Thinking from an Environmental Standpoint Companywide with Nestlé Waters’ Kim Jeffery

October 24, 2011

JOHN SHEGERIAN: Welcome back to Green is Good, and we’re so honored to have today with us on the line Kim Jeffery, the President and CEO of Nestle Waters of North America. Welcome to Green is Good, Kim Jeffery. KIM JEFFERY: Thank you very much. JOHN SHEGERIAN: You know, Kim, you are truly, in the best of senses, a green leader from way back when, and you have a fascinating biography and what you’ve done, in terms of your leadership of Nestle Waters of North America and everything you’ve done in the green space, can you share a little bit, before we get going to talk more specifically about Nestle Waters North America, can you share your journey? How did you even come to this place, and what have been some of your inspirations and your landmark things that you’ve done along the way? KIM JEFFERY: Well, John, I was recruited to this company 33 years ago, and it was very, very small then. We had 30 employees, about $20 million in revenue. We were established in the U.S. just to market and distribute the Perrier brand, and we were hired by a group of folks in France that really were the fathers of the bottled water industry in France, wanting to establish a market for their products in the United States. In 1980, we purchased our first domestic brand. It was the Poland Spring brand, which was essentially bankrupt at the time up in Maine, and we bought another small business in California, the Cal Soda Mineralized Company, at approximately the same time. You know, we were very young guys running the company. We believed there would be a market for bottled water in the future. We believed that it would be domestically-driven, not from the imported brands, and so we started acquiring what I call these landmark spring brands that had real heritage to them, that people may have forgotten a little bit about, but were big brands. Four of the six brands we own are over 100 years old, and the category was about $250 million annually when I started; it’s probably closer to $11 billion today, and it’s come a very long way. The things we’ve done over the years have really been largely responsible for the evolution of that category, and it really began with owning the heritage brands, Poland Spring, Deer Park, Arrowhead from California, Ozarka. All four of these brands are over 100 years old, and they really formed the foundation of what we’ve been able to do over the years. JOHN SHEGERIAN: You’re a very humble guy because I also wanted to share with our listeners, you also won the Beverage Forum Lifetime Achievement Award in 2007, you sit on the Boards of Keep America Beautiful and also the American Beverage Association, and also you’ve created a long partnership and way before it was cool to be green, with the Nature Conservancy, so you’ve really been into this space of green and the sustainability evolution and the green revolution long before, Kim, it was cool to do so. KIM JEFFERY: Well, you know, certainly before we had a lot of pressure on us, but, you know, it goes back to the first business we bought, Poland Spring. That business came with kind of a broken down old factory, about 30 employees and 450 acres of watershed land that protected the spring, and you realize from the very first day that the future success of that business is totally dependent on managing the resource for quality and sustainability. We became environmental stewards the day we bought that business, and of course it’s expanded now to where we own 14,000 acres of land, all watershed land, protecting our spring sites around the country, and we manage that land for sustainable harvesting the spring water with a team of 10 geologists, so it’s really in our DNA to think from an environmental standpoint first. As time has gone by and society’s expectations of all of us have grown, I’ve grown along with it, and have branched out into some other areas of interest that have to do with sustainable management of our resources. JOHN SHEGERIAN: For our listeners out there, I just want to direct them to your amazing website because Mike and I are on it now with our laptop and our iPad. For our listeners, if you have your laptop, iPad, or any other type of device where you can view, go online, please go to Kim’s amazing website, nestlewatersnorthamerica.com. It’s just full of tremendous information about all the great brands they have under their umbrella and also everything they’re doing with regards to sustainability. Kim, talk a little bit about what does sustainability mean to Nestle Waters North America? Like you said, it was an evolution when you started the process. How have you evolved over the years with regards to the different directions you’ve taken, sustainability, with regards to all your amazing brands? KIM JEFFERY: Well, I think the first thing you think about is what’s inside your own four walls that you’re capable of controlling and making better. Where it might begin with the fact that we own 400 acres of watershed land in Maine, it then grew into thinking holistically about all the things that we do. I would define the journey this way. We, in 2002, built our first LEED-certified manufacturing facility. We now have 10 facilities that are LEED-certified, and nine of them are either silver or gold. When we first built our first certified plant in 2002, they didn’t even have classifications of silver and gold. We now have 3.7 million square feet of LEED-certified space under management. The mapping of our carbon footprint, the recycling of all the natural resources in our plants, so that we can use them again. We’ve learned a lot about how to reduce our impacts. One great example would be over the last six years or so, we’ve reduced the weight of our packaging by 40%. When we mapped our carbon footprint for the first time, we realized that 50% of our carbon footprint is in the bottle. We make all of our own packaging, so we lightweight our packaging by 40%, and it’s 50% of your carbon footprint, you get a real 20% absolute reduction in your total carbon. We’ve learned these things over the years, and it just kind of feeds on itself. You start recycling in your facilities, you build LEED-certified manufacturing plants, you reduce your carbon footprint. Interestingly, though, at the end of the day, you come to a place, “Look, there’s still more things we can do in our own manufacturing facilities.” We’ve got 28 plants in North America, but for the last few years I’ve been thinking beyond our own four walls to what happens after we sell our product, and where does this material go, and how do we get it back and use it again. It’s an evolutionary process, where you never run out of things to do, and you keep expanding the universe of things that you see are opportunities. JOHN SHEGERIAN: One of the things, also, in terms of milestones that you’ve hit recently, I understand with regards to electronic waste called e-waste in the industry, what has your great brand done with regards to e-waste? KIM JEFFERY: Well, you know, we have a great culture here, and sometimes without me even knowing it, things happen because we’re all kind of on the same page here. Our head of our information technology, Dave Colville, got us certified as an E-Steward Certified recycler, which ensures that we handle all of our e-waste in an environmentally responsible way, for items from laptops to cell phones, printers, servers, keyboards, even mice. E-Steward certification also provides standards for the proper disposal of all this stuff, so it ensures a commitment to global social accountability standards. We’re planning a companywide policy of reducing even the resources we use, from paper to energy. We just moved to a new headquarters a year ago. We centralized printers, reduced printers in the building. We’ve managed to have a 40% reduction in our use of paper this last year, just based on doing some simple things when we moved our headquarters. JOHN SHEGERIAN: That’s so interesting. You know, Kim, I’m 48 years old, and I’ve grown up watching the advent of the bottled water industry and the evolution of it, and we all enjoy drinking all the great brands that you have. Whether you own them or whether you distribute them, you’re clearly the leader, Nestle Waters North America. Talk a little bit about the controversy that goes on a little bit with regards to tap water, the bottled water industry. How do you come out, in terms of handling the critics, when they start talking about tap water versus water? You’ve done not only a brilliant job handling the critics, but you’ve shown at the top of the show you’ve grown your amazing brand, and now you have so many brands underneath your umbrella. How does that all work out? KIM JEFFERY: Well, it’s interesting. Five years ago, we were considered the antidote for obesity in America, and then all of a sudden, one day, a switch flipped, and somebody said, “Who, you’ve got a bottle. What’s happening with that bottle? You shouldn’t have a bottle. Tap water doesn’t have to have a bottle. Tap water is just as good.” Our attitude on this is we’re agnostic on water. We believe people should be drinking more of it. The fact is some people have tried to pit us against tap water as a competitor, but I can give you the statistics on this. Per capita consumption of carbonated soft drinks 10 years ago was 54 gallons per capita. Think about that for a minute. Every man, woman, and child consuming 54 gallons of carbonated soft drinks a year. Today it’s 44 gallons. Over that 10-year period, our per capita consumption has gone from 16 gallons of bottled water to 24 gallons of bottled water. That’s almost a one-for-one conversion from carbonated soft drinks to bottled water, which proves that our competitor is not tap water. People may be drinking more tap water, but they’re drinking a lot more bottled water and they’re drinking less carbonated soft drinks. So, you know, our attitude is with 50% of adults going to be obese by 2030, we represent a real option for people to have. If you want to drink tap water, that’s fine, but why shouldn’t people have the opportunity to drink bottled water also? The other thing I would say is that 70% of what we drink as Americans comes in packaging, either Tetra Pak or cans or glass bottles or plastic. Bottled water has by far the lightest carbon footprint of any packaged beverage. When I see people saying, “We shouldn’t be drinking bottled water, but we have Gatorade that’s in a container three times as heavy as one of ours and uses three gallons of water to make a gallon of product,” I don’t get it. What we try to do is take the high road on this stuff. People are going to make their own decisions what they want to drink, but they should know this. Bottled water has the lightest carbon footprint of any packaged beverage in America. JOHN SHEGERIAN: That’s so great. That is such an important message. What also was fascinating was the one-to-one conversion from carbonated to water. That is such an important piece of information, and I’m so glad you brought that up. For our listeners out there, if you’ve just tuned in to Green is Good, we’re so honored to have the boss himself, the President and CEO, Kim Jeffery of Nestle Waters North America. You can go look at their great website, nestlewatersnorthamerica.com. Kim, talk a little bit about obviously, over your leadership period at Nestle Waters and 33 years there, sustainability has grown to be part of the culture. Talk a little bit about what you’re doing with regards to recycling and recycling in public spaces in the United States. KIM JEFFERY: Well, first of all, we set a very aggressive goal for ourselves as part of our first citizenship report. We set goals for ourselves on various aspects of sustainability, and recycling has to be one of them because we do produce a lot of packaging each year. We know that only 30% of beverage containers are being recycled today, and it’s an issue. So we set a goal of recycling 60% of beverage containers by 2018. We put a big goal and a big target for ourselves out there. Frankly, as I started to redo that target and look at where we were and what we could feasibly do ourselves, I realized that we couldn’t get there unless we rethink recycling, not just for beverage containers, but that we think recycling across the country for lots of streams of material. We lack the infrastructure to collect more than 30% of our bottles today, and beverage containers only represent about 50% of the PET packaging that’s out there. We have a huge job on our hands. We don’t have federal money. Not one nickel of the stimulus package was earmarked for recycling infrastructure in America three years ago, so we have this real societal issue of getting this material back and being able to use it again. We don’t have federal money, we don’t have state money, we don’t have local money, and I’m a little bit alone in this, but I’ve come to the conclusion that people like myself have to get involved and take responsibility for the close consumer handling of these materials by helping to build the infrastructure through something I call extended producer responsibility, which means that people like me would actually be responsible for being part of the solution to get this material back. It would require all of us to pay into a fund that can be used to build recycling infrastructure. It would be a small fee that we’d probably put onto the end of our product that would be earmarked for infrastructure. We want to use recycled content in our products. We’re using it in two of our brands today. We’re going to be using it in more, but the reality is that there’s not enough recycled content PET out there, and what’s out there is expensive, and it’s expensive because we have more demand for it today than we have ability to get this material back. I see a big green opportunity for jobs, for reusing this material, but we have to begin at the beginning, and that is we have to build a system that allows us to get this material back across the country. JOHN SHEGERIAN: What would that look like, and how does your vision of EPR compare against our already existing bottle bills in 11 states right now? KIM JEFFERY: I would never say that bottle bills don’t work. They do work, but they only work for beverage containers. Let’s just think about high-density polyethylene containers as another plastic material. Every detergent bottle is high-density polyethylene. Every gallon milk container is high-density polyethylene. Some of our household products are high-density polyethylene. Only 30% of those are being returned today, and you can’t just tack them onto a bottle bill because the take back mechanism in these bottle bills is the grocery retailer. He’s not going to be taking back printed paper, which we need to get back. He’s not going to be taking back every mayonnaise bottle that’s made of PET. He’s not going to be taking Tide’s laundry detergent back, so my view is that for beverage containers, we need a totally built out away from home recycling infrastructure. Today we only have public space recycling availability in 13% of the United States locations that could have recycling containers in them. In curbside recycling, only 50% of Americans really have access to good curbside recycling, and 50% of those people don’t use it regularly, which means we have an infrastructure problem and an education problem. We need robust curbside recycling in all of our residential areas in the United States, all of our commercial areas, and we need away from home recycling infrastructure in those places where people are consuming beverages and other foods on the go. Bottle bills are great for getting soft drink containers back, but they’re not good for getting anything else back. I was in Toronto last January, and 20 years ago, they started recycling three streams of material. Today they’re up to 30 streams of material that have value, that create a municipal recycling system that basically has zero waste. It’s all being used again. A bottle bill can’t do that for you, so we think of extended producer responsibility as being a better bottle bill, and covering more materials. That’s what I’m advocating for. If you’ve got a bottle bill today, fine, keep it. But to me, that’s not a 21st century recycling solution. Bottle bills are really put in place to reduce litter. It was before we were even thinking about using this material again to make a bottle out of it. I’m going to build a recycled PET facility in the Northeast next year that will turn 80 million pounds of beverage bottles back into virgin resin to be beverage bottles again. I think that’s what we should be doing. JOHN SHEGERIAN: Will that be the first of its type? KIM JEFFERY: No, there are many of them around the country today, but there’s not enough of them. As I said earlier, we’re interested in using recycled content. I think the best way to show that we’re serious about extended producer responsibility and getting this material back is to be involved in the manufacturing of recycling PET bottles into virgin resin again. JOHN SHEGERIAN: So the whole cradle-to-cradle concept is what you do? KIM JEFFERY: Exactly. Cradle-to-cradle. The real meaning of cradle-to-cradle. This material, when it’s turned into a polymer, can be used forever. We should not be throwing this material away. And besides that, it’s worth 47 cents a pound on today’s open market. JOHN SHEGERIAN: Wow. Just for our listeners, what’s so amazing about what you’ve done with the company, Kim, is the brands that you actually have under your umbrella. I just want to throw a couple names out there – Arrowhead, Deer Park, Ice Mountain, Ozarka, Poland Springs. Then you also represent Acqua Panna, Perrier, San Pellegrino. These are the landmark iconic brands of the bottled water industry. KIM JEFFERY: Well, the company actually owns San Pellegrino, Perrier, and Acqua Panna, and then we have another brand called Nestle Pure Life, which is now the largest brand in the United States, so we end up with about a 40% share of the packaged water business. Perhaps the most amazing thing is that we started out at zero. JOHN SHEGERIAN: It’s really such a great story. Now you’ve been there, and you’ve done such a tremendous job in your stewardship of the brand and all the brands tucked underneath the Nestle Waters North America Brand. Kim, what does the future look like? What does the future look like, both for Nestle Waters North America and also for the bottled water industry? Is there going to be continual erosion of the carbonated beverage industry with the continuing growth of the bottled water industry? Where do you want to take the future? KIM JEFFERY: Well, Nestle bought this company 20 years ago, and I came along with the acquisition. They asked me to stay, which I have done for the last 20 years. They bought this company because it’s in the sweet spot of health and wellness. It’s arguably the product that Nestle sells with the most relevance in the health and wellness area, so the believe in the category long-term. I very much believe in the category long-term. We still consume way too many calories from sweetened beverages today in our society. There’s definitely a move to consume less. We’re in the middle of that switch that consumers are making today, and so I’m very bullish on the category long-term in the United States. I just believe that per capita consumption of the bottled water category could very well in the next 25 years be where soft drinks are today, and they could be where we are today. JOHN SHEGERIAN: Wow. Kim, there are a lot of people that listen to this show, a lot of young people, graduate students, college students, teenagers, and they listen on the iTunes network or wherever they are. That’s the fun part of the world now in terms of the democratization of information. They’re going to listen to you and get inspired, and they’re going to want to know how can they be the next Kim Jeffery. Looking backwards now from where you sit, what’s your message to the youth, not only in America, because we have listeners from Shanghai to Dubai and Mumbai because we track our listeners on the Apple network after it airs on the Clear Channel network. What’s your advice looking backward to the next generation of leadership, both in the green and also with regards to business? KIM JEFFERY: Well, my career path is a little bit unusual because I started out working at Kraft Foods for four years, and then I worked at Pepsi-Cola for four years, and I joined this company intentionally because it was small and entrepreneurial. It was a great place for me to be. Then in 1992, Nestle purchased the company, and all of a sudden I was being purchased by the largest food company in the world and being asked to stay and work there. I’ve got two things to say. First is that I’m here at Nestle for 20 years because I believe in the culture and the values of the company. They’re very honest, honorable, good people to work for trying to do the right thing. Big companies oftentimes get maligned for perceived things that they don’t do. I can tell you from sitting on the inside, this is a great company. The second thing is that I believe people have to find a passion for what they want to do. I’ve had kids come and tell me they want to make a lot of money. I think that’s totally the wrong attitude. I think if you have passion and commitment and really work hard at something you love, chances are you’re going to get very good at it and probably get rich along the way. But you have to start with what you’re thinking about the end being in mind, and I think you get huge amounts of capacity out of people if they like what they’re doing and they like who they’re doing it for. So I think this whole notion of passion, commitment, trust in the people that you work with and for is critical in having a successful business career. JOHN SHEGERIAN: You know, Kim, that is so well put, and I just want to say from Mike and I and from all our listeners, we truly need more leaders like you, not only here in the United States, but around the world. The world would be a better place. You’re doing such great things, and it was just such an honor to have you on Green is Good today. You’re a visionary leader and a sustainability champion, and truly living proof that green is good.