Cott, a leading manufacturer of private label and branded soft drinks, has agreed a finance deal with packager Sidel over the lease of blow-moulding equipment for expansion into sustainable bottled water production.

The company announced yesterday that it had entered into an eight-year lease agreement that would grant it state of the art water bottling capacity to tap into the market for healthy and environmentally sustainable beverage alternatives.

The soft drink group said the 2007 financial year had proved to be the most difficult in the group's history, as rising commodity costs and declining sales of carbonated beverages hit its margins hard.

In broadening its manufacturing capabilities, the company claims it will now be in the position to replace "cost disadvantaged" areas of its operations like packaging contracts with high-speed production of lighter bottles for its products.

Rick Dobry, the group's president for North American operations, said the agreement would allow the company to reap both financial and environmental benefits of producing lower cost lightweight bottles for its operations.

"This equipment enhances Cott's ability to compete in the large and fast growing bottled water category," he stated. "It also allows our customers to lower their carbon footprint by shifting to lower weight bottles while continuing to satisfy growing consumer demand."

The company added that the equipment would allow for further development in creating environmental benefits within its production process.

"Cott will be introducing proprietary new bottle designs that are consumer preferred and among the most environmentally responsible packages in the beverage industry," Dobry stated.

GE Commercial Finance will supply $31.4m in funding to Cott as part of the lease agreement, with the beverage maker using $8.6m for civil works, engineering and other implementation costs of the project.

The expansion plan could still prove risky for Cott though, as some environmental groups and local governments have begun advocating using tap water over the bottled variety due to the environmental impacts from packaging the product.