Beverage Industry

Nestlé Waters

September 1, 2004

Nestlé Waters

North America: Focused on perfor mance
In a beverage industry where an ever-increasing number of new products compete with flashy marketing campaigns, Nestlé Waters North America has instead focused on a single product, and prefers to be noticed for its emphasis on people and high-performance manufacturing. The company recently invited Beverage Industry into two of its bottled water facilities — its Poland Spring plant in Hollis, Maine, and its recently built Arrowhead plant in Cabazon, Calif. — to demonstrate its efforts to combine high-speed, low-cost production, environmental concerns and a strong corporate culture.
As beverage companies go, Nestlé Waters has a fairly new network of production facilities, most of which were built during the past 15 years. For a company that now holds about 35 percent of the bottled water market — with sales growth this year of 10 to 15 percent — that has meant adding plants at a fast clip. It estimates that continued growth in the bottled water industry will require construction of one new plant a year for the next 10 years. Building so many new facilities has allowed the company to develop practices that can be standardized across its plants nationwide, and today’s new plants are built on similar models of efficient production.
Chief Executive Officer Kim Jeffery says Nestlé Waters’ model of low-cost production took form during the early 1990s when the company realized the growth potential of bottled water would soon bring a big wave of competition. “I knew 12 or 13 years ago that if we were going to insulate ourselves [from the competition], we needed to be vertically integrated and a low-cost manufacturer,” he says. “It didn’t happen overnight, we had to learn how to do it and get good at it. The standardization today is the accumulation of 10 or 12 years of learning.”
As a vertically integrated company, Nestlé Waters is responsible for producing its own packaging, making its own package preforms and blowmolding its own bottles. Another example of cost-saving efficiency is the company’s choice to use a warehouse delivery system as opposed to direct store delivery.
“We don’t go to market DSD, we use people’s warehouses, and we think it’s an advantage in this day and age,” Jeffery says. “The bigger customers get, the more they like doing business the way we do it, and if we can be the best guy to do business with, we’re really in an advantage situation.”
He says the company recently reorganized a bit to allow even better access to customers with a more regional approach to distribution.
“We’ve spent a number of years getting to best-in-class in logistics and manufacturing,” he says. “Now that we’ve done that, we’ve married up those responsibilities regionally. By decentralizing, we’ve been able to put a regional focus on best practices from a logistics standpoint.”
Decentralizing distribution responsibilities is an example of the way Nestlé Waters has attempted to both standardize operations for maximum efficiency and put decision-making in the hands of its employees. Nestlé Waters plants, for instance, have incorporated self-guided teams that run their own daily debriefing meetings to discuss what went well during the day and what could be improved.
“The debrief process came about because we want people managing themselves and the assets that they are in charge of,” Jeffery says. “The supervisors are there to support their activities, but these are self-directed work teams.”
He says the philosophy begins with hiring the right people and maintaining a corporate culture based on the notion that “if you like what you’re doing and you like who you’re doing it for, you’re going to do great things.”
“Results are really important, but the way you get results is even more important,” he continues. “We’ve got really high-caliber people who have been here for a long time. We have low turnover, and we have people who like coming to work every day and want to do great things.”
The company has discovered that implementing benchmarking measurements not only helps improve operations, but feeds the desire to do great things at work.
“We don’t do Six Sigma here, but we do our own brand of making ourselves better,” Jeffery says.
Continuous improvement measurements are taken for each of its brands and facilities, and the company also consolidates and implements best practices on a national basis.
“If you have introspective people, they’ll look at themselves and see the opportunity to improve, and then they just go after it,” Jeffery says.
An eye on the environment
Bottled water, more than other beverages, seems to raise the ire of environmentalists. Nestlé Waters has taken great pains to not only communicate its view that it is a natural resource company, but to incorporate a wide variety of environmental protection measures. Its Cabazon, Calif., facility and its Ice Mountain facility in Stanwood, Mich., both have received certification from the Leadership in Energy & Environmental Design (LEED) program of the U.S. Green Building Council, and three other new facilities will seek certification this year.
“We do great environmental work before we come into a place, and continuous monitoring work to make sure the water resources are sustainable for a long time,” Jeffery says. “You can’t build a plant on wheels. The spring water source has to be there 100 years from now, and in order to do that, we’ve got to have good land use practices and aquifer practices. We’ve got to know what’s coming out of there and how fast it’s being replenished. The health of the aquifer is paramount to us.”
Because the company has encountered protest in some of the areas it has chosen for new projects, it has developed a number of efforts to communicate its environmental stand.
“When we go into an environment like [Hollis], which is basically a pristine environment, and buy the springs and use the water, it’s a more obvious use of water than someone turning on a faucet or using a municipal water supply,” Jeffery says.
“We want to be transparent with our communities. We want to help create context around what we do so people don’t fear it, they understand it. At the state levels where we operate, we are taking a much more proactive position regarding educating legislators and regulators about what we do.”
Part of a global business
In North America, Nestlé Waters produces a number of mostly regional bottled water brands such as Poland Spring, Arrowhead, Ice Mountain, Deer Park, Zephyrhills, Ozarka and Calistoga. Nestlé Pure Life, one of the company’s international brands, also is quietly achieving big sales in the United States. So far, its sales have remained under the radar because much of it is sold through Wal-Mart, which is not measured by the national syndicated data services.
“Pure Life is going to be big,” Jeffery says. “It’s big right now, and it’s going to be bigger. We have lots more distribution of Nestlé Pure Life that we need to get, but we’re taking our time and doing it in a consistent manner.”
While the company also has some flavored sparkling waters on the market, it has yet to enter the enhanced water category in North America. But don’t rule it out for the future. Jeffery says, “I believe that for this category to achieve its long-term potential, there are going to have to be some things that happen in flavor technology and packaging technology. You can see examples of the way we’re working on that [outside the United States].”
Nestlé Waters North America draws on the resources of its Switzerland-based parent company, including a new global water R&D facility in France, for product development.
“Something people don’t see in us is the global nature of our water business,” Jeffery says. “It’s not just about what we do in the United States, but we have a lot of reach and capability [globally]. In our group at Nestlé, that’s all we do and that’s all we’re focused on, which I think is a competitive advantage.”
Jeffery says the company feels good about the progress it has made, especially during the past five years as it has reaped the benefits of its push for performance. But he says, “We feel we’ve got lots more improvement to make; we’re never satisfied with where we are.”
“I don’t like to make big projections about where the company’s going to be — I think you need to stay humble about your business,” he says. “But I’m very optimistic about our future. I feel really good about it and our brands.” BI