everything that Cott does will be geared toward developing and expanding the retailer's personality," he added.

"We have developed a network of retail customers who have significant resources and distribution capability and we are trying to plug in quality products into that network. "Cott is not about cola wars -- although we have a great soda. We are truly about helping the retailer improve profitability across hundreds of product categories, and offering them thousands of products.

"We don't create brand names that we own; we create brand names that the retailers own," Watt said.

Watt said Cott would not manufacture the bulk of the products, but will instead help in sourcing and developing names and packaging for products.

"The products would be sourced in most cases by David Nichol, using his own personnel, and we would assist him with packaging and distributing," Watt said.

"We will use the excess capacity of quality manufacturers, help to improve the return on assets all over the world, and also deliver some kind of benefit to the retailer," he said, adding that stockkeeping unit count would be up to the individual retailer.

"One particular customer might want 500 SKUs, another might want 100 SKUs and another might want 2,000 SKUs," Watt said.

Securities analysts and industry observers contacted by SN said the move should bode well for Cott.

"This is going to represent another exciting growth opportunity for Cott," said Gabe Lowy, a securities analyst with Oppenheimer & Co., New York.

"Cott is branching out because their customers asked them to and they see it as a good growth vehicle," he said, noting that Cott already has private-label snacks and pet food businesses.

"What they are first trying to do is to determine what categories to enter first. One of the main reasons they are doing this is that many of their retail customers are asking them for it," Lowy said.

Lowy said private label is going to continue to become an increasing factor in the United States, and its growth will largely be driven by the upscale sector.

Burt Flickinger, an industry consultant with A.T. Kearney, New York, said he sees Cott going into cookies, crackers and salty snacks first. Based on its success with the President's Choice soda program, he sees the expanded private-label program as being a good move for Cott.

Flickinger said the time is right for a major marketer, like Cott, to come out with a good upscale private-label program because most U.S. retailers have been lackadaisical when it's come to creating strong private-label programs, leaving the door open for Wal-Mart and other astute retailers to raid sales of important grocery categories.