Don't Put All Your Eggs in One Wal-Mart Basket

The latest victim in the shelf space wars is now Cott Beverages. It is estimated that 38% of Cott's sales are from Wal-Mart. Many companies, especially with large offices in Bentonville, have high exposure to this risk with average WM % of business estimated at 25-30%. With one buyer change, they could be at risk for substantial losses as evidenced below. What was the reason for this cut in space? Was it replaced with other soda products or did another category grow and gain space? It just goes to show that you aren't just competing for space with people within your category but everyone in the store. Micro-managing your accounts at store-level with category management processes and demand signal repositories (DSR) help keep your eye on the pulse of what is going inside and outside your company.

Cott Shares Sink on Wal-Mart Shelf Space

Tuesday February 26, 2:58 pm ET Cott Shares Fall After Company Confirms Wal-Mart Will Cut Shelf Space for Its Sodas

NEW YORK (AP) -- Shares of Cott Corp. sank Tuesday after the private-label soda maker confirmed that Wal-Mart Stores Inc. was reducing the amount of shelf space in its stores for Cott-made sodas. UBS analyst Kaumil S. Gajrawala responded by downgrading the shares to "Neutral" from "Buy." Shares fell $1.53, or 37.8 percent, to $2.52 in afternoon trading. The shares earlier bottomed out at $2.42, their lowest point since the stock began trading on the New York Stock Exchange in 2002. The stock previously traded between $3.81 and $17.33 in the past year. Trading soared to nearly 12 times normal volume as investors sold off the shares. Cott confirmed the news after rumors that Wal-Mart was cutting space for Cott's private-label carbonated soft drinks brought shares down 23 percent Monday before they rebounded slightly. Wal-Mart is Cott's biggest customer. Cott makes Sam's Choice sodas and waters for the world's largest retailer.

In a statement before the market opened, the company said it is still "actively negotiating" with Wal-Mart to determine space allocation and other merchandising support for the brands, which include Sam's Choice. Cott also said there was no indication that Wal-Mart would cut shelf space for Sam's Choice water. Gajrawala slashed his profit estimate for 2008 to 7 cents per share from 19 cents per share -- which was a penny below the average estimate, according to Thomson Financial. He also lowered his price target to $4.50 from $8, calling the shelf space loss "cause for concern."

The analyst estimated that Wal-Mart makes up about 38 percent of Cott's sales, and said the Toronto-based company could lose as much as $70 million this year, about 10 percent of Cott's Wal-Mart revenue. Lehman Brothers analyst Michael Branca cut his price target to $3 from $6 on the news, calling it "a significant blow." He added in note to clients he believes Cott will need to scale back its new-product investments "in light of the frontal attack on their core business."