Nestle cuts investment in bottled water business

ZURICH, Feb 24 (Reuters) - Nestle NESN.VX is cutting investment in bottled water as it suffers from the economic downturn and environmental concerns, but will push the health benefits to help the business rebound, it said on Tuesday.

Chief Financial Officer Jim Singh told an investor roadshow webcast from London that Nestle had cut capital expenditure on its water business by 275 million Swiss francs ($236 million), or 26 percent, in 2008, and would trim further in 2009.

“Our focus is to defend and grow market share. We have a drive on cutting costs,” he said, adding that Nestle planned to trim its portfolio further. “2009 will be a year of stabilisation.”

Nestle, the world’s biggest bottler of water with brands including Perrier and Poland Spring, said last week its water business was the only one to record falling sales in 2008, down 1.6 percent on an underlying basis to 9.6 billion francs.

But Chief Executive Paul Bulcke said Nestle was not giving up on the business, noting that its Pure Life brand was still growing strongly and said the industry had to do more to improve its image and advertise the health benefits of water.

“I really believe this is a category that is going to grow because water is the best beverage around,” he said. “We want to be a very healthy alternative to other beverages.”

“Because of the intrinsic arguments for water we strongly believe this is a good category and it’s going to have growth again in the years to come,” he said.

Environmental groups have campaigned against bottled water, saying resources are wasted in bottling and transporting water which may be no safer or healthier than tap water, while selling for up to a thousand times the price.

But Bulcke said criticism of bottled water was irresponsible because it was pushing consumers towards high-calorie drinks.

Nestle shares, which rallied last week when it gave a relatively upbeat outlook for 2009, were down 0.6 percent at 38.44 Swiss francs at 1128 GMT, in line with the Dow Jones Stoxx European food and beverage index .SX3P. (Reporting by Katie Reid and Emma Thomasson; Editing by Rupert Winchester) ($1=1.165 Swiss Franc)