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Why Consumers, Community Groups and Investors Are Saying No to Nestle

Nestle has worked hard to convince people that the company has turned over a new leaf, but fewer folks are buying Nestle's line or their water.
 
 
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This past year, as more and more people joined the tens of thousands who have begun to question the value of bottled water, and as more communities began to challenge Nestlé's attempts to gain control of water resources in their communities, Nestlé worked hard to convince individuals and communities that the company has turned over a new leaf, while also ensuring investors that the future viability of Nestlé's bottled water business is sound. However, consumers and community groups aren't buying Nestlé's line, or their water, and even some investors are beginning to doubt that Nestlé's bottled water business will be viable in a climate where more and more people are turning back to their public water systems and rejecting Nestlé and other bottlers' efforts to sell them 'old water in new bottles.'  

Like the rest of the bottled water industry, which in the U.S. alone saw a sales volume drop of 2.7 percent in the last year, global bottled water sales for Nestlé were down 1.4 percent this past year, only a slight improvement from last year's 1.6 % drop. News media, industry analysts and other commentators all cite continuing public concerns about the social and environmental impacts of bottled water as one key reason for this downturn.  

Yet, Nestlé continues to claim that the future of their business is sound. In a November 2009 presentation for investors, Nestlé Waters North America CEO Kim Jeffery said, "we're bullish on water." In fact, Nestlé is banking on the failure of public water to ensure it's continued success -- in this same presentation, Jeffery said that 'We believe tap infrastructure in the U.S. will continue to decline. People will turn to filtration and bottled water for pure water needs. Around this same time, Nestlé launched its Born Better Campaign -- an advertising and promotion campaign touting the alleged 'unique' properties and 'superior' quality of its spring water brands.   

The investing world seems to think Nestlé's strategy is a bad bet. Swiss based investment fund Pictet and Cie recently sold all of its 3.19 million shares in Nestlé, as well as 2.04 million shares of Nestlé's bottled water competitor, Danone. And, commentators on the Motley Fool investment advising website, in reference to declining bottled water sales, have said "Investors may need to get used to such numbers. Market-researcher Mintel, for instance, sees sales of home water-filtration solutions climbing nearly 20 percent in the next three years. Presumably, that projection includes trade-up by consumers who have long practiced unprotected tap-swigging, but the remainder of the growth will likely come directly out of soda and bottled water sales."  

Meanwhile, communities throughout the U.S. who have been challenging Nestlé's practices in their own backyards won major victories this year. Residents in Mecosta County, Michigan won a nine-year legal battle to force Nestlé to reduce pumping levels at local well sites, where water withdrawals were negatively impacting local freshwater resources. Meanwhile, voters in Shapleigh, ME passed a local ordinance that helped protect local water resources from Nestlé's efforts to set up new pumping sites in their community, resulting in Nestlé removing 23 test wells from a proposed well site. Lastly, residents and community groups in McCloud, CA forced Nestlé to withdraw a proposed bottling plant -- its largest proposed plant to date -- due to concerns about the impacts the plant would have on the surrounding community.  

These victories demonstrate that local residents can come together to successfully protect their water resources from major corporations seeking to gain access to local water supplies for profit. However, Nestlé's business model is built on continued expansion of its wells and water bottling sites, to the tune of up to two new bottling plants a year and many more wells to support these sites. New communities, such as Chaffee County, CO, Cascade Locks, OR and Sacramento, CA now have Nestlé knocking that their doors, seeking access to their local water resources.   

 
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