Commentary

Nestle Exploring Sale Of Much Of Its North American Waters Business

Nestlé, the Swiss-based multinational conglomerate, is conducting a strategic review of its North American water business that may result in its putting some of its brands -- including Pure Life and Poland Spring -- up for sale.

“We are withdrawing from a bulk business to focus on high-value (water) specialities. We can then grow … organically and through acquisitions,”  Nestlé chief executive Mark Schneider tells  Reuters’ Silke Koltrowitz.

“Nestlé, known for KitKat chocolate bars and Nescafe coffee, said it was expecting to conclude a strategic review by early 2021. It has lagged rivals PepsiCo, LaCroix and Coca-Cola in sparkling and flavored waters in the U.S.,” Koltrowitz writes.

“With corporations under intense pressure to help fight climate change … Schneider, Nestlé’s Tesla-driving chief executive, has been trying to show that the company can be both sustainable and profitable. Nestlé, whose brands of baby formula, ice cream, chocolate, pet food and coffee are omnipresent worldwide, has been moving into plant-based meat substitutes, promising to reduce sugar and fat content in its products, and aiming to make all of its packaging recyclable by 2025,” points out  Jack Ewing for The New York Times.

advertisement

advertisement

“Nestlé announced on Thursday that, also by 2025, it will replenish all of the water it draws from watersheds while taking measures to offset the carbon dioxide produced by bottled water production and transport,” Ewing adds.

“The creation of a more focused business enables us to more aggressively pursue emerging consumer trends, such as functional water, while doubling down on our sustainability agenda. This strategy offers the best opportunity for long-term profitable growth in the category, while appealing to environmentally and health-conscious consumers,” Schneider states  in a news release outlining the strategy.

"Nestlé remains fully committed to growing its iconic International brands in the U.S. and globally, including Perrier, S.Pellegrino and Acqua Panna. Additionally, the company will further build its leading premium mineral water brands around the world and invest in differentiated products under the Nestlé Pure Life brand, such as functional water with health-enhancing ingredients,” he continues.

“It’s another strategic shift from … Schneider, who has made more than 50 deals since taking charge in 2017 and promised that this year would show investors a more interesting M&A pipeline than 2019. A sale could cut Nestlé’s total bottled-water sales by almost half,” observes  Bloomberg’s Corinne Gretler.

“Possible buyers include Coca-Cola Co. and PepsiCo Inc., which lag behind Nestlé’s North American 20% market share at 10% and 7.8%, respectively. Soft-drink bottlers like Cott and National Beverage Corp. could also be interested, according to Bloomberg Intelligence’s Duncan Fox,” Gretler adds, noting that MainFirst Bank analysts Alain Oberhuber said the business could fetch about $6.9 billion.

“Nestlé in October said it would restructure its water arm, changing it from a stand-alone, globally managed business with headquarters in France, to one managed locally in the company’s various regions. Its waters head, Maurizio Patarnello, also left the company. The moves were part of Nestlé’s attempt to de-emphasize low-margin water brands but in April, the company said organic sales growth in its global waters business had declined 1.4% as coronavirus lockdowns whacked out-of-home sales,” Saabira Chaudhuri reports  for The Wall Street Journal.

“The review … includes the company’s two Breinigsville [Pennsylvania] bottling facilities, which employ about 500 workers, confirmed Nestlé Waters spokesperson Alix Dunn. The facilities produce Deer Park spring water and Nestlé Pure Life bottled water, which is then distributed to major retail and grocery customers throughout Pennsylvania and the mid-Atlantic,” Jon Harris writes  for The Morning Call.

“Just three years ago, Nestlé completed a $79 million expansion that added three high-speed bottling lines to the local Nestlé Pure Life bottling facility as the company worked to keep up with demand for healthier beverage options. The year before, in 2016, bottled water outsold carbonated soft drinks in the United States for the first time.”

The divestiture could also impact jobs in Maine, where it has bottling plants in Poland, Hollis and Kingfield, draws from 10 water sources, and employs about 860 people, according to Steve Sherlock in the [Lewiston-Auburn] Sun Journal.

Nestlé, with headquarters in Vevey, Switzerland, is the largest food and beverage company in the world, Sherlock also points out.

Next story loading loading..