Swiss food and beverage giant Nestle S.A. is offloading its North American water business, a $4.3 billion sellout that comprises two longtime Lehigh Valley bottling plants where about 500 people work.
News story details:
The company announced late Tuesday, 17th February 2021 that it reached an agreement to sell its regional spring water brands, purified water business, and beverage delivery service in the United States and Canada to buyout firm One Rock Capital Partners and investment firm Metropoulos & Co.
The deal, expected to close in the spring, will put the sluggish water business under the umbrella of One Rock, an experienced investor in middle-market companies across the manufacturing and distribution sectors, and Metropoulos & Co., a turnaround artist in the food-and-beverage industry that helped reinvigorate well-known firms such as Hostess Brands and Pabst Brewing Co.
Nestle Waters spokesperson Alix Dunn confirmed that the sale includes all of Nestle Waters North America’s U.S. factories, warehouses, offices, and branches. That includes the company’s two-building, nearly 1.1 million-square-foot complex in Breinigsville, which primarily produces Deer Park spring water and Nestle Pure Life bottled water that is then distributed to larger retail and supermarket customers throughout Pennsylvania and the mid-Atlantic.
It’s too early to say whether changes will come to the Lehigh Valley operations. Metropoulos & Co. did not respond to a request seeking comment Wednesday, and a One Rock representative said the firm was not commenting beyond its news release Tuesday night. In this release, One Rock Partner Kimberly Reed stated the water business is demanded to have greater resources and extensibility as a private company.
Once the deal is complete, Metropoulos & Co. founder Dean Metropoulos will become chairperson and interim CEO of the bottled water business.
“I am pleased to have the opportunity to lead NWNA as it enters the next phase of evolution,” Metropoulos said in a news release. “This is an important modulation point for the market as it transitions to an independent company, and I look forward to collaborating with One Rock and NWNA’s management team to deliver unparalleled value to our customers.”
Don Cunningham, president, and CEO of the Lehigh Valley Economic Development Corp. said his organization will reach out to the new owners to understand their plans.
“I’m not overly concerned,” Cunningham said. “I think those are great assets and great brands and new facilities that have a lot of value. You don’t pay $4 billion to exit the business.”
In addition to Deer Park and Pure Life, the sale includes several other brands in the United States and Canada: Poland Spring, Ozarka, Ice Mountain, Zephyrhills, Arrowhead, and Splash. The deal, which does not include Nestle’s international premium brands Perrier, S.Pellegrino, and Acqua Panna, comes about eight months after Nestle said it would conduct a strategic review of its North American waters division as it sought to sharpen the focus of its global water portfolio.
While the bottled water business had grown — in 2016, bottled water outsold carbonated soft drinks in the United States for the first time — those gains stalled recently. Through the first nine months of 2020, Nestle’s water division posted a sales decrease due to its “high exposure to out-of-home channels and on-the-go consumption,” the company said in October.
Besides, the bottled water trade has faced stiff competition from grocery shop brands, and consumers have frequently opted for sparkling or flavored waters. Many also have raised anxieties about plastic waste — Nestle, for one, reemphasized its commitment to forming its water portfolio carbon-neutral by 2025.
In the news release, One Rock Managing Partner R. Scott Spielvogel said his firm brings extensive operational capabilities that should aid Nestle Waters North America as a standalone company.
“Company looks forward to working closely with operating partners to accelerate the growth of NWNA’s extraordinary set of attractive brands while continuing to create value in the communities in which the company operates,” One Rock Partner Kimberly D Reed said.
Headquartered in Stamford, Connecticut, Nestle Waters North America possesses about 7,000 employees in the United States and 27 production amenities across North America. The company also sources water for six regional spring water brands from 38 springs throughout the United States.
Nestle Waters has a more than 25-year history in the Lehigh Valley, which was inaugurated in 1995. When it opened, its first local bottling plant had about 75 employees.
Since then, the company built a second plant in 2007 and has expanded several times, most recently in 2017 via a $79 million project that added three high-speed bottling lines. With that expansion complete, Nestle Waters’ investment in its Lehigh Valley campus climbed to $354 million.
Jobs at the two Lehigh Valley facilities are tied to water resources at the company’s seven spring sites throughout eastern Pennsylvania.
Now, rising attention about the carbon and plastic scrap produced by that process is fueling a backlash that endangers the water business. Across the industry, businesses are softening and some municipalities are even banning plastic water bottles—encouraging producers to react with alternatives ranging from canned water to flavor pods for tap water to dispensers that sell sparkling and flavored mixes.
At Mainfirst Bank, Alain Oberhuber, an analyst who predicts an explicit decline in sales of bottled water over the following two decades. He says “Yielders meet a real risk from the environmental movement, which has influential support among young people,” & he showed his concern with the statement -“They know they have to do something.”
In October 2019, Nestle SA Chief Executive Officer Mark Schneider informed analysts that The water business has to cope with several sustainability issues that are growing increasingly important.
As, Nestle next intends to introduce a dispenser that is named Refill Plus, which filters tap water and can add flavors and varying levels of carbonation. It is working on a paper-based bottle that it says is fully biodegradable. Danone is exploring refill stations but for now, is concentrating on the home market with a new project that dispenses Evian delivered in balloon-like spheres that use less plastic than bottles.
Manufacturers are figuring on such initiatives to appeal to consumers who endorse branded water healthier than tap.