Spending cuts won’t affect Nestle Waters

[As households pull in their belts in the face of this economic downturn, Nestle still thinks people will pay an exorbitant price for bottled water instead of turning on the tap. – ed.]

By Michael C. Juliano, Stamford Advocate, 02/24/2009

Nestle Waters North America [head office in Greenwich, CT] does not plan to reduce capital spending this year despite its Swiss parent’s plan to cut capital expenditures and reduce its products portfolio for its global waters business.

“As long as we continue to see growth, we don’t expect any reduction in capital expenditures,” said Jane Lazgin, director of communications for Nestle Waters.

According to preliminary results for last year, the Nestle subsidiary saw its market share in the bottled-water industry increase by 2 percent, down from previous years but still healthy, Lazgin said.

“Our market was slower, but we are still seeing growth,” she said. “We see that as stability.”

According to its Web site, Nestle Waters posted about $4.26 billion in sales for 2007 and commanded a third of the U.S. market share.

Official 2008 sales numbers for Nestle Waters, which has 8,500 workers and 27 bottling facilities in North America, including a new plant in Kingfield, Maine, should be reported next month by the Beverage Marketing Corp. in New York City, Lazgin said.

“We are not planning to see capital expenditure go either way,” she said. “We adjust according to the marketplace.”

Nestle, which is based in Zurich, Switzerland, announced Monday in “2008 Full Year Results Roadshow,” a 44-page investor presentation posted on its Web site, that it plans to “further reduce” capital expenditure and “trim portfolio further” for its water business this year as it sees slower sales because of the economic downturn.

“Our focus is really to continue to defend and grow shares, but also to drive on taking costs out of the business with acceleration,” Jim Singh, Nestle’s chief financial officer, said during an online broadcast of the report.

According to the presentation, the worldwide market trend for Nestle Waters, whose products include San Pellegrino and Perrier, was soft this year as its “organic growth” decreased by 1.6 percent and “real internal growth” declined 3.9 percent. The company, which has 103 factories and 31,500 employees around the globe, reduced its 2008 capital expenditure by $237 million, or 26 percent.

The bottled-water industry may not be experiencing 15 percent annual growth as it did 10 to 15 years ago, but it still grew 2? 1/2 percent last year, said Tom Lauria, vice president of communications for the International Bottled Water Association in Alexandria, Va.

“A lot of companies would like to have that growth in today’s recession,” he said.

However, the past year was tough for the beverage industry because of the economy, said Gary Hemphill, Beverage Marketing Corp.’s managing director.

“Long term, we believe the category’s performance will improve because it is so well-positioned as a healthy lifestyle beverage,” he said.