- Nestlé will introduce two new lines of bottled water in 2020, Poland Spring energy water and Nestlé Pure Life Plus, CNBC reported.
- Poland Spring energy water will contain the same amount of caffeine as a cup of coffee, but the stimulant will be derived from green tea extract. Nestlé Pure Life Plus will be the brand's initial foray into functional water and will debut in February 2020 with three varieties: magnesium, zinc and potassium.
- In 2020, the company also will launch Poland Spring Origin nationwide, which is bottled water ubiquitous in the Northeast. Nestlé also pledged to convert all Poland Spring still bottled water in less than one-gallon containers into bottles that are completely recyclable by 2022.
As bottled water faces challenges, Nestlé is looking for ways to grow its brands. During the first nine months of 2019, Nestlé's organic sales of bottled water in North America were flat and its global water volumes fell by 2.2%. What was once a booming segment has become a "problem category," Jefferies analyst Martin Deboo told The Wall Street Journal.
In such a market, it could be a smart move for the Swiss company to rethink its strategy where it has a major presence. The bottled water segment is incredibly crowded and there is a limit to the number of ways that companies can differentiate their products. Currently, Nestlé Pure Life ranks fourth with about $860 million in sales compared to other bottled still water brands, according to data from Statista. It is trailing behind private label with $2.8 billion in sales, followed by Coca-Cola's Dasani and PepsiCo's Aquafina at roughly $1.1 billion.
Now, Nestlé is pursuing a strategy that focuses on high-value premium brands, functional waters as well as flavored and carbonated products. This latest announcement puts Nestlé in the functional beverage space, which Imbibe recently predicted would be a top trend for 2020. However, interest in beverages that do more than hydrate is nothing new. Functional beverages have received an infusion of investment from venture capital companies, with VCs putting more than $170 million toward companies that make these products in 2018 — up from $111 million in 2017, according to Pitchbook data.
While consumers are interested in bottling their health, adding extra vitamins and minerals to bottled water may not be enough to convince some consumers to come back into the category where questions about sustainability have been dogging companies.
In response to the environmental impact of plastic, consumers have pushed back and companies are responding. Major bottled water manufacturers such as Danone, PepsiCo, Coca-Cola and Nestlé are investing in alternatives and pledging to increase the amount of recycled plastic in their bottles. In January, Nestlé announced a new partnership with Danimer Scientific, a developer of biodegradable plastic products, to develop biodegradable water bottles. Several companies this summer, including Coca-Cola's Dasani and PepsiCo's Aquafina, announced plans to turn to more recycle-friendly aluminum cans.
For Nestlé to refresh its water business, it will need to do more than simply add functionality to water sold in plastic bottles. Water makes up about 8% of Nestlé's overall sales and under 5% of profit, according to Jefferies data highlighted by The Wall Street Journal. In an earnings call earlier this year, Nestlé CEO Mark Schneider said, "Depending on the year, typical growth is between 5% and 7%. So as you can see, with our current numbers, we’re quite a bit away from that."
In addition to launching new lines, Nestlé announced in October that Nestlé Waters will restructure from a globally managed business to one that is managed locally in each of the company's three geographic regions. The idea is to improve proximity to the customer and allow for Nestlé to focus on higher-margin segments since 60% of the unit's business by volume in the water category is local brands in various countries. And last year, the company launched a line of regional sparkling spring water products packaged in cans and plastic bottles in an effort to attract people unwilling to purchase Nestlé’s long-standing premium Perrier and San Pellegrino brands.
Despite its dominant position in water, Nestlé is facing growing competition from the likes of PepsiCo's buby and SodaStream. Even Costco has launched a line of sparkling waters that have cans, flavors and price points are similar to LaCroix sparkling water. Other upstarts also are gaining in popularity like Spindrift, a Massachusetts producer of sparkling water made with real fruit. Perhaps this restructuring in tandem with a desire to launch new products and improve sustainability will help Nestlé reinvigorate its sales.