Nestle to Sell Poland Spring, Pure Life and Other Water Brands for $4.3 Billion -- 2nd Update
February 17 2021 - 12:38PM
Dow Jones News
By Saabira Chaudhuri
Nestle SA agreed to sell most of its North American
bottled-water brands, including Poland Spring, Arrowhead and Pure
Life, for $4.3 billion, hoping to jump-start growth by focusing on
a slimmed-down group of upscale and trendy brands.
The world's largest bottled-water maker said the sale to
private-equity firms One Rock Capital Partners LLC and Metropoulos
& Co. would allow it to focus on premium brands Perrier, San
Pellegrino and Acqua Panna.
Bottled-water sales boomed in recent decades, particularly in
the U.S. -- Nestle's biggest water market -- as consumers cut back
on sugary soft drinks. But growth has slowed lately as the category
matures and consumers opt for sparkling and flavored waters, which
are consumed in smaller quantities.
Mainstream bottled water has faced fierce competition from store
brands, making the category less attractive for Nestle, which in
recent years has sought to sharpen its focus on faster-growing,
more lucrative products such as infant formula, coffee and
plant-based foods.
The cost of selling bottled water has also risen, while the
pandemic has reduced sales of single bottles typically consumed at
home.
Moreover, Nestle and the rest of the industry -- long criticized
for bottling a drink readily available from the tap -- are
contending with mounting concerns about plastic waste. The company
has pledged to address environmental concerns, saying it would
halve its use of plastic derived from fossil fuels and make its
water portfolio carbon neutral by 2025.
Nestle Chief Executive Mark Schneider said Wednesday the company
would now focus in North America on selling its premium brands and
natural mineral waters, as well as boosting efforts in so-called
functional water, a common example of which is caffeinated
water.
The company's North American water business -- excluding the
global brands it is keeping -- generated sales of around 3.4
billion Swiss francs, equivalent to $3.8 billion, in 2019, making
up the biggest chunk of its global bottled-water business, which
had 7.8 billion francs in sales.
The sale, which Nestle initially said it was exploring last
year, includes its U.S. direct-to-consumer and office-drinks
delivery business.
Vontobel analyst Jean-Philippe Bertschy characterized the sale
price as "highly attractive for such an underperforming business"
and lauded Nestle for its ongoing pruning of its portfolio. Nestle
in recent years has sold its U.S. chocolate business and Gerber
life-insurance business among others.
For buyer Metropoulos, the deal is its latest in the
food-and-drink industry. The private-equity firm previously
invested in Hostess Brands Inc., Pabst Brewing Co. and Utz Quality
Foods LLC, among others.
The firm, run by financier C. Dean Metropoulos and his sons Evan
and Daren, says it is seeking to improve the performance of
well-known brands that haven't kept up with consumer trends by
focusing on product innovation and brand marketing.
Mr. Metropoulos plans to become chairman and interim CEO of the
acquired unit, which has more than 7,000 employees across the U.S.
and Canada, when the deal closes, expected this spring.
Meanwhile, One Rock Capital, founded in 2010, says its
experience with stand-alone businesses carved out from big
corporations will hold it in good stead. The firm, which last year
more than doubled its managed assets, has also previously been
active in the food-and-drink industry, including taking ingredients
maker Innophos Holdings Inc. private in a deal valued at about $932
million, including debt.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
(END) Dow Jones Newswires
February 17, 2021 12:23 ET (17:23 GMT)
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