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Dealing with Products and Managers that Fail: Corporate Cyanide and Executive Suicide

What's become of Perrier? Did they have to take the ultimate hit and go out of business?

Image: San Pellegrino - part of Nestle-Waters who also own Perrier. Copyright: Erik Dungan

Perrier is part of the Nestle family of companies, owned by Nestle-Waters. Interestingly, Nestle-Waters also owns San Pellegrino and Vittel, as well as other water brands. There was outcry in France in 2004, when it seemed that Nestle were about to put the Perrier brand up for sale. Perrier and its association with its source in Vergeze, southern France, is regarded with a great deal of French national pride.

The importance of Perrier as a national symbol is demonstrated by the uproar that greeted rumours that the company was to be sold by Nestle. France's Interior Minister, Nicholas Sarkozy intervened and talks were organised between the company's French management and union representatives and the crisis was halted.

But in the US, Perrier's owners have been pre-occupied more with the impact of the benzene crisis, rather than the national identity of the brand. In 1989, Perrier was the leading US brand of imported water, with close to 6% of the bottled water market. When the product recall occurred, Perrier's sales growth began to lag behind the market, so the company launched a $25 million advertising campaign intended to inform and persuade consumers. This intensive marketing effort failed to produce results, though, and by 1995, sales had fallen to half their 1989 level.

Worse was to come when the US Food and Drug Administration forced Perrier to end their labelling claim that the water was 'naturally sparkling'. Researchers for the authorities found that Perrier's product was actually carbonated by the firm after extraction. Nestle-Waters' Web site can only claim the following about the product: "Originating in Vergeze in southern France, Perrier is a natural mineral water carbonated with its own gas."

With Nestle-Waters estimating that annual consumption of bottled water in 2003 has grown to 82 litres per capita, it's clear that there is intense competition in the market. Whilst this level of consumption lags far behind demand in continental Europe, sales in the US have grown in the past 15 years by 10% per year on average. The Perrier brand is not well positioned to take advantage of this market growth and it is likely that other brands will benefit more from growing US demand.

The benzene incident and other smaller controversies may have undermined Perrier's image forever. With hindsight, it's easy to see that if they had acted more responsibly and openly, the firm may have been able to grow further in recent years. As it is, the case of the botched product recall cost the company an estimated $35 million in the initial recall and a further $40 million in future lost sales. A heavy price to pay for an initial problem that was eventually traced to only 13 bottles, with concentrations of chemicals which would be harmless to humans.

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