Visual China.
Blue Whale financial reporter Zhang Jinglun.
Recently, according to some ** investigation reports, a number of bottled water brands, including Nestle, have committed fraud, and the so-called "natural mineral water" actually uses the filtration process of tap water.
Nestlé Drinking Water has admitted to the allegation, saying that some waters such as Perrier and Vettel have been treated with ultraviolet and activated carbon filters "to guarantee food safety", and said that it had informed French authorities about the matter as early as 2021, according to the report. The company said it has lifted the processing that is not allowed in France and that all brands involved now meet the requirements of France.
In this regard, France** was questioned for a long time to know about the matter but secretly granted immunity. In February 2023, France** allowed the use of microfiltration purification technology, allowing the plant to continue operating, but this is not in line with EU law.
In response, Nestlé China responded: "Since the implementation of the transformation plan in 2021 under the supervision of the French ** agency, all bottled water products of Nestlé France Water now comply with the relevant regulatory requirements in France. The products we sell in China also comply with the requirements of relevant Chinese laws and regulations. ”
Why illegal production?
According to the official website, Nestle was founded in 1866 and is headquartered in Wey, Switzerland, and is a world-renowned food and beverage company. The products are sold in 186 countries and have more than 2,000 brands in the fields of infant nutrition, drinking water, coffee, confectionery and chocolate, pet food, dairy products and more.
Nestlé Water confirmed that it informed French authorities in 2021 that it used banned ultraviolet and activated carbon filtration treatments for some of its mineral water to maintain "its food safety". Nestlé mineral water claims that although the purpose of these treatments "has always been to guarantee food safety", they"Causing companies to neglect the issue of complying with regulations"。
The report cited a confidential document saying that Nestlé and other companies used less than 0 in bottled water labeled "spring water" or "natural mineral water".Microfiltration technology with 8 micron (m) threshold, ultraviolet light, and carbon active substances are treated.
Unlike tap water, mineral water must have a naturally high microbiological quality, and European regulations prohibit any disinfection of mineral water. According to the French National Agency for Food, Environment and Occupational Health and Safety (ANSES), bottled water labelled "spring" or "natural mineral water" should come from well-preserved groundwater resources, be very pure natural water, and must not be sterilized.
That is, according to the original standard, "natural water" must not use ultraviolet treatment and activated carbon filters. Nestlé Water has been using the devices until at least 2021, but the exact date of their discontinuation is unclear.
However, Nestlé said that while ensuring that it is safe to drink, Nestlé's natural mineral water has always ensured that the unique mineral composition of each brand of water is consistent with what is indicated on the label.
More importantly, why would Nestlé risk violating the law by adding an extra production process to natural water?
Muriel Lino, president of Nestlé Drinking Waters, said there was a need to "overcome the effects of climate change and rising water stress, which are partly affecting minerals in its waters", but that there were no bacteria or pesticide metabolites in the raw water.
However, the report cited classified documents that some of Nestlé Drinking Water's wells were suffering from recurrent or seasonal problems with coliform contamination, which was "due to fecal contamination", which was deliberately concealed.
Nestlé said that water from two springs in the Vosges Mountains marketed under the Hépar brand is no longer purified using the technology. Some of the springs in the south of France will now be marketed as flavored water under the new brand Maison Perrier**. For this product, Nestlé will no longer label the product as "natural mineral water", which makes it possible to process and treat the water using the above technology.
France** has known this for a long time
In addition to this, the local ** in France also questioned the cover-up and accommodating behavior of the French **. ** was reportedly aware of Nestlé's practices back in 2021 but did not take the case to court. Instead, the Directorate-General for the Inspectorate of Social Affairs (IGAS) was ordered to carry out an administrative investigation of all water packaging plants in France. The IGAS report was published in July 2022 and concluded that 30% of companies in the industry use such products. On February 22, 2023, after a ministerial meeting, it was said that ** decided to relax the rules through a local decree to allow the use of such filtration products.
One of the reasons for the decision was that Nestlé Water believed that thousands of jobs would be at risk if it closed operations at some of its plants in the Vosges Mountains and Garr, according to the report. In addition, France** has not yet informed the European Commission or Member States of this situation in accordance with Directive 2009-54-CE.
The Blue Whale reporter learned that the European Union's directive stipulates that without changing the basic composition, natural mineral water shall not be treated in any way except for the separation of unstable elements by filtration or decanting, the separation of iron, manganese and sulfur compounds and arsenic by ozone-rich air, and the elimination of free carbon dioxide by physical means.
So far, no health risks associated with the quality of bottled water in France have been identified. But Radio France quoted a scientific study as saying that "it would be imprudent to conclude that health risks are completely under control, especially microbiological ones".
Jiang Han told the Blue Whale financial reporter that whether there are health hazards needs to be judged according to the specific water quality situation. "UV and activated carbon filters are effective at removing bacteria, viruses and organics from water, but they cannot remove minerals and chemicals from water. If natural water contains excessive amounts of minerals or chemicals, it can be a health hazard, even after being treated with UV and activated carbon filters. ”
In fact, this is not the first time that drinking water in France has been exposed as a possible problem. As early as 2020, Evian mineral water, known as the "purest water", detected chlorothalonil, a residue of banned fungicides, at a concentration of about 6 nanograms per liter, according to a report by Huanqiu.com.
So is there a violation of Nestlé's bottled water production in China? A relevant person from Nestlé China replied that the products we sell in China comply with the requirements of relevant Chinese laws and regulations.
Zhu Danpeng, vice president of the Guangdong Provincial Food Safety and Security Promotion Association and food industry analyst, pointed out that the "GB 19304 National Food Safety Standard Hygienic Specification for the Production of Packaged Drinking Water" stipulates that products that use groundwater as the source water for production are only allowed to pass through limited treatment methods such as degassing, aeration, decanting, filtration, ozonation or ultraviolet disinfection and sterilization process, without changing the basic physical and chemical characteristics of water. The water source shall be set up with different levels of health protection areas of Class I, II and III.
In other words, according to China's food safety standards, natural water can be treated appropriately without changing the basic physicochemical characteristics of water.
Focus on high-end water business
According to Nestlé's financial report for the first three quarters of 2023, the company's total sales in the first three quarters of 2023 were CHF 68.8 billion, with an organic growth rate of 78%, but the real internal growth rate was negative 06%。However, Nestlé's sales in Greater China were CHF 3.6 billion, down 57%, in recent years, in addition to the mass daily consumption, Nestle is also constantly improving the layout of high-end products. According to the data, Nestle's high-end products now account for 26% of total sales, more than double that of a decade ago.
The reason why Nestle vigorously deploys high-end markets in various fields is, on the one hand, because high-end products can indeed bring higher profits. On the other hand, the growth of high-end products seems to be more pronounced than that of mass products. Taking Nestle's drinking water as an example, Dongxing** research report shows that ordinary bottled water is priced between 1 and 3 yuan, and the average profit margin is only 385%, while high-end bottled water has a gross profit margin 6-7 times that of ordinary bottled water. Previously, Nestlé's water business was generally flat, but high-end water achieved 8%-9% growth globally.
As early as August 2020, Nestlé China stripped off the low-end "baggage" and then focused on the high-end water market. Nestlé will transfer its Huashui business to Tsingtao Brewery Group. The transaction includes local brands "Dashan", "Yunnan Mountain Spring", and Nestlé's three water business plants in Kunming, Shanghai and Tianjin. Under the license agreement, Tsingtao Brewery Group will manufacture and sell the Nestlé Youhuo brand in China. Nestlé continues to focus on iconic international brands and well-known premium mineral water brands (including Perrier, San Pellegrino and Puna).
Schneider, CEO of Nestlé, explains, "Nestlé has also benefited from the new strategy to ensure that the category returns to high growth in the future. And high-end and functional products are the best opportunities for Nestlé."