Nestlé Shakes Up Its Bottled-Water Business
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What is the main topic discussed in this episode?
Here's your Money Briefing. I'm J.R. Whelan at The Wall Street Journal in New York. The trend toward using reusable bottles is forcing companies like Nestle to rethink their business model for water. We'll check in with The Wall Street Journal reporter for details. First, some money and market news you should know. The cost of shampoo, rinse, and repeat is leveling off. Unilever, the maker of Dove and Tresemme products, has launched a price war with Pantene, Maker Procter & Gamble, and a surge to boost its market share. Unilever raised prices on products like mayonnaise and ice cream in North America this year, but capped its shampoo price increase at about half a percent to compete with P&G. This isn't the first time the two companies have gone to battle over suds.
In 2001, Procter & Gamble paid Unilever a multi-million dollar settlement after P&G admitted to spying on Unilever's hair care division. Hair care is a key battleground for consumer products makers.
How has bottled-water demand changed and why is Nestlé rethinking its business?
Shampoo has strong profit margins and easy opportunities to innovate just by minor changes to ingredients. What does it take to be a part of the 1%? The IRS says earnings of $515,000. According to its most recent data, the IRS says 1.5 million people reported between $515,000 and $2.3 million as their adjusted gross income in 2017, putting them among the wealthiest 1% of Americans. But what about being among the super-rich, like the .001%? The IRS says $63.4 million in annual income is the starting point. Who has that kind of money? Turns out about 1,400 people reported income at that rarefied level in 2017.
Nestle is refreshing its bottled water business to keep sales numbers from going down the drain. And Wall Street Journal reporter Sabra Chowdhury joins us from London with some details. You might say that Nestle rode the wave on bottled water. Pardon the pun, Sabra. But is the tide turning now?
Yeah, so it's interesting. I think that bottled water sales, as you said, they grew for a very long time and the market is now matured quite a lot. So it isn't just Nestle that's having a problem. Bottled water volumes overall are slowing. And so I think they're at about 4.8% growth right now. They were about 8% just a few years ago. So we're really seeing a pretty sharp slowdown in the U.S. And I think some of that is pretty natural. It's just the market actually maturing. Some of it has to do with the fact that there is more competition ready to drink tea and coffee and sports drinks and energy drinks. For Nestle, I think the big problem that they're having is that they were quite late to this sparkling, flavored, functional waters category, which has really taken off in the U.S.
What data shows bottled-water growth is slowing in the U.S.?
And Nestle started rolling out products in that category in a big way only last year. So they've kind of missed that. a little bit of that picture now.
And the growth of water was really propelled at one time by people turning away from sugar drinks, and so it seems like consumers' tastes have evolved a couple of times.
Yeah, and I think the same way the bottled water growth has slowed, we're seeing the decline in sugary soft drinks also slow, and I think that's just natural. People, you know, the most health-conscious people are going to leave really quickly, and then after a period of time, the consumers who've stayed are just going to stick around and say, hey, we like drinking Coke or we like drinking Pepsi. We're not going to stop. So consumer tastes have changed. I'd say overall people are still really health conscious. It feels like now, though, people want more from bottled water than just a bottle of still water. They're looking for the sparkle and the flavor that comes with a carbonated, sugary, soft drink, but they want like a healthier version of it, which is why they tend to then reach for these sparkling and flavored waters.
And you drink less of that stuff. So you're not going to be drinking, you know, a huge bottle of sparkly flavored water the way you would have drunk a big bottle of still water.
And there's also a big push for people to stop using single-use plastic and carry their sustainable water bottles.
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Chapters
4 chapters
1
What is the main topic discussed in this episode?
0:05–0:59
2
How has bottled-water demand changed and why is Nestlé rethinking its business?
0:59–3:02
3
What data shows bottled-water growth is slowing in the U.S.?
3:02–6:13
4
Why did Nestlé miss the early surge in sparkling and flavored waters?
6:13–8:27
Speakers
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