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Bottled Water Industy Faces Downward Spiral

By Richard Girard, Polaris Institute, March 11, 2009

One year ago we published an article outlining the bottled water industry’s plan for dealing with a quickly spreading backlash against their products. We reported that bottled water companies would focus attention on altruistic and humanitarian efforts to hide environmental and social impacts. At the time, marketing publications were predicting that bottled water companies would employ intense ‘ethical’ or ‘responsible’ marketing, understood as tying the purchase of a product to charitable activities.

These attempts at cleverly tricking people into buying a product have failed to effectively re-invigorate lagging sales of bottled water. The continuous downward spiral of the bottled water industry over the past year is not likely to be reversed any time soon. Last year’s sales figures for the big four bottled water giants (Coke, PepsiCo, Danone and Nestlé) show that sales figures have dropped significantly.

These are desperate times indeed for bottled water companies. Some industry analysts are already predicting the sell off of bottled water assets by Groupe Danone while Nestlé has publicly announced that it is slashing investment in their bottled water brands. However, these difficult times do not mean that these companies are giving up. On the contrary, in the case of Nestlé the company is resorting to facing the bottled water backlash head on through advertising and other, more aggressive means.

Nestlé, its executives, lobbyists and communication firms have their work cut out for them. The fight to have bottled water banished from municipal buildings and promote publicly delivered drinking water in North America has incredible momentum. In December the City of Toronto became the largest city in the world to pass a comprehensive policy to get rid of the bottle in City buildings and to reinvest in publicly delivered tap water. Other major urban centres, like Seattle and New York are promoting their own tap water over bottled water.

To deal with this well organized backlash Nestlé Waters North America has not resorted to the ‘ethical marketing’ angle, instead it has ‘gone negative’ by disparaging tap water, using television ads and newspaper advertisements, threatening lawsuits, aggressively lobbying city councillors and employing public relations and communications firms to push their narrative into the media. Looking at Nestlé’s track record will show that this company and the industry in general, is desperately trying to hold onto their bottled water customers.

Unlike Coca-Cola and PepsiCo — two of the big-four international bottled water companies — Nestlé’s beverage division is almost completely reliant on bottled water. Nestlé got into the bottled water business when it bought Perrier in 1992. Over the next decade Nestlé went on a shopping spree, buying a large number of small regional bottled water companies around the world. Today Nestlé owns over 70 brands worldwide.

The majority of these products are non-flavoured still bottled water. Emphasis on regular bottled water has left Nestlé vulnerable to the rapid downturn in sales of this beverage. Nestlé Waters’ — Nestlé’s bottled water division — performance has quickly declined over the past two years due to, what business analysts say is a combination of tough economic times and environmental concerns. Nestlé reported a 1.6% drop in bottled water sales in 2008. Consequently the company announced that it would cut investment in its bottled water division in 2009 indicating that the company does not see a quick recovery of bottled water sales in the near future.

Because of the amount of money it has invested in acquiring its 72 bottled water brands, Nestlé cannot simply de-emphasize its bottled water portfolio and promote other beverage brands much like what Coca Cola and PepsiCo have done over the past few months. Instead, the company must either sell off its bottled water brands or confront the backlash and invest in advertising to attract new customers.

Nestlé Chief Executive Officer Paul Bulcke has said that 2009 will be a year of ‘stabilization’ for the company’s bottled water division and that the industry needs to work more on its image. In terms of marketing Nestlé Waters North America has launched a series of television advertisements to promote its Pure Life brand as a healthier alternative to sugary drinks. The advertisements are presently targeting the US Spanish speaking population and will move into English language television advertising soon. The company hopes that consumers of carbonated soft drinks will continue shifting to bottled water.

While the company is targeting soda drinkers in its advertising, it is going directly after the bottled water backlash through concerted and strategic initiatives. Some of the tactics employed by the company to confront its detractors include, directly lobbying municipal politicians, writing numerous letters to the editor and op eds vilifying the anti-bottled water movement, threatening lawsuits and actually infiltrating and spying on water activists.


In Canada, where the list of municipalities banning bottled water is rapidly expanding (twelve municipalities so far in 2009), Nestlé Waters’ has mounted an extensive lobbying and public relations campaign to try and avert any more bans. In the days leading up to the city council vote on banning bottled water in Toronto, city councillors faced a barrage of lobbying from Nestlé Waters and the bottled water industry.

These frenzied attempts to sway votes away from a ban took place over the two days of debates when the industry brought a battery of lobbyists, corporate executives and industry associations into the council chamber to influence the vote. Bottled water industry representatives used lobbyists from the Sussex Strategy Group to intensively lobby city councillors. Active lobbying took place during the entire six-hour debate even while councillors were speaking. The industry also had communications and PR representatives Argyle Communications attend parts of the debate. The high-priced strategy ultimately failed to influence elected officials, who voted with a two-thirds majority to ban bottled water and reinvest in the public delivery of drinking water.

Since December 2008, when the Toronto motion passed, 10 bans have passed in Ontario municipalities. In the majority these cases Nestlé Waters has contacted city officials to either provide them with company information or to speak at committee or council meetings where the bans are being debated. It is unclear if Nestlé Waters has exclusive distribution deals with any of the municipalities it is contacting. This indicates that the company is frantically trying to curb the momentum of the bottled water backlash and sees municipal action on bottled water as a major threat to its bottom line.

Legal threats

A radio ad promoting Miami-Dade County’s tap water as a cleaner, safer and cheaper option than bottled water prompted Nestlé Waters North America to threaten to sue the County if the ads were not removed. The company leveled its threat at the County in October 2008 when the advertisements had already been on the air since August. At a point when bottled water sales are dropping, the harassment of Miami-Dade shows how much is at stake for this company and how it will aggressively counter criticism of not only its own brands but bottled water in general.

False Advertising

A full-page advertisement appeared in the Canadian newspaper the Globe and Mail in October 2008, that made a series of statements, including that: “most water bottles avoid landfill sites and are recycled”; “bottled water is the most environmentally responsible consumer product in the world”; and, “Nestlé Pure Life is a Healthy, Eco-Friendly Choice”.

A coalition of Canadian groups filed a complaint under the Canadian Code of Advertising Standards against Nestlé Waters North America. The groups argued that Nestlé attempted to mislead the public on the true impacts of bottled water and that the ad contravened the Canadian Code of Advertising Standards by making false and misleading statements regarding the environmental impacts of its product. The complaint also alleged that some of the statements in the ad are contrary to guidelines that have been set by Canada’s Competition Bureau and the Canadian Standards Association to ensure environmental claims are specific and verifiable. The complaint has yet to be resolved.

Infiltrating and spying

In June 2008, a Swiss television station aired a documentary revealing how in 2003 Nestlé had commissioned a private security firm — Securitas — to infiltrate a group of Swiss citizens who were working on a book about Nestlé’s business activities. The citizens were all members of the trade monitoring group Association for the Taxation of Financial Transactions for the Aid of Citizens, known by its French acronym ATTAC. One of the main focuses of Nestlé’s surveillance was a Brazilian activist who has been struggling against the company’s bottled water operations in Sao Lourenco Brazil.

The tactics outlined above paint a picture of a company trying to salvage a struggling business segment. They also point to Nestlé’s historical track record in dealing with organized resistance to its global operations. Due to its size and diversity, Nestlé’s socioeconomic impact is truly global and spans a large number of industries. Given its reach it is no surprise that the Economist would state in 2004 that “few companies are more exposed than Nestlé to reputational risks”. The company response to critics is often arrogant, hostile and stubborn. This is not a company that will shy away from controversy and will employ a diversity of tactics to cleanse its reputation and ensure a steady stream of profits. How it is dealing with the bottled water backlash is no different to how it has responded to other criticisms.

Nestlé’s recent drop in bottled water sales and its increased resistance to the bottled water backlash show that it will not go down without a fight. Nevertheless, when industry analysts begin discussing the prospect of selling bottled water brands what we will see is Nestlé either begin to sell off parts of its bottled water division or fight back. Until now, Nestlé has chosen to fight on a variety fronts with the hopes of regaining lost ground. However, given that the company is facing a broad popular movement challenging bottled water and a buying public with less disposable income, the future does not look bright for Nestlé Waters.

Richard Girard is the corporate researcher at the Polaris Institute.

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