Nestle to Sell Poland Spring, Pure Life and Other Water Brands for $4.3 Billion -- Update

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, more on-trend 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. -- 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.

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.

For buyer Metropoulos, the deal is its latest in the food-and-drink industry. The private-equity firm previously acquired 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, last year more than doubled its managed assets after taking food-ingredients maker Innophos Holdings Inc. private in a deal valued at about $932 million, including debt. The firm says its experience with stand-alone businesses carved out from big corporations will hold it in good stead with the Nestle acquisition.

Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com

(END) Dow Jones Newswires

February 17, 2021 05:12 ET (10:12 GMT)

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