Nestle selling North American bottled-water brands for $4.3B

Global food giant Nestle is selling its bottled-water brands in North America for $4.3 billion to a pair of private-equity firms that hope to reinvigorate sales.

Brands including Poland Spring, Deer Park, Arrowhead, Ozarka, Zephyrhill and Pure Life will be sold to a subsidiary of One Rock Capital Partners and investment firm Metropoulos & Co. The deal, which is expected to close this spring, will create one of the largest beverage companies in the U.S.

Ice Mountain, a Nestle's brand, has operations in Michigan.

Dean Metropoulos, who previously led turnarounds at Hostess Brands and Pabst Brewing Co., will be serve as chairman and interim CEO of the independent company that will house the brands acquired from Nestle.

Swiss-based Nestle said it intends to sharpen its focus on its international premium water brands, including Perrier, S. Pellegrino and Acqua Panna, which were not part of the deal.

The new owners, meanwhile, hope to boost the bottled-water brands, which have seen slower sales growth in recent years.

Nestle has expanded its withdrawal of underground water in a part of Michigan, which local groups have been fighting. Now environmentalists will have to fight equity firms instead of a global water firm.

An administrative law judge upheld a state permit that lets Nestle Waters North America pump 400 gallons a minute from a well near Evart in Osceola County, a 60% increase. 

The state’s environmental department under Democratic Gov. Gretchen Whitmer said in November it didn’t have the authority to intervene in the case, even though the department “remains committed to protecting our state's valuable water resources.”

The water is trucked to an Ice Mountain production facility in mid-Michigan’s Mecosta County. Nestle pulls water from other wells in the area.

Michigan Citizens for Water Conservation and the Grand Traverse Band of Ottawa and Chippewa Indians had challenged a permit that was approved by Republican former Gov. Rick Snyder's administration. Critics say increased pumping will harm the environment in the Chippewa Creek watershed.

Nestle disagrees and defends its scientific work, arguing the water source is sustainable. Administrative Judge Dan Pulter said the higher pumping rate is "reasonable under common law principles of water law in Michigan."

Peggy Case, the executive director of Michigan Citizens for Water Conservation, said her group isn’t happy about the Nestle sale “because we see it as an attempt to further privatize water and water infrastructure and treat it as a commodity.”

“By Nestle selling its operations to a private equity firm, we figure that’s going in the wrong direction,” Case said. “We are in favor of water remaining public.”

She said the deal is a bit confusing in terms of what the company is selling.

“Hopefully they don’t imagine they are selling the water because water’s not for sale in this state,” Case said.

U.S. bottled-water sales have grown every year since the 2009 recession, as health-conscious consumers have switched away from sugary soft drinks. Bottled water outsold soft drinks for the fourth year in a row in 2019, according to the International Bottled Water Association.

But that growth has been slowing amid criticism from environmental activists about waste from single-use plastic bottles. Consumers have also been switching to flavored and sparkling waters, like LaCroix or Coca-Cola’s smartwater brand. Lower-cost store brand bottled waters have further cut into sales.

Nestle’s North American water business has 27 production facilities and more than 7,000 employees. It sources water from 38 active springs throughout the U.S.

That practice has come under increasing scrutiny from environmental groups. Last year, lawmakers in Washington state considered –– but ultimately dropped –– legislation that would ban companies from bottling ground water. And Democrats in Congress launched a probe of the industry, asking Nestle for data on water extraction and sales.

In Maine, home to Poland Spring, a water rights group is worried that the new owners will backtrack on agreements with local communities.

“This water connects to all of us and should be stewarded by the local communities who depend on them, not negotiated away behind closed doors, exploited and exported by corporations for privatized profit,” said Nickie Sekera of Community Water Justice.

The Associated Press left messages seeking comment from One Rock and Metropoulos.

Detroit News staff writer Leonard N. Fleming contributed.

Sharp reported from Portland, Maine. Durbin reported from Ann Arbor, Michigan. The Detroit News contributed.