Nestlé has finalized the acquisition of premium beverage brand Essentia Water, the leading alkaline water brand and number one selling bottled water in the natural channel, for an undisclosed amount. The transaction follows Nestlé’s recent sale of its North American water business — including Poland Spring, Pure Life, Deer Park and other brands — to two private equity firms for $4.3 billion.
“With the addition of Essentia we continue to transform and best position our water business for long-term profitable growth here in the US and globally,” said Steve Presley, Chairman and CEO of Nestlé USA, in a press release. “We are excited to welcome the Essentia team to the Nestlé family as we expand our premium water portfolio.”
Functional Beverage Market
So what makes Essentia Water a premium, functional beverage brand? Using a proprietary process to ionize water, Essentia delivers a pH of 9.5 or higher. Ionized water is said to have a variety of benefits, including boosting energy and counteracting the effects of acidic foods. Some scientists, however, say there are not enough studies supporting the marketing claims made by ionized water companies and others believe the claims are nonsensical. Regardless of what science says, Essentia consumers are loyal to the brand’s clean, smooth taste and the company posted sales of $192 million in 2020.
Unlike the bottled beverage brands Nestlé sold last month, premium and functional beverages are increasing in popularity among consumers who want their drinks to do more than just hydrate. Back in 2018, the global functional water market was projected to show a compound growth rate of nearly nine percent through 2022. Nestlé recognized this growing segment and wasted little time expanding its enhanced water portfolio.
“Essentia gives us an immediate strong presence in the high-growth, functional water segment and supports our efforts to capture opportunities with emerging consumer trends such as healthy hydration,” Presley added in the same press release.
Other beverage giants looking to boost sales have also tapped into the premium beverage space. Keurig Dr Pepper (KDP) acquired nutrient- and fruit-enhanced bottled water brand Core Nutrition in 2018 for $525 million. The transaction put KDP head-to-head with competitors like Coca-Cola and PepsiCo, who own Smartwater and Lifewtr, respectively. Now with Essentia Water in the mix, Nestlé will be going against these players, which are all aggressively working to move beyond high-sugar drinks with more functional, healthy beverages.
With Essentia Water now a Nestlé-owned brand, it will be able to tap into the food and beverage giant’s global distribution network, relationship with retailers and innovation expertise. It will join other brands including Perrier, San Pellegrino and Acqua Panna as part of Nestlé USA’s Premium Waters portfolio.
What the Acquisition Means for Nestlé’s Sustainability Goals
The acquisition of a bottled water brand, however, calls into question Nestlé’s global sustainability goals. Striving to have zero environmental impact in its operations by 2030, Nestlé specifically highlights the role of water in its goals. It asserts that access to clean water is a fundamental human right and aims to steward water resources for future generations. Tackling plastic waste is also a part of Nestlé’s goals, calling it a major threat to our planet and aiming to develop the most sustainable packaging for its products.
Essentia Water is currently a member of The Recycling Partnership and uses PET-1 plastic, which can be recycled at almost all recycling facilities in the US, according to the company’s website. Despite Nestlé’s plan to achieve 100 percent recyclable or reusable packaging by 2025, recycling plastic requires natural resources and energy, and a substantial amount of plastic winds up in landfills. In 2018, National Geographic reported that 91 percent of plastic isn’t recycled. Perhaps Nestlé could reconsider its plastic use if it wants to achieve its sustainability goals by taking into consideration that not all consumers are responsible recyclers of plastic.
Sustainability goals aside, Nestlé continues to find ways to boost its growth through acquisitions. Mark Schneider, CEO of Nestlé said in an investor call last month that the company is putting more emphasis on growth and acquisitions in 2021, instead of relying on organic growth. In the past few years, the Swiss conglomerate has acquired more than 75 businesses, representing about 18 percent of its total brands. Nestlé posted its highest sales growth rate in five years during 2020, and its most recent purchase of Essentia Water is likely to contribute to its projected sales this year.