Nestlé purchases Essentia Water, increases functional water portfolio

18 Mar 2021

Nestlé entered into an agreement in early March to acquire ionized alkaline water brand Essentia Water, which the Swiss company said was the No. 1 selling bottled water brand in the natural channel.

Founded in 1998 in Washington state, Essentia is one of the pioneers in the functional water space and has built a successful, widely-recognized brand. Although terms of the agreement were not disclosed, Essentia posted $192 million in sales for 2020, which is nearly double the company’s 2018 valuation of $100 million in revenue when it was relying on Credit Suisse to negotiate a sale of the brand. At the time, there were projections that bids for the brand would be in the range of $500 million.

Nestlé purchases Essentia Water, increases functional water portfolio
Photo credit: Essentia Water

By purchasing Essentia, Nestlé is stepping into the fast-growing market for functional water. According to Mordor Intelligence, the global functional water market is projected to grow at a compound annual growth rate of 7%, and big brands worldwide are vying to quench the thirst of consumers looking for more from their beverages than just hydration. From Coca-Cola to Keurig Dr Pepper, premium functional water is a category that is attracting heavy investment, and this recent purchase by Nestlé catapults the Swiss brand into the big leagues.

"With the addition of Essentia we continue to transform and best position our water business for long-term profitable growth here in the U.S. and globally," said Steve Presley, Chairman and CEO of Nestlé USA in a statement. 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."

While Nestlé is expanding its footprint in healthy hydration, the company is shedding brands in less profitable categories. Just last month, Nestlé sold its North American bottled water business for $4.3 billion to private equity. At the time of the sale, CEO Mark Schneider said the divestment will position the global waters business for long-term profitable growth by allowing Nestlé to focus on functional water as well as international premium brands, local natural mineral waters and high-quality healthy hydration products.

However, the company is not making room for growth only in its global waters business. Recently, Nestlé sold its U.S. ice cream business to Froneri, and in 2018, the company sold its U.S. chocolate business to Ferrero. These deals have put billions into Nestlé’s coffers, which the company has preceded to invest into high-growth areas such as meal delivery kit service Freshly, and the biopharmaceutical company Aimmune Therapeutics.

As the Swiss multinational continues to aggressively pursue growth, it will be no surprise to see the company invest further in the functional water space in order to court customers that are willing to spend the extra money to hydrate themselves with brands that are healthier than soda and juice and also promise additional benefits beyond what simple H2O provides.

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