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CASE STUDY CHANGE MANAGEMENTPerrier may well be the iconic brand in the world of mineral waters. However, regardless ofthe profile of the brand, the company that produces the bottled sparkling mineral water ishaving tough time. It is the focus what one commentator describes as “a vicious struggleunderway for soul of the business.”The company that was formed in 1898 bought a mineral water source near Vergeze, France.Demand escalated in the late 1980s when it became highly fashionable and championed by arange of admirers including Wall Street yuppies. At its peak (1989) Perrier sold 1.2 billionbottles down to 830 million in 2003, almost half to consumers in the United States.However in 1990, the finding of minute trace of benzene (an oil particle) in the bottle led tothe collapse of US sale. By 1992 the company was close to a bankruptcy. Nestle boughtPerrier for $1.2 billion attracted by the combination of bottled water as fast-growing businessand world’s best known mineral water brand. However Perrier struggles to turn a profit. In2003 its pretax profit margin on $300 million of sales was only 0.6% compared with 10.4%for Nestle’s Water division overall. In 2004 it again recorded loss.The Perrier factory is on 234-acre site on the Mediterranean coastal plain near Nimes whichis nondescript and from distance can be mistakenly identified as power station or auto plan.Perrier employees work a 35-hour week and earn an average annual salary of $32,000 whichis relatively high for this industry. However average worker produces only 600,000 bottles ayear, compared with 1.1 million bottles of Nestle’s two other international French mineral-water brands (Vittel and Contrex).Relations between management and workers are not good. Almost all (93%) of Perrier’s1,650 workers belong to the CGT, a union that is viewed by the management as consistentlyresisting Nestle’s attempts to improve Perrier’s financial performance. According to Nestle’sCEO Peter Brabeck-Lethmathe, “We have come to the point where the development of thePerrier brand is endangered by the stubbornness of the CGT.”Jean-Paul Franc, head of the CGT at Perrier, sees the situation differently. In regard to thecompany’s plan to cut 15% of its workforce, he protests, “Nestle can’t do whatever it likes.”He says, “There are men and women who work here…morally speaking the water and the gasstored below this ground belong to the whole region.”
In 2004 Danone launched a new product (Badoit Rogue) that was designed to directlycompete with Parrier’s new super-bubbly brand, Eau de Perrier, Perrier’s management putbottles of Badoit Rogue in the factory cafeteria. This had been done to emphasize the point toPerrier employees that they were involved in a head-to-head battle for that niche in themarket. However, this act was not well received.