June 11, 2020, 4:50 p.m. EDT

Nestlé explores sale of Poland Springs, others

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By Saabira Chaudhuri

Nestlé 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. -- Nestlé'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 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.

Nestlé 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.

Nestlé'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.

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.

It expects to complete the review of its North America waters arm by early next year.

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