Cott soft drinks deal goes flat

CADBURY SCHWEPPES has severed its arrangement with Cott Corporation of Canada to produce beverages for sale on the Continent, amid fears that the fizz is going out of the market for own-label soft drinks.

Cott entered into a five-year agreement in January to buy fizzy drinks made by Cadbury for sale on the Continent. But its failure to drum up sufficient business led to the deal being curtailed.

Cott has been fundamental to the development of private-label soft drinks in Britain, manufacturing Virgin Cola and Sainsbury's Classic. But the ballyhoo that greeted the emergence of such products last year has begun to fade.

News of the parting follows a troubled week for the Canadian soft drinks maker. Last week, it issued a surprise profits warning. The news stunned the Toronto stock market, with the shares sliding to a new low of C$6.88 (pounds 3.25), down from a peak of C$49.62 in late 1993. Then the business was gaining a wide following, through what seemed to be its magical riposte to heavyweights Coca-Cola and PepsiCo.

Cott expects to lose C$2.5m in the third quarter, before restructuring charges of C$8m. A further C$32m will be charged against fourth-quarter income. But sales will grow 31 per cent to C$340m.

Simon Lester, managing director of Cott Corporation UK, said: "We changed our deal with Cadbury's a little while ago. It is fair to say it reflects the company's changing approach." But he denied Cott was no longer interested in Europe, citing strong interest in Scandinavia, Spain and Portugal. A spokesman for Cadbury Schweppes said the decision was amicable.