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Company Perspectives:
Our Mission: Water. Nestlé Waters, world bottled water leader, is the Nestlé Group's Water Division, accounting for approximately 10% of total sales. Established in 130 countries, with a full range of product formats for all distribution channels, Nestlé Waters offers bottled waters and refreshing water-based beverages to meet consumer needs anywhere, anytime.
In a bottled water market where disparities between countries are significant, Nestlé Waters bases its growth on managing a unique portfolio of brands and on a policy of targeted acquisitions around the world.
Since its creation in 1992, Nestlé Waters has continued to strengthen its position, regularly showing faster growth than the bottled water market.
In parallel with growth, Nestlé Waters is committed to scrupulous protection of its springs, drawing only the bare minimum required for its operations. The company also has a policy of continuous optimisation of production processes so as to avoid waste. As a result, despite Nestlé Waters' market leadership, it uses only a tiny share (0.0009%) of the water consumed on the planet.
With this approach, Nestlé Waters ensures the sustainable development of its business model and guarantees its consumers a superior product that stands for quality and purity.
Nestlé Waters is the world's leading producer of bottled waters for both the small-format (PET) retail and large-format HOD (Home and Office Delivery) circuits. The company, the Water Division of foods giant Nestlé, has nearly 110 production plants in 33 countries providing sales and distribution to more than 130 countries and, with sales of CHF 8.0 billion ($6.2 billion) in 2005, represents some 10 percent of its parent company's total sales. Whereas HOD contributes approximately one-third of sales, the company's small-format, branded bottles represent its fastest-growing segment, particularly in markets such as South America, Asia, and the United States. Nestlé Waters is also one of Nestlé's fastest-growing divisions, particularly since the launch of its two "multiple-site" water brands, Pure Life and Aquarel. These brands acquire their water from local market sources, rather than from a specific spring, enabling Nestlé to lower its bottling, transportation, and logistics costs. Nestlé Waters also markets five international brands: flagship Perrier; two high-end Italian waters, Acqua Panna and S. Pellegrino; Vittel, the company's first bottled water; and Contrex, which Nestlé Waters markets as a "weight-loss" water (due to its high magnesium and calcium content). Although sales of these brands are significant, the multiple-site and international brands combine to generate just one-third of Nestlé Waters' total sales. The bulk of the group's revenues comes instead from its impressive portfolio of local brands, which include Valvert (Belgium); Sainte-Alix, Carola, Hepar, Quezac, Opalia (France); Rhenser Mineralburnnen, Rietnauer, Klosterquelle (Germany); Korpi (Greece); Theodora (Hungary); Aqua Claudia, Ulmeta, Lora Recoaro, Levissima (Italy); Buxton, Ashbourne (United Kingdom); and Ice Mountain, Deer Park, Poland Spring, Arrowhead, Calistoga, Zephyrhills (United States), among many others. Altogether, Nestlé Waters' portfolio includes nearly 80 brands, giving the company a 17 percent share of the global market.
Founding a Bottled Water Portfolio in the 1970s
Founded by Henri Nestlé in Switzerland in 1866, Nestlé grew into one of the world's largest and most diversified food groups. Yet the company's interest in bottled beverages came as early as 1843, when Henri Nestlé built a factory in order to produce lemonade. Nestlé also began bottling water around this time. This activity remained marginal in terms of the group's overall operations, however.
Bottled water became a fixture in Europe toward the end of the 19th century, popularized particularly by the continent's many spas. Since water, and various water therapies, were central to the spa business, many began bottling their spring water so that customers could continue their treatments once back at home. Many of the brands in the later Nestlé Waters portfolio appeared during this time, such as Vittel, in the Vosges Mountains, where a spa was constructed in 1855; Perrier, which began spa operations in the 1860s; and Contrexville, discovered in the 18th century, which began bottling its water at the height of the spa fashion in the 1890s.
The popularity of Europe's spas ebbed and flowed through the 20th century, as spa usage gradually fell out of favor. Yet the habit of drinking bottled water persisted, and by the late 1960s had become a fixture among European consumers. The economic boom of the 1960s, and the introduction of new types of packaging, notably the first PVC bottles, helped raise the profile of the bottled water market into a veritable industry.
Never one to be left behind in consumer trends, Nestlé began taking an interest in the bottled water market in the mid-1960s. In 1969, the group made its first purchase, taking a 30 percent stake in Société Générale des Eaux Minérales de Vittel (SGEMV). Vittel had been founded by Louis Bouloumié, who acquired the Source Gérémoy in the Vosges in 1854. The Vittel spa opened in 1856, then launched its bottled water in 1882. By the beginning of the 20th century, SGEMV had sold one million bottles, and by 1951, the company's sales had topped 100 million. In the 1960s, Vittel began experimenting with packaging types, and became the first to launch its waters in new PVC bottles in 1968. Although heavier than the later PET bottles, the plastic format made the bottled water lighter to carry and less prone to breakage. These factors helped stimulate a new boom in bottled water consumption.
Nestlé next turned to Germany, where it acquired the Blaue Quellen group in 1974. That purchase gave Nestlé control of a number of mineral water springs, as well as a portfolio of popular German brands, including Klosterquelle and Rietenauer.
The bottled water market had a number of inherent limitations. Most important among these was the difficulty in transporting a brand of spring water far from its source. Shipments were both heavy and fragile, and logistics costs represented a significant share of a bottled water's end price. For these reasons, the bottled water market developed a strong local nature. Although a number of brands succeeded in generating national and even international success, the largest share of the market remained with the many local brands.
Nestlé followed this market by acquiring its own portfolio of local brands, buying up brands throughout most of Europe through the 1980s and 1990s. Nonetheless, the company also strengthened its hold on Vittel, the third largest selling bottled water brand in France and a growing international brand as well, acquiring the majority control of SGEMV in 1987.
Even though many, if not most, bottled waters on the market represented the continuation of long-popular brands and spa names, Nestlé also began experimenting with the creation of new bottled water brands. The development of a new packaging type--PET bottles, which were lighter than PVC, more flexible and shock-resistant, and also recyclable--encouraged the company to launch a new in-house brand in 1992, called Valvert, based in Belgium. The début of Valvert was also notable in that it marked the first time Nestlé had simultaneously rolled out a brand in five countries.
Bottled Water Leader in the 1990s
Yet a still more important event marked 1992, that of the acquisition of Perrier. Star of the bottled water set, Perrier's origins traced back to a spring in Bouillens, near Nîmes, on a property owned by the Granier family. Alphonse Granier became the first to investigate the spring's naturally carbonated water, and in 1863, after receiving official recognition as a mineral water source, opened a spa on the site. A fire in 1869 destroyed the spa, however; by 1884, Granier was forced to declare bankruptcy and close the spa.
New life came to the site in the form of Doctor Louis Perrier, who leased the spring in 1894, before buying the property outright in 1898. Perrier founded his own company there, called Société des Eaux Minerales, Boissons, et Produits Hygieniques de Vergeze. At the time, water was not a favored beverage among French consumers, but Perrier sought to correct this situation by bottling his naturally carbonated water.
Perrier, however, lacked the capital to launch his bottled water business. Instead, he leased the business to an Englishman, St. John Harmsworth, a paraplegic who had come to France to learn the language. Inspired by the weights he used as part of his physical therapy, Harmsworth developed a new bottle shape for the water. Harmsworth also was credited with creating a new brand name for the water: Perrier.
Targeting the British population, Harmsworth first began selling Perrier to the British army in India, reasoning that the returning soldier would then introduce the product into England itself. Harmsworth's instincts proved correct, and Perrier quickly captivated the British market. By 1908, the company was selling more than five million bottles per year in England; the company then turned to developing the French market, and by 1933, the company's sales of 20 million bottles per year were split almost evenly between France and England. Harmsworth's death that year saw the company fall into a slow decline; during World War II, the German occupying force took over the spring. By 1946, Perrier had more or less ceased operation and its owners put the property up for sale.
In 1947, Gustav Leven, of Paris, bought the property and modernized its production facility, bringing in bottling machinery from the United States. By 1948, Leven had succeeded in raising production to 30 million bottles per year. Yet by 1952, the company's production had soared to 150 million. Coupled with an astute marketing program, Perrier quickly captured the lead of the French bottled water market, before expanding throughout Europe. The company also expanded its drinks portfolio, acquiring the Contrexéville bottled water brand (redeveloped by the company as a "weight-loss" water), and then launching its own soft drink, Pschitt, and acquiring the French license to bottle Pepsi Cola. In the 1970s, Perrier turned to the United States, where bottled waters were virtually unknown. The company's distinctive advertising campaigns helped the group become the North American market's dominant bottled water producer. By 1988, Perrier accounted for more than 80 percent of all imported water in the United States and had established itself as a leader in the total U.S. water market.
Yet, in 1990, the discovery of traces of benzene in a bottle of Perrier destined for the United States spelled a near catastrophe for the company. The company was forced to withdraw its products from supermarket shelves and sales of Perrier plummeted worldwide. Amid the scandal, Gustav Leven was forced to resign from the company. Nestlé seized the opportunity, acquiring control of Source Perrier S.A. and the Perrier brand. Backed by Nestlé's marketing clout, Perrier quickly rebuilt its reputation and reasserted itself as the world's leading bottled water brand.
The Perrier acquisition prompted Nestlé to form a dedicated bottled waters division, Nestlé Sources International (NSI). The 1990s saw the bottled water market boom, particularly in the United States, where Nestlé helped successfully reposition bottled water as a status symbol. NSI began buying up North American bottled water brands, including regional leaders such as Ice Mountain, Deer Park, Poland Spring, Arrowhead, Calistoga, and Zephyrhills. In order to reinforce its position as a brand leader, NSI changed its name in 1996, becoming Perrier Vittel.
Into the late 1990s, Nestlé began targeting a wider international market, boosting its presence in South America, Asia, and elsewhere. The company also began expanding into the Home and Office Delivery (HOD) segment. This market, more familiarly recognized for its water coolers, had been in existence since the 19th century and had long been the favored commercialized water source in the North American and South American markets, among others. Despite the growing interest in branded bottled waters in these markets, Nestlé sought to become a major player in the HOD segment as well. In 2000, the company designated the HOD market as a strategic priority.
Global Multi-Site Model for the New Century
If spring water brands had long been associated with specific springs, by the late 1990s, the actual source of a bottled water had become more and more irrelevant. In France, Perrier Vittel faced new competition from a fast-growing new brand, Cristalline. That brand was based on a new multi-site concept, in which the same brand was applied to water bottled at several different sites around France. In this way, Cristalline was able to slash its logistics costs and sell its water at a price far lower than that of premium brands represented by Nestlé and the like. Other similar competitors emerged during the same period, while the large-scale retail distribution began to roll out their own private-label bottled waters.
Nestlé responded by launching its own multi-site brand, Pure Life, in 1998. That brand specifically targeted the nascent markets in developing countries, such as Pakistan, which became the first to test the Pure Life brand. Other markets followed quickly, including China, Thailand, the Philippines, and Vietnam (where the brand became La Vie). The Pure Life rollout continued into South America, including Argentina and Mexico in 2000, then the Middle East, including Lebanon and Jordan in 2001, and Egypt, Uzbekistan, and Turkey in 2002, among others. By 2005, Pure Life had reached Russia, Canada, and the United States. Nestlé expected the brand to become the first truly global bottled water brand, with plans to develop the brand into the world's leading bottled water by 2010.
The success of Pure Life encouraged the company to roll out a multi-site brand specific for the European market. That brand was launched in 2000 as Aquarel. Based on seven production sites around Europe, Aquarel quickly reached Belgium, France, Germany, Hungary, Luxembourg, Poland, Portugal, and Spain, with plans to expand the brand to the entire European market in the second half of the decade.
As Nestlé's brand strategy shifted to the multi-site model, Perrier Vittel changed its name in 2002, becoming Nestlé Waters. The following year, Nestlé Waters made a splash in the European HOD market, buying up the Powwow Group, the European leader in the HOD segment.
Into the mid-2000s, Nestlé Waters continued seeking new expansion opportunities in its quest for global domination of the bottled waters market. In 2004 and 2005, the company joined the trend in flavored waters, rolling out its own lines of flavored waters under a number of its brands, including Perrier, Vittel, Contrexéville, and others. The company also sought new markets, entering South Korea, for example, in a joint venture with Pulmuone Group in 2004. By the beginning of 2005, Nestlé Waters claimed a global market share of 17 percent; the division also had grown to become one of parent company Nestlé's most important, accounting for some 10 percent of its total sales. As the world's thirst for bottled water appeared unquenched, Nestlé Waters looked forward to steadily growing sales in the 2000s.
Principal Competitors: Unilever PLC/Unilever N.V.; Procter & Gamble Co.; PepsiCo Inc.; Embotelladora Metropolitana S.A. de C.V.; Sammons Enterprises Inc.; Coca-Cola Co.; Philip Morris USA; Sara Lee Corporation; Groupe Danone; Cadbury Schweppes PLC.
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