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Nestle could sell most of its North American water business, which includes 2 Lehigh Valley plants

Swiss food and beverage giant Nestle S.A. is changing course in its waters business, a shift that could lead to the company unloading a part of the business that includes two Lehigh Valley bottling plants and about 500 local employees.

Nestle announced the “new strategic direction” Thursday, after its board of directors approved a sharpened focus on the company’s international brands such as Perrier, S.Pellegrino and Acqua Panna.

The board decided that its regional spring water brands, including Deer Park, purified water business and beverage-delivery service within its Nestle Waters North America unit don’t align with the new focus.

So Nestle is exploring strategic options, including a potential sale, for the majority of its Nestle Waters business in North America.

The review, which is expected to be completed by early 2021, includes the company’s two Breinigsville bottling facilities, which employ about 500 workers, confirmed Nestle Waters spokesperson Alix Dunn. The facilities produce Deer Park spring water and Nestle Pure Life bottled water, which is then distributed to major retail and grocery customers throughout Pennsylvania and the mid-Atlantic.

Just three years ago, Nestle completed a $79 million expansion that added three high-speed bottling lines to the local Nestle Pure Life bottling facility as the company worked to keep up with demand for healthier beverage options. The year before, in 2016, bottled water outsold carbonated soft drinks in the United States for the first time.

But times change, with consumers now opting for sparkling or flavored waters and with heightened criticism surrounding plastic waste.

Nestle Waters only logged 0.2% organic growth in North America last year, slightly positive because of price increases, according to Nestle’s 2019 annual review. To try to fix what was dubbed an underperforming business in the review, Nestle announced in October it was integrating its waters business into the group’s three geographical zones to boost local expertise, quicken its response to changing consumer preferences and create synergies.

As part of its announcement Thursday, Nestle also pledged to make its global water portfolio carbon-neutral and replenish watersheds by 2025.

“The creation of a more focused business enables us to more aggressively pursue emerging consumer trends, such as functional water, while doubling down on our sustainability agenda,” Nestle CEO Mark Schneider said. “This strategy offers the best opportunity for long-term profitable growth in the category, while appealing to environmentally and health-conscious consumers.”

Excluding the international brands Nestle will focus on, the Nestle Waters business in North America had sales of 3.4 billion Swiss francs, or about $3.6 billion in U.S. dollars. Aside from Deer Park and Nestle Pure Life, it includes brands such as Poland Spring, Ozarka, Ice Mountain, Zephyrhills and Arrowhead.

Nestle Waters has a 25-year history in the Lehigh Valley, a period during which its employment here has increased by more than 500%.

In 1995, the company opened its first Lehigh Valley bottling plant with about 75 local employees. About a decade later, Nestle Waters spent $116 million to expand and build its second local facility: a 580,000-square-foot bottling plant. The two plants’ combined payroll represents more than $36 million.

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