Blog: Water under the bridge
Chris Brook-Carter | 29 June 2004
As the deadline approaches for reaching an agreement with unions for around 1,000 job cuts at Nestle's unprofitable Perrier plant in France, the company's threats to sell off the water brand look increasingly weak.
Speculation has mounted recently, that Nestle would look to sell the brand if it cannot settle the row with unions at the plant. Nestle set a deadline of tomorrow to resolve the matter.
In the Wall Street Journal Europe yesterday, a number of analysts suggested that Nestle would find selling the brand harder than it thinks.
Rene Weber, analyst at Bank Vontobel, told the newspaper that he is confident the two parties will eventually resolve the conflict. “I still believe there will be an agreement. The unions have to be aware that any other solution, such as a sale to a third party, could hurt even more,” he said.
Nestle can't simply close the plant, because of the power of French unions and the nature of the business - a mineral-water plant is dependent on a well and can't be moved, analyst Patrick Hasenboehler at Bank Sarasin told the journal.
Selling Perrier to a financial investor might be a possibility, Hasenboehler said. However, a protracted struggle is the most likely scenario, he added. “I think it's entirely possible that Nestle continues to muddle through until some sort of solution appears.”
Although Nestle has said that it is a priority to reach an agreement before the summer holidays, the company has indicated it may extend the deadline beyond tomorrow if there is progress in the negotiations.
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