Nestle(US:NSRGY) 2 1 Shi Ji Jing Ji Bao Dao·2025-05-21 13:15Core Viewpoint - The investigation report by the French Senate revealed that Nestlé, the producer of Perrier, engaged in consumer fraud and that French government agencies failed to regulate the company properly, potentially covering up water source contamination issues [1][2]. Group 1: Investigation Findings - The report indicated that Nestlé's facilities in France had been illegally treating contaminated water since at least 2020, using methods intended for tap water, which posed health risks due to the presence of harmful bacteria [1]. - The Senate committee was established in late 2024 following media reports on the scandal, and the findings were described as "explosive" and "shocking" [1]. - Nestlé had proposed a plan to the French government in 2021 to modify its operations, including using fine microfiltration for some water sources to maintain the "natural mineral water" label [1]. Group 2: Financial Performance - In the first quarter of 2025, Nestlé's water business revenue grew by 1.6% year-on-year to 809 million Swiss francs (approximately 7.064 billion RMB), accounting for only 3.5% of total revenue [8]. - In 2024, the water business revenue declined by 1.0% to 3.18 billion Swiss francs (approximately 27.769 billion RMB), maintaining a 3.5% share of total revenue [9]. - The Chinese market saw a significant drop, with water business sales at 38 million Swiss francs (approximately 332 million RMB) in 2024, down from 46 million Swiss francs in 2023, representing only 0.8% of total sales [10]. Group 3: Market Dynamics - The overall bottled water market in China is contracting, with major competitors like Nongfu Spring and China Resources Beverages also reporting declines in revenue [11]. - The high-end water segment is experiencing a more pronounced decline, with offline sales dropping by 16% in 2024 [13]. - Price competition has intensified, with Perrier's 330ml product price dropping to around 5.9 RMB, significantly lower than its previous premium pricing [14]. Group 4: Brand Impact and Management Changes - The scandal may have a more significant impact on the Perrier brand rather than on Nestlé's overall sales, as there is a brand distinction within the company [15][16]. - Nestlé China is undergoing a leadership transition, with a new market head appointed to address growth challenges in the region [17][18]. - The company is focusing on strategic adjustments, including a restructuring of its market divisions and an emphasis on operational efficiency and marketing investments [21][22].