Threatened Sale of Perrier

Perrier, the French mineral bottled water, was in the news last month (September 2004) when its parent company Nestle Waters France said it was considering selling Perrier after a trade union blocked an early retirement plan affecting about 1,000 jobs.

In July 2004, the trade union Confederation Generale du Travail (CGT), which represents 55 percent of all Nestle Waters staff and 83 percent at the Perrier source, rejected a retirement plan that would affect 1,047 Perrier workers, reported The Tocqueville Connection.

The sale of Perrier, one of the world's best known water brands, is a "project that will be examined along with others," Nestle Waters France said in a statement.

In response, French Finance Minister Nicolas Sarkozy set up a meeting with Nestle Waters management, and then issued a statement that Nestle wanted to keep its Perrier mineral waters business and resume discussions.

In its own communication, Nestle Waters France warned that "under no circumstances" could the July agreement be re-negotiated. CGT official Jean-Paul Franc later said his union would consider "taking a decision on the withdrawal or not" of its opposition. "There must be a return to dialogue, to negotiations, in order to get out of this impasse," he added, as reported in The Tocqueville.

The departure of Nestle from the town of Vergeze, France, the source of Perrier bottled water for 100 years would have significant consequences for the residents. Rene Balana, mayor of Vergeze, told the Financial Times that the town’s 3,700 inhabitants are terrified at the brinkmanship between the Swiss multinational and the communist-backed union CGT. Two-thirds of Verge’s income, he says, derives from taxes levied on Perrier’s plants.

Nestle CEO Peter Brabeck first threatened to sell Perrier in March 2004, saying it was not profitable enough to remain in the Swiss food giant's stable of bottled water brands. "I find it very hard to work in France,” he said. “To produce a billion litres of water here, I am obliged to employ 4,800 people [including the Vittel and Contrex water plants, as well as Perrier]. To produce the same quantity in Italy, I need 1,800. And I'm talking about Europe there - not China or India."

Tied into the discussion about Perrier is another debate going on in the European Union about the cost of labor in Western Europe. “But Nestlé's disenchantment with Perrier is also connected to the new trend in the mineral water market: the processing of anonymous water supplies to fill colourfully branded and marketed bottles. ‘Real’ springs such as Perrier may be gradually reduced to a niche market for more expensive brands,” reports John Lichfield, writing for the Independent.co.uk News.

Lichfield goes on to say that one of the complaints of the Perrier workers is that Nestlé has concentrated its recent investments on new generic mineral waters, which can be bottled anywhere.

Nestle’s Brabeck has been quoted as saying, "I have liberated myself from dependence on one spring and the economic and political burdens that that brings." Thus, indicating that Nestle could move in the direction of developing generic or flavored mineral water, which is not dependent upon a specific water source. Without the limitations and transportation costs of a specific spring, the water enterprise becomes much more economical for Nestle.

To reduce costs at its Perrier factory in Vergezè, Nestlé earlier negotiated cuts of 800 jobs. However, the company still said that that excess staff, compared to other water-bottling plants, the 35-hour week and the high "social charges" on companies in France make the Perrier plant unprofitable.

Earlier in the year, more moderate unions at the Perrier plant had agreed to Nestlé's plan to cut 356 out of 1,650 jobs by giving early retirement to anyone over 55. However, under a French labor law, the plan had to be agreed to by a majority of the workforce. The CGT union federation, representing 83% of Perrier employees, rejected the plan, leading to the current stalemate.

Legally, the brand is not linked to the source, according to Nestle spokesperson, Hubert Genieys, as reported in the Financial Times. “We would need to find another source with the same chemical and bacteriological characteristics and assess how sensitive consumer would be to a change in the source,” he said.

Further Information/Sources:

“Home of Perrier Worries That Firm Will Flow Away,” by Jo Johnson of the Financial Times, printed in The Los Angeles Times, September 27, 2004.

“French Government Says Nestle Wants to Keep Perrier,” The Tocqueville Connection, September 21, 2004.

“Perrier Row Sparks State Intervention,” The Tocqueville Connection, September 19, 2004.

“Eau dear, what can the matter be?” by John Lichfield, Independent.co.uk News, September 16, 2004