Problems at Perrier

Case study: Problems at Perrier
Perrier may well be the iconic brand in the world of mineral waters. However, regardless of the profile of the brand, the company that produces the bottled sparkling mineral water is having a tough time. It is the focus of what one commentator describes as “a vicious struggle underway for the soul of the business.
The origins of the Perrier company can be traced to 1898 when a local doctor, Louis-Eugene Perrier, bought the mineral water source near Vergeze, France. The company grew steadily but demand really escalated in the late 1980s when it became highly fashionable and championed by a range of admirers including Wall Street yuppies. At its peak (1989), Perrier sold 1.2 billion bottles (830 million in 2003), almost half to consumers in the United States.
The boom years were good for the Perrier workers. Buoyant profits were associated with regular pay rises, social benefits, and extra holidays. However, in 1990, the finding of a minute trace of benzene in a bottle led to the collapse of U.S. sales. By 1992, annual output had halved and the company was close to bankruptcy. At this point it was bought for $2.7 billion by Nestle, the world’s largest food company. Attracted by the combination of bottled water as a fast-growing business and the world’s best known mineral water brand, Nestle identified Perrier as an attractive takeover target.
However, Perrier struggles to turn a profit. In 2003 its pretax profit margin on $300 million sales was only 0.6% compared with 10.4% for the Nestle Waters division overall. In 2004 it again recorded a loss.
The Perrier factory is on a 234-acre site on the Mediterranean coastal plain near Nimes. The factory itself is rather nondescript, so much so that “from a distance it could be mistaken for a power station or auto plant.” Perrier employees work a 35-hour week and earn an average annual salary of $32,000 which is good for this part of France and relatively high for this industry. However, the average Perrier worker produces only 600,000 bottles a year, compared with 1.1 million bottles at Nestlé’s two other international French mineral-water brands (Vittel and Contrex).
Relations between management and workers are not good. Almost all (93 percent) of Perrier’s 1,650 workers belong to the CGT, a union that is viewed by the management as consistently resisting Nestlé’s attempts to improve Perrier’s financial performance. According to Nestle 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.”
Jean-Paul Franc, head of the CGT at Perrier, sees the situation differently. In regard to the company’s plan to cut 15 percent 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 gas stored below this ground belong to the whole region.”
When, in 2004, Danone launched a new product (Badoit Rouge) that was designed to directly compete with Perrier’s new super-bubbly brand, Eau de Perrier, Perrier’s management put bottles of Badoit Rouge in the factory cafeteria. This had been done to emphasize the point to Perrier employees that they were involved in a head-to-head battle for that niche in the market. However, this act was not well received.
“It 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.
Background
Adapted from: Palmer, I., Dunford, R. and Akin, G (2006) Managing organizational change: A multiple perspectives approach
Your Task

1. Identify the key elements of the resistance to change described in this scenario
2. Construct a change management strategy for dealing with this situation. In doing so, identify what approaches to managing resistance you would recommend and provide a justification for your choice.

Guidelines: Submit your answers to the question above as a text entry. As a guideline, your text entry should be approximately 200-300 words.

Must reference from the below required reading:
Required Reading: Hodges: Chapter 2 and Chapter 3
Required Reading: Cameron and Green: Chapter 1
LINK: https://online.vitalsource.com/

Hodges, J. (2021) Managing and leading people through organizational change: Chapter 2 and 3
LINK: https://online.vitalsource.com/reader/books/9781789667981/epubcfi/6/2[%3Bvnd.vst.idref%3Dcover_Ebook_cover_RGB_xhtml]!/4/2[cover]/2/2%4051:2
Cameron, E. and Green, M. (2020) Making sense of change management: Chapters 1
Link:
https://online.vitalsource.com/reader/books/9780749496982/epubcfi/6/2[%3Bvnd.vst.idref%3Dcover]!/4/2[cover]/2/2%4090:34
Erwin, D.G. and Garman, A.N. (2010) Resistance to organizational change: linking research and practice, Leadership & Organization Development Journal, 31: 39 – 56 (Attached as a file)
Note to students: Both books above provide an in-depth discussion of the individual and emotions. Chapter 3 in Hodges presents a useful discussion of how individuals make sense of change with a focus on how change affects the psychological contract, stages of adjusting to change and resistance. Chapter 1 in the Cameron and Green book also focus on the individual, with some notable differences. Suggest that you look at reframing, pattern breaking and anchoring and resource states under the techniques for change; also the Weinberg (1997) critical points in the change process framework on pages 36-37 and the discussion on resistance towards the end of the chapter.
Chapter 2 in Hodges provides a useful discussion on the role of emotions during change – this is an important though frequently overlooked area. The sections on types of emotions during change, their impact on work performance, supressing and expressing emotions, and emotional intelligence are quite informative. In essence, emotions can be a useful type of data that can be used as evidence and feedback during the change process.

Task 2: in continuation

Keeping the same chapters in mind and below topics, This week, we would like you to share your reflections with your reflective activity in no more than 300 words. Your reflection can be brief – no more than one page in length and it will be confidential.

You will have to do this ONLY for this week’s reflective activity to gain some feedback on it.
For your reflection activity this week, consider a recent experience that involved either one or more experiences around individuals, emotions, or managing resistance and motivating for change. You may have had one or all of these experiences recently, but you only need to reflect on one of them for this task. The reflective activity need not be long, the suggested length is no more than one page using a word document though it could be less than that.
As a reminder, the areas for your reflection are:
What happened?

Thoughts?

Feelings?

Typical action tendencies?

Implications for development?