Nestle SA
Nestle SA is exploring a sale of the majority of its
North America waters business, including brands like Poland Spring and Pure
Life, as the world's largest bottled-water maker tries to adapt to shifting
consumer tastes.
The company will instead focus on upscale and international brands like San
Pellegrino and Perrier, as well as functional water, like caffeinated water,
which together make up about 20% of its North America sales.
Bottled-water sales have boomed in recent decades, particularly in the U.S. —
Nestle's biggest water market — as consumers cut back on sugary soft drinks.
But growth slowed lately as the category matures and consumers opt for
sparkling and flavored waters, which are drunk in smaller quantities.
The industry — long criticized for bottling a drink readily available from
the tap — is also contending with mounting concerns about plastic waste,
rising costs to make and transport bottles, and fierce competition from
store-branded products.
Nestle said it would explore options, including a sale of its regional spring
water brands, purified water business and beverage delivery service in the
U.S. and Canada and instead focus on high-growth areas like functional water.
The company also pledged to address environmental concerns, saying it would
halve its use of virgin plastic — derived from fossil fuels — by 2025. It
also said it would work toward making Perrier, San Pellegrino and Acqua Panna
carbon neutral by 2022.
“This strategy offers the best opportunity for long-term profitable growth in
the category, while appealing to environmentally and health-conscious
consumers,” Chief Executive Mark Schneider said.
Nestle's domestic business in North America — excluding global brands — had
sales of around 3.4 billion Swiss francs ($3.60 billion) in 2019, making up
the biggest chunk of the company's 7.8 billion Swiss franc bottled water
business globally. Apart from Poland Spring and Pure Life, the North America
arm also includes brands like Arrowhead, Deer Park, Ozarka, Ice Mountain and
Zephyrhills.
Nestle 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 Nestle'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.
It expects to complete the review of its North America waters arm by early
next year.