Nestlé is to separate its water and “premium beverages” activities into a global stand-alone business from the start of next year.
The move is part of a wider plan Nestlé presented today (19 November) at the company’s capital markets day to “fuel and accelerate growth”.
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Nestlé said the new management of the drinks assets will “evaluate the strategy” for the business, including “exploring partnership opportunities”.
The hived-off operation will be based in Paris under the leadership of Muriel Lienau, head of Nestlé Waters Europe.
Nestlé owns the water brands Perrier, San Pellegrino, Acqua Panna and Pure Life. A company spokesperson confirmed to Just Drinks the “premium beverages” aspect of the spin-off relates to flavoured waters linked to brands such as Maison Perrier.
At the capital markets day event today, Nestlé CEO Laurent Freixe, who took the helm in September, described an overall “plan to drive operational excellence, unlock the full potential of the portfolio and strengthen foundational capabilities”.
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By GlobalDataSpeaking to analysts this morning about the spin-off of the water assets, he said: “We believe that they [the brands] will be better managed with one unified leadership and execution in the marketplace.”
He added: “This will allow us to have the right focus to drive performance in our leading brands and this includes exploring possible partnerships as we have done successfully in other areas in the past and, as we evaluate all options to make the business successful, with the focus on creating long-term shareholder value.”
Expanding on the partnership reference, Freixe said: “When we think partnerships, we look all sorts of partnerships but obviously external ones are also in the picture. The team has just been appointed. They will have the task to set them up, number one, and then review the strategic options and then come back with those options to be discussed and implemented.”
Delivering its sales for the first nine months of 2024 on 17 October, Nestlé said its water business had delivered mid-single-digit growth “underpinned by continued momentum for San Pellegrino and a recovery in Perrier”.
But the division has not been without its problems.
Early this year, Nestlé admitted to a violation of French laws in the way it treated bottled mineral water against contamination.
The company was later fined €2m ($2.2m at the time) for breaching French mineral water laws and engaging in illegal drilling.
In the US in May, Nestlé’s Perrier water brand was re-classified as a soft drink by a Pennsylvania court and therefore subject to sales tax.
Wider cost cuts to come at Nestlé
More widely, in its announcement this morning, Nestlé said it wants to achieve cost savings of at least SFr2.5bn ($2.83bn) above existing initiatives by the end of 2027 to fund increased investments.
In prepared remarks, Freixe said: “Our action plan will also improve the way we operate, making us more efficient, responsive and agile. This will allow us to deliver value for all our stakeholders. I am confident that we can deliver superior, sustainable and profitable growth and gain market share, while transforming Nestlé for long-term success.”
Its actions will include targeted investments in “winning” brands and growth platforms, more focused innovation activities to drive greater impact and systematically addressing “underperformers”.
Nestlé said it will also step up investment in advertising and marketing to support growth.
The company has confirmed its 2024 guidance, with organic sales growth of around 2%, underlying trading operating profit margin of around 17% and underlying EPS broadly flat in constant currency.
Looking ahead to 2025, Nestlé said it expects an improvement in organic sales growth compared to 2024, with the underlying trading operating profit margin anticipated to be moderately lower than the 2024 guidance.
