Video: Sweet Leaf 3 — How Nestle Made Its Move
January 11, 2012 by Jeffrey Klineman
Welcome to part three of our video replay of BevNET Live’s special “Building Sweet Leaf Up and Out” case study.
In this installment, William Pearson, the CFO of Nestle Waters North America, gives his view of the role that the acquisition of Sweet Leaf could play in the ongoing development of NWNA. While Sweet Leaf had already begun to work with private equity group Catterton Partners in an attempt to become a national brand, Pearson said, the larger company was not yet ready to pick up the entrepreneurial brand from Texas.
“We started talking about how do I take a very small company with a lot of potential, and a great brand, and develop it into a large brand while maintaining all that authenticity?” Pearson told the Santa Monica crowd. “It was obvious to me that a 100 percent purchase right out was not the way to do it.”
Instead, NWNA itself made a private equity investment in Sweet Leaf, acquiring 35 percent of the company in 2009. Over a three-year period, NWNA and Catterton slowly added to their stake, with the water company eventually purchasing all of Sweet Leaf in 2011.
The staged purchase was necessary in part because Nestle still had to prepare for the absorption of Sweet Leaf, and also because of the concerns that surround the ability of a smaller company to adapt to a larger company environment.
“In 2009, my assessment was that the company was not ready to be acquired by a tea company,” Pearson said, but Nestle wasn’t ready either, he said, adding, “We were a water company, not a tea company.”
In 2010, following the private equity placement, Sweet Leaf’s sales went from 11.5 million to $53 million. But Pearson bowed to Catterton and to Sweet Leaf founder Clayton Christopher, who had presented earlier, saying that the earlier steps that had been taken — in terms of building a brand with lots of potential and then creating a company that could be a national player — were what enabled that growth to occur.
“By the time we were invited in to talk, the groundwork was set for a good deal.”
To see Pearson’s speech and hear how NWNA was able to ensure that the deal took place with minimized risk, as well as how Sweet Leaf fits into its sales and distribution plans, watch the following:
Part four of this series will show the question-and-answer period that further explored the transaction.