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Problems at Perrier
Perrier may well be the iconic brand in the world of mineral waters. However, regardless of the profile of the brand, the company that produces the bottled sparkling mineral water is having a tough time. It is the focus of what one commentator describes as “a vicious struggle underway for the soul of the business. The origins of the Perrier company can be traced to 1898 when a local doctor, Louis-Eugene Perrier, bought the mineral water source near Vergeze, France. The company grew steadily but demand really escalated in the late 1980s when it became highly fashionable and championed by a range of admirers including Wall Street yuppies. At its peak (1989), Perrier sold 1.2 billion bottles (830 million in 2003), almost half to consumers in the United States. The boom years were good for the Perrier workers. Buoyant profits were associated with regular pay rises, social benefits, and extra holidays. However, in 1990, the finding of a minute trace of benzene in a bottle led to the collapse of U.S. sales. By 1992, annual output had halved and the company was close to bankruptcy. At this point it was bought for $2.7 billion by Nestle, the world’s largest food company. Attracted by the combination of bottled water as a fast-growing business and the world’s best known mineral water brand, Nestle identified Perrier as an attractive takeover target. However, Perrier struggles to turn a profit. In 2003 its pretax profit margin on $300 million sales was only 0.6% compared with 10.4% for the Nestle Waters division overall. In 2004 it again recorded a loss. The Perrier factory is on a 234-acre site on the Mediterranean coastal plain near Nimes. The factory itself is rather nondescript, so much so that “from a distance it could be mistaken for a power station or auto plant.” Perrier employees work a 35-hour week and earn an average annual salary of $32,000 which is good for this part of France and relatively high for this industry.
Perrier may well be the iconic brand in the world of mineral waters. However, regardless of the profile of the brand, the company that produces the bottled sparkling mineral water is having a tough time. It is the focus of what one commentator describes as “a vicious struggle underway for the soul of the business. The origins of the Perrier company can be traced to 1898 when a local doctor, Louis-Eugene Perrier, bought the mineral water source near Vergeze, France. The company grew steadily but demand really escalated in the late 1980s when it became highly fashionable and championed by a range of admirers including Wall Street yuppies. At its peak (1989), Perrier sold 1.2 billion bottles (830 million in 2003), almost half to consumers in the United States. The boom years were good for the Perrier workers. Buoyant profits were associated with regular pay rises, social benefits, and extra holidays. However, in 1990, the finding of a minute trace of benzene in a bottle led to the collapse of U.S. sales. By 1992, annual output had halved and the company was close to bankruptcy. At this point it was bought for $2.7 billion by Nestle, the world’s largest food company. Attracted by the combination of bottled water as a fast-growing business and the world’s best known mineral water brand, Nestle identified Perrier as an attractive takeover target. However, Perrier struggles to turn a profit. In 2003 its pretax profit margin on $300 million sales was only 0.6% compared with 10.4% for the Nestle Waters division overall. In 2004 it again recorded a loss. The Perrier factory is on a 234-acre site on the Mediterranean coastal plain near Nimes. The factory itself is rather nondescript, so much so that “from a distance it could be mistaken for a power station or auto plant.” Perrier employees work a 35-hour week and earn an average annual salary of $32,000 which is good for this part of France and relatively high for this industry.