The best negotiated contract ever
May 15, 2008 by Shane BorerPosted in: Bad investments, Special report, Whistleblowers
Imagine the bottom line improvement your company’d see if all its supplies and production materials were at rock-bottom prices. Better yet: Just “borrow” them from the state.
That’s what Nestle’s decided to do — it’ll be siphoning 1.47 million gallons of water per day from Florida’s Madison Blue Spring for its Deer Park bottled water line.
To be honest, it’s not outright theft, but thanks to some incredible bargaining skills by Nestle, the deal it’s struck is as close to highway robbery as a company can get. It won’t have to pay any taxes or fees on the water it takes out, aside from the $230 for a county permit. And that permit’s good until 2018.
How did this deal-of-the-century happen? The Suwannee River Water Management District fought Nestle tooth-and-claw for protection of the water source. Drought conditions are already affecting the Madison Blue Spring, but the District’s attempts to have Nestle’s permit either revoked or altered hit a wall once Nestle touted the benefits of letting them open a plant.
What did it promise? Money, of course. The Swiss-based company promised to invest over $100 million in the new plant over seven years and create 300 jobs for the area’s declining economy, but only if it was allowed to keep its dirt-cheap permit.
The state acquiesced, and the eco-friendly bottling plant was opened in Madison. So far, Nestle’s making good on most of its promises, but it still has a ways to go. The most people it’s ever employed was 250, but that number dropped to only 205 late last year. Even worse: 46 of those employees aren’t even from the Madison area — they’re from Georgia. But Nestle claims that’s common for a facility that’s within 50 miles of the state line.
As if the nearly free water weren’t incentive enough for Nestle to settle in, the state also approved a tax refund of up to $1.68 million for the bottling facility. So far, Nestle’s collected on $196,000 of that, and another refund is in the pipeline.
The government doesn’t technically charge for water — people are charged a delivery and processing fee on tap water, but that water itself doesn’t cost anything. And we normally wouldn’t condone one person or business being treated differently than another.
But there are two things about Nestle’s operation that we just can’t get around:
- Nestle’s taking its water from a already drought-stricken state park.
- It’s getting its water for free, then turning around and selling it right back to the entire Southeast. Nestle’s turning that $230 permit fee into … well, how many bottles of water have you had recently? You get the picture.
What’s the lesson here? Bargaining can be a company’s greatest ally. When all’s said and done, Nestle’s plant will reinvigorate the declining area’s economy. But because of some skillful negotiations, the company didn’t have to fork over nearly as much money up front.
Just one small favor to ask: Steer clear of the state parks. Mother Nature’s not as relaxing when there’s a bottling plant 30 yards from your favorite pond.
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Tags: Bottled water, Florida drought, Nestle, Tax refund
May 16th, 2008 at 3:29 pm
Well, well, well…..I guess about all that can be said here is; No where else but America! And one other thing I will no longer buy Nestle’s water that is for certain. I think companies should bargain but this is nothing but a ripoff to the people of Florida. If I had my guess I bet a bunch of state politians got a kick back from this one!
May 16th, 2008 at 4:05 pm
Do contracts mean anything anymore? And so much for accountability…. Here’s another suprise – Ice Mountain Water in Michigan is tapping into the local water supply practically at no cost as well. When checking out the their website, saw that they are affiliated with, guess who – Nestle! Looks like Nestle has found a nice little work around in the water bottling business. Not sure how the states will regulate taking of water but I’m sure they will find a way! Then those not using municipal water supplies will have to pay for use of their own wells. I foresee this becoming a much bigger issue…
May 17th, 2008 at 7:24 am
I see this all of the time, although it is usually small towns and rural counties which are strapped for cash.
In my home town, we have a glass-making facility which negotiated a tax break which will last the practical life-expectancy of the plant.
The County 10 years ago tried to do a similar deal with a huge egg-production facility which would generate tons of manure and oder (in a tourist area) raise millions of chickens within 20 miles of 3 of the largest turkey production plants in the country (chickens have a disease which is similar in danger to a cold–to chickens–but kills turkeys.) The county was to get a handful of minimum-wage jobs.
The county board was impressed that the company wanted to build a $5 million plant, saying “they’re spending that much money, they’ll do it right and be environmentally sound.” Except that the company has a long track record in Illinois of illegal waste dumping.
I suppose the State of Florida was similarly impressed with the $100 million promise, but I’ve yet to see a community come out of such a deal better than they went into it. But to Nestle, the $100 million is nothing. They will make at least $1 per gallon after expenses, so their return on investment is high enough that they can just walk away in less than a year and still make a profit.
The problem is that there is usually no contractual, enforcible contract to make certain that the company actually delivers.
I’m willing to bet that it will NOT revitalize the community, but will instead cost the area greatly in increased infrastructure repairs as the trucks tear up their roads–and the drought is not likely to end for good withing the next 10 years, and it will take at least 5 years after the rain returns to recharge the aquifer.
Add to that Nestle’s less than stellar record around the world….
The State would have been better advised to get a percentage.
And you’re wrong, “…we normally wouldn’t condone one person or business being treated differently than another.” It is one thing to use 10,000 cubic feet of potable water a month, locally, where it gets back to the local environment. It is an entirely different matter to EXPORT that water from your area.
This is why the Great Lakes are protected from transport of water outside of the drainage basin!
And pulling that much water from a drought area nearly insures that somewhere down the line the local people will pay the price–whether that be in higher water costs, lower water quality or in some other way. Effectively, this is a fascist action–the State demanding that resources which belong to the people be GIVEN to corporate entities. At the very least, Nestle should have been made to turn over stock to the State and local governments.
This is government at it’s worst.
June 3rd, 2008 at 2:24 pm
Why haven’t I seen this reported on the 6 o’clock news? Just when I think I can’t be shocked! I will never buy Nestle’s water, that’s for sure.