Cott Corporation (NYSE:COT) announced that it sold its traditional beverage manufacturing business to Refresco (OTCPK:RFFRY) for $1.25B in an all-cash transaction.
The agreement includes Cott's North America, U.K., and Mexico businesses (excluding the RCI International division and its associated concentrate facility as well as the Aimia Foods division).
The company says the deal is in line with an accelerated diversification and acquisition strategy.
"The sale of Cott's traditional business substantially accelerates our ability to deleverage the business and positions us well to grow our water, coffee, tea and filtration businesses both organically and through value accretive tuck-in acquisitions while also giving us the optionality to expand our platforms through larger scale acquisitions if and when the right value enhancing opportunities present themselves," says Cott CEO Jerry Fowden.
Craft soda is starting to become a trend to watch closely, according to industry insiders.
Though still accounting for only ~1% of the total U.S. soda market, major retail chains have increasingly been willing to bet on local craft brands in store aisles.
The craft craze is old news for the beer industry where coming-of-age millennials buy craft/local beers at a 50% higher rate than brand-loyal older generations. Fading stars such as Budweiser and Bud Light are testament to the impact of the millennial paradigm.
The craft influence in coffee hasn't been lost on Starbucks which has strategically deployed trucks on college campuses in an effort to win over students.
Despite the progressive reputation of Starbucks, analysts think new upstarts such as Craft (subscription) and Cups (app) have a shot of gaining influence with the Indie-minded millennial crowd on "customization" and pricing.
What to watch: An increase in M&A activity in the beverage sector is expected as major companies strategically pick off more local craft brands to incubate.