Problems_at_Perrier

Problems at Perrier A militant French labor union, CGT (Confédération Générale du Travail aka General Confederation of Labour), representing 93 percent of the workers at Perrier’s mineral water plant in Vergèzy, France, has led the resistance to Nestlé S.A.’s efforts to reorganize its unprofitable Perrier mineral water plant. (Palmer, Dunford, & Akin, 2009) (Colorado State University-Global Campus, 2012). Nestlé, a Swiss company headquartered in Vevey, Switzerland, in 1992 acquired the nearly bankrupt Perrier after its benzene disaster of 1990. Even after the acquisition, Perrier continued to struggle, with 0.6 percent pretax profit margin on sales of $300 million in 2003, compared with 10.4 percent profit for the Nestlé Waters Division overall. (Palmer, Dunford, & Akin, 2009). According to Nestlé CEO Peter Brabeck-Letmathe, “We have come to the point where the development of the Perrier brand is endangered by the stubbornness of the CGT.” (Palmer, Dunford, & Akin, 2009). Between 1992 and 2000, Nestlé fought the CGT to cut 1,000 jobs while at the same time investing about $250 million to launch new brands. "From a technical point of view, we're in a good position," said Pierre Mineraud, Perrier's co-general manager in charge of production. The other half of the plant management team is human resources director André Sembelie, who has years of experience dealing with the CGT. He insists that the time for diplomacy is over: "The CGT says, 'Be charitable.' From my point of view that isn't the question. The main purpose of a private company isn't charity but profitability." (Tomlinson, 2004). When Perrier’s management put bottles of Badoit Rouge (which had just been launched by rival Danone to go head-to-head with Perrier's new super-bubbly brand, Eau de Perrier) in the factory cafeteria, the union’s reaction was that "[i]t was a provocation," recalls one Perrier truck driver. "We took the bottles and dumped them in front of the factory director's door, so he couldn't get into his office." "It was not a provocation," says Sembelie. "It was to make the union realize that there was a competitor under our nose." (Tomlinson, 2004) [Perrier employees] are, however, steeped in a left-wing tradition that goes back to the French Revolution, when their peasant ancestors sacked the local chateaux. The union's worldview is summed up by two pictures. The first is a cartoon in the CGT magazine, which depicts Brabeck-Letmathe as a cigar-chomping, top-hatted capitalist. The second is an oil painting in Franc's office showing a Perrier worker in overalls, one of the doughty sons of the local soil determined to defend their heritage. "Morally speaking," Jean-Paul Franc, head of the CGT at Perrier, says, "the water and the gas stored below this ground belong to the whole region." (Tomlinson, 2004). Nestlé’s real problem is worker productivity: the average Perrier worker produces only 600,000 bottles a year, compared with 1.1 million bottles per worker at Contrex and Vittel, Nestlé's two other international French mineral-water brands, where the CGT is weak. Put another way, it takes 22 workers to make a bottle of Perrier from beginning to end, compared with 12 at San Pellegrino, Nestlé's Italian mineral-water brand (Tomlinson, 2004). Then French Economics Minister (later President) Nicolas Sarkozy, himself a unionist as the former leader of the Union for a Popular Movement, declared that the Perrier dispute was damaging France's image with foreign companies. The union, under intense pressure from Sarkozy, ultimately lifted its veto on Nestlé's latest restructuring plan--its fourth since 1992. (Tomlinson, 2004). “This will allow Perrier to improve its industrial efficiency and for more than 300 people to retire,’ said Andre Sembelie, co-director of Perrier. He added that the signing of the restructuring plan should lift Nestlé’s threats to sell Perrier. (Gelnar & Passariello, 2005). Managing resistance to change is particularly difficult for an outside owner in a strongly unionized European organization, even if the owner is European from another country as here—a Swiss company trying to effect change in a French subsidiary. The most effective approach to this resistance, which ultimately succeeded, is a combination of “negotiation and agreement” and “explicit and implicit coercion” (Palmer, Dunford, & Akin, 2009). Kotter and Schlesinger’s methods for managing resistance to change suggest the context for negotiation and agreement is where “resistors are in a strong position to undermine the change,” the union in Perrier’s case, and finally the coercion of threatening to sell the company again “where survival of the organization is at risk if change does not occur quickly.” (Palmer, Dunford, & Akin, 2009) (Table 6.11) (Kotter & Schlesinger, 1979). References Colorado State University-Global Campus. (2012). MGT351-1 Modules 1-4. Gelnar, M., & Passariello, C. (2005, May 3). Nestle union deal on Perrier puts end to sale talk. Dow Jones Commodities News. Retrieved September 23, 2012, from Dow Jones Commodities News: http://business.highbeam.com/436101/article-1G1-132086139/focusnestle-union-deal-perrier-puts-end-sale-talk Kotter, J. P., & Schlesinger, L. A. (1979). Choosing strategies for change. Harvard Business Review, March-April. Palmer, I., Dunford, R., & Akin, G. (2009). Managing organizational change: A multiple perspectives approach (2d ed.). Boston, MA: McGraw Hill. Tomlinson, R. (2004, November 29). Troubled waters at Perrier: Nestlé, which owns the brand, and the French workers who bottle it are locked in a nasty fight. Fortune.