The Twinkie Redeemer Is Taking on Water

As the rest of the continent defrosts, Nestlé is liquidating its North American water portfolio.

The food and drink conglomerate has agreed to sell its U.S. and Canada-based bottled-water brands, including Poland Spring, Pure Life and Deer Park, to a pair of private equity firms for $4.3 billion.

Watered Down Results

Nestlé’s North American water segment locked up revenues of $3.8 billion in 2019. But sales dried up last year as typical bottled water guzzlers like restaurants and stadiums were shuttered by lockdowns.

Now Nestlé will give private equity a crack at righting the ship:

  • Joining One Rock Capital Partners in the purchase of Nestlé’s North American water brands is billionaire investor Dean Metropoulos. He’s known for revitalizing once-outdated consumer brands like hipster beverage of choice, Pabst Blue Ribbon — as well as Hostess Twinkies, Bumble Bee Tuna and Chef Boyardee.
  • Despite offloading much of its H2O, Nestlé will hold onto its more profitable premium waters from overseas like Perrier and San Pellegrino.

Selling Spree: Since CEO Mark Schneider took the helm in 2017, Switzerland-based Nestlé has dialed back its footprint as a global food giant. The company cut some confectionary lines and merged its ice cream business with another venture, while doubling down on coffee and pet food. This deal will be the second largest sell-off of the Schneider era, after the $10.1 billion sale of Nestlé Skin Health in 2019.

Analyst at Bank Vontobel AG, Jean-Philippe Bertschy said Nestlé’s return on the sale “is highly attractive for such an underperforming business.”

the takeaway

Nestlé may see the deal as a win, but Dean Metropoulos rarely misses. After owning Pabst for 4 years, he and his partners sold the brand in 2014 for a $550 million premium. They also exited Perrier-Jouët Champagne, Ghirardelli Chocolate and Bumble Bee with healthy returns.

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