Challenges to Nestle's Bottled Water Strategy

09/20/2017 05:36 pm ET Updated Sep 21, 2017

From Maine to California, controversy follows Nestlé Waters North America, Inc. like paparazzi follow a Hollywood star. The rap against the bottled-water division of Nestlé, a Swiss-based company, may rest in part on nativist opposition to multinational corporations. It’s also because Nestlé extracts vast quantities of public water without paying for it, other than a modest permitting fee. But the same could be said of western farmers who irrigate their fields or of Dasani and Aquafina, two other major brands of bottled water, marketed by Coca-Cola and Pepsi, whose expansion plans seldom generate controversy.

The big difference in public reaction stems from the impact of Nestlé’s marketing strategy on the environment. Nestlé mostly sells “spring” water, rather than “purified,” “sparkling,” or “mineral” water. Nestlé understands that American consumers find greater cachet in “spring” water and are willing to pay a premium. By Food and Drug Administration rules, which govern the sale of bottled water, “spring” water can only come from “the spring or through a bore hole tapping the underground formation feeding the spring.” Water taken from a spring or the formation supplying the spring will, by definition, reduce the flow in the spring.

Springs supply high-quality water to downstream creeks and rivers, but only in small quantities. The flow in most springs is miniscule, ranging from a few gallons to a few dozen gallons per second. While springs may be modest in size, their flows are critical to the fragile ecology of the creeks and rivers they feed. A diminution of even one cubic foot per second (7.5 gallons) may devastate fish spawning and larval rearing.

Imagine what happens to a spring when a nearby well pumps, say, 400 gallons per minute of every minute of every day in the year. The fear of that happening has rekindled a controversy in Michigan, which I first reported on in Water Follies: Groundwater Pumping and the Fate of America’s Fresh Waters (2002). Nestlé currently pumps 130 million gallons per year from a well near Evart, Michigan, to supply a bottling plant that churns out 4.8 million bottles every day. Nestlé has filed a $200 permit fee with the Michigan Department of Environmental Quality seeking approval to increase its pumping by 60 percent. If granted, Nestlé’s pumping from this single well would exceed 400 gallons per minute or almost 200 million gallons every year. Nestlé has seven wells in the region.

In Michigan, other large-scale users, such as Pfizer and Post Foods, use more water than Nestlé, but most of the water they use is returned to the watershed. In contrast, Nestlé’s use is almost entirely consumptive. Every year, Nestlé fills 1.7 billion bottles and trucks them away. Nestlé still wants more.

Nestlé maintains that its proposed well in Michigan will not have “a significant impact” on the nearby spring. It strains credulity for Nestlé to assert that a well, which pumps hundreds of millions of gallons of water from a formation that feeds a spring, will not have a significant impact on the spring.

Nestlé’s assertion creates a catch-22 for itself. On the one hand, Nestlé is marketing “spring” water to consumers. On the other, it is telling Michigan regulators that its pumping won’t “significantly impact” the spring. But if it won’t impact the spring, then it’s not spring water under the FDA regulation. Nestlé can’t have it both ways. Either consumers are being sold something that isn’t spring water or the company is giving Michigan regulators incorrect information.

In June 2017, Michigan’s Department of Environmental Quality hit the pause button on Nestlé’s permit to increase pumping. DEQ asked the company for detailed calculations on the relationship between groundwater pumping and surface water flows.

A shout out for nudging DEQ to push back goes to Garrett Ellison, an investigative reporter who writes for MLive, a media group that offers digital access to ten Michigan newspapers. Ellison uncovered that Nestlé’s claim that its pumping would have no “measurable effects” on the local springs and wetlands conflicted with the company’s own aquifer pump tests, conducted in 2000. He obtained Nestlé’s pump test documents under a public records request. After DEQ placed these test results on its webpage on Nestlé’s application, independent scientists skewered Nestlé’s conclusion that increased pumping would have no “measurable effects.” After Ellison’s reporting was covered by the Detroit Free Press and the New York Times, Nestlé’s marketing strategy become a regional and then national issue.

Media attention continued in August 2017, when consumers in Connecticut filed a federal class action, which described Nestlé’s marketing of its Poland Spring water in Maine as “a colossal fraud.” The lawsuit seeks damages for false advertising and deceptive labeling, claiming that what Nestlé is selling is not “spring” water and that Poland Spring actually went dry 50 years ago. Maybe that’s why critics in Maine have long ridiculed Nestlé’s Poland Spring as “Stolen Spring.”

In Florida in the 1990s, Nestlé proposed to pump 657 million gallons annually from a well near a spring. The company’s hydrologist testified at a hearing that “you will not be able to detect” a change in the flow of a nearby river. A colleague of mine, who is a prominent hydrologist, dismisses such extravagant claims as coming from “hydrostitutes.”

The new lawsuit is not the first-time consumers have attacked Nestlé for its Poland Spring water. Shortly after I published Water Follies, I received a call from a lawyer who was suing Nestlé for reasons similar to the new suit. That suit settled in 2003 (as did a flurry of other class actions). When I called the lawyer to find out the terms of the settlement, he told me that he had signed a confidentiality agreement. But the settlement changed nothing on the ground for consumers. For the last 14 years, Nestlé has continued to sell Poland Spring water, with annual revenues between $300 million and $900 million.

Recent lawsuits, including ones against Nestlé’s Ice Mountain brand in Chicago and Nestlé’s Arrowhead Mountain Spring Water division for taking water from the San Bernardino National Forest in California, seem to have prompted Nestlé to reexamine its communications strategy. In June 2017, the company released “Perspectives on America’s Water,” a survey of more than 5,000 adults across the country. Nestlé included in its sampling the opinions of water utility managers, government officials, academics, and employees of NGOs. The study found substantial public concern for the quality of municipal water supplies, and almost universal agreement that failure to invest in the country’s water infrastructure now will end up costing more in the future.

In the past, critics (especially Peter Gleick, author of Bottled and Sold) have accused the bottled water industry, including Nestlé, of engaging in a shameful marketing campaign to undermine the public’s confidence in the safety of municipal tap water. This report could be interpreted as a subtler attack on public water supplies, but its tone suggests an idealistic non-governmental organization sounding the alarm. Is Nestlé pivoting away from a narrow focus on its bottom line?

In 2016, Nestlé named Nelson Switzer its chief sustainability officer. In May 2017, according to Garret Ellison of MLive, Switzer convened a private roundtable on the future of water at an exclusive Detroit restaurant. The guest list for dinner, which coincided with a major conference on Sustainable Brands held at Detroit’s Cobo Hall, included important academics and representatives of major environmental organizations, as well as business leaders. The discussion covered broad topics, such as water value, distribution, access, and security. To some guests, the central issue seemed to be whether water is a right, a public or private resource, or a common resource. In this context, Nestlé may be shifting its emphasis from providing a product to providing a service: the distribution of water. Switzer intends to hold dozens of these meetings as he explores whether “we could all collaborate to ensure there’s sustainable management of this precious natural resource.”

If Switzer intends to rebrand Nestlé, he has his work cut out for him. In Oregon, Nestlé has spent ten years trying to secure rights to water from Oxbow Springs, located near the City of Cascade Locks in Hood River County, which lies in the Columbia River Gorge, about 40 miles east of Portland.

Opposition from local and national environmental groups, including Food and Water Watch, initially stalled the project. The City of Cascade Locks ultimately agreed to sell Nestlé water rights to Oxbow Spring, but that prompted opponents to propose an amendment to the Hood River County charter. The amendment, which passed overwhelmingly in 2016, bans commercial producers from bottling more than 1,000 gallons per day. A Food and Water Watch organizer explained that “water should not be made into a commodity.”

But that principle apparently does not apply to craft breweries. There are 10 craft breweries in and around Hood River. The water used by some of them, including Full Sail Brewery, is spring water that Nestlé would love to bottle itself. The message sent by Oregon voters seems to be that it’s bad to bottle water unless it’s craft beer. Dislike of Nestlé apparently runs so deep that Oregonians have no objection to water being used commercially, just so long as it’s not by Nestlé.

If an effort to rebrand Nestlé is to be successful, perhaps the company should stop selling spring water. That significant pivot might change people’s perception of Nestlé. If the company is unwilling to take that step, the pending litigation may ultimately achieve the same result.

Robert Glennon is a Regents’ Professor at the University of Arizona and the author of Unquenchable: America’s Water Crisis and What to Do About It.

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