Bottled water giant Nestle has announced a new strategic direction for its water bottling business to focus on “functional” water (mineral, vitamin, etc) and high-end international brands (eg San Pellegrino and Perrier). The decision, announced 11 June, includes potential acquisitions to grow this category as well as dispositions, including a majority of its contentious North American waters business.
The North American business, with $3.6 Billion USD in revenues in 2019, bottles and markets the company's large international brands as well as popular, largely regional, US spring water brands such as Poland Spring, Deer Park, and Ice Mountain that is sourced and bottled in Western Michigan.
Nestle’s Board decision to “refocus on international brands” may be associated with contention around environmental impacts of the company's water bottling, which became subject of Congressional investigation when and investigation of Nestle Waters North America was launched by the US House of Representatives in March this year. The Subcommittee on the Environment is seeking information on all US production wells, volumes of water extracted, revenues earned, internal communications about potential health risks and contaminant testing, money spent on product marketing and advertising, and annual totals for plastic used and planned for purchase in the next five years.
The investigation reflects growing concern across the country where activists are pushing back against the bottled water industry. Activists cite depletion of natural resources and accumulating plastic waste from landfilling single-use bottles as unsustainable industry traits.
At the local level, Michigan residents and environmental groups have objected to a 2018 permit application to double its extraction from a well in Evart MI. The Michigan Department of Environmental Quality granted the permit and a state administrative judge upheld the decision in April 2020 after having been challenged.
Much of the local opposition to Nestle’s extraction was out of concern for environmental impacts on the area watershed. However, the broader opposition had to do with the fact that Nestle could source groundwater at essentially no cost at the same time residents of Flint and Detroit struggled with water safety and access.
Read more on Nestle operations in Michigan here.
In February 2019, Nestle closed a bottling facility in Arizona, citing increasing competition. Notably, this facility had been operating only three years and was subject to local opposition due its location and for extraction of water from a notably dry, desert geography. (OOSKAnews).
In announcing the company's new strategic direction, Mark Schneider, Nestlé CEO, said "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. We are working tirelessly to ensure that consumers can enjoy our beverages in an environmentally responsible way."
At the same time, Nestle SA took the opportunity to reinforce its strategic goals through 2025:
- Achieve Carbon Neutrality
- Enhance Water Stewardship, including achievement of Alliance for Water Stewardship (AWS) standard certification of all water sites globally
- Tackle Plastic Waste by halving its use of virgin plastic