Commentary

Nestle Taking Its Water Brands Local

Nestlé this morning announced it will be reorganizing its global bottled water business, which includes nearly 50 brands such as Perrier, Poland Spring and San Pellegrino, into local “geographical units” rather than managing the business from Nestlé Waters headquarters in Paris, France.

“This move, subject to employee consultation where required, will help utilize Nestle’s strong local expertise, better respond to rapidly changing consumer preferences, accelerate profitable growth and create synergies,” it states in a news release.

Nestlé created Nestlé Waters in 1992, following the acquisition of Source Perrier S.A.

In addition, Maurizio Patarnello, the deputy executive vice president and head of Nestlé Waters, is leaving the executive board at the end of this year. The Nestlé board appointed Sanjay Bahadur, who is head of acquisitions and business development, to lead a new group strategy and business development function to “support Nestlé in identifying internal and external strategic growth opportunities” starting Jan. 1.

“About 60% of Nestlé’s bottled-water sales come from local or regional brands -- like Poland Spring in the U.S. Waters makes up about 8% of overall sales and under 5% of Nestlé’s profits, according to Jefferies. Revenue was flat over nine months, while volumes dropped 2.2%,” Saabira Chaudhuri writes for The Wall Street Journal.

“Water is a ‘problem category’ for Nestlé, said Jefferies analyst Martin Deboo earlier this month, saying the business is losing share to rivals in the U.S., its biggest market. Nestlé last year began selling sparkling, flavored water under Poland Spring, Arrowhead and other brands in the U.S. but the company has struggled to stand out in an increasingly crowded category. Apart from LaCroix -- the market leader -- Coca-Cola Co. and PepsiCo Inc. have rolled out sparkling-water competitors, while startups and private-label seltzer brands abound,” Chaudhuri adds.

Bottled water is also facing pushback from environmentalists.

“With water resources barely covering our agricultural needs, along comes a behemoth international corporation, Nestlé Waters North America, asking to take over a million gallons a day so that they can increase their water-bottling profits,” Michael Roth, president of Our Santa Fe River Inc., wrote in an opinion piece published by The Gainesville Sun last month. “How does it serve the public interest for Nestlé to put water in plastic and sell it back to us? “

Nestlé also announced today from its headquarters in Vevey, Switzerland, that it intends to return up to 20 billion Swiss francs ($20.13 billion) to shareholders over the next three years, primarily in the form of share buybacks, but special dividends are also possible, Reuters’ Silke Koltrowitz reports.

“Its organic growth, which strips out currency swings and acquisitions, dipped to 3.7% in the third quarter from 3.9% in the second as prices for its products fell slightly, the maker of KitKat chocolate bars, Maggi noodles and vegan burgers, it said in a statement,” Koltrowitz writes.

“Nestle confirmed its outlook for organic sales growth of around 3.5% and an operating margin of 17.5% or above for the full year, pointing to strong momentum in the United States and its pet care business. China reported flat growth as infant nutrition slowed and sales at its Yinlu brand fell,” Koltrowitz adds. 

“Year-on-year growth acceleration was supported by both the U.S. and Brazil while all product categories saw positive growth, led by Purina PetCare and coffee. The newly launched Starbucks products saw strong demand with further expansion into new countries,” FoodBev Media reports.

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