A Town Torn Apart by Nestlé

How a deal for a bottled water plant set off neighbor against neighbor in struggling McCloud, Calif.

Officials in the old mill town of McCloud, Calif., figured a bottled water plant would bring good times. Instead, the deal they made set off a bitter, neighbor-against-neighbor feud Stan Kennedy

by Michelle Conlin

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Tucked into the foothills of Mount Shasta, the Northern California town of McCloud has no stoplights and one grocery store. A former logger's El Dorado, McCloud fell on hard times in the 1980s when it started running out of trees to cut down. But with its drop-dead panoramas and crisp, clean air, the burg started to limp back in the 1990s. Today it is a world-renowned paradise for trout anglers, a respite for burned-out boomers looking to escape the status race, and a hotbed of New Age seekers, some of whom jet in from Japan to meditate and chant in what they regard as a spiritual vortex.

It is here that Nestlé Waters North America (NWNA), a subsidiary of the Swiss food and beverage giant, plans to operate one of the largest spring-water bottling plants in the U.S. The 1 million-square-foot facility—picture five Wal-Mart (WMT) supercenters strung together—is to rise on the site of McCloud's defunct lumber mill, a 250-acre swath of land that bends around the base of the mountain. Nestlé aims to draw 1,250 gallons a minute of water from McCloud's glacier-fed springs. The company would then pack 300 semi-trailers a day full of Arrowhead brand water, truck it as far away as Los Angeles and Reno, and sell it at prices that are as much as 1,000 times more than the cost of tap water. In exchange, Nestlé has agreed to pay McCloud roughly $350,000 a year for the water and create up to 240 jobs in and around the town.

That contract was signed nearly five years ago. Nestlé had hoped to have the plant up and running by 2006. But the company has yet to break ground on the abandoned mill site.

Nestlé Waters has run into a wall of opposition, prompting it to delay construction and resubmit its environmental permit application. Since learning about the bottling plant, nearly half of McCloud's 1,300 residents have mobilized into a well-armed resistance force. Furious that their elected representatives inked the deal without consulting them and worried about the potential impact the plant could have on Mount Shasta's delicate local hydrology, they have ordered up studies, signed up wealthy backers, and lobbied politicians.

Nestlé, the largest bottled water company in America and purveyor of the Perrier, Poland Spring, and S. Pellegrino brands, has faced similar opposition in towns from Maine to Michigan. Time and again, it has used its clout and legal firepower to get the plants open. Nestlé is determined to prevail in McCloud, too. At a time when soda sales are soft, it hopes to improve on its 32% share of the U.S. bottled water market.

But this time the company seems to be taking its foes more seriously. "I want all the t's crossed, all the i's dotted," says Kim Jeffery, Nestlé Waters' CEO. "I don't want anyone to say we didn't do it right." It's not hard to see why Jeffery is proceeding cautiously. Amid rising concerns about the deteriorating condition of America's lakes, rivers, and springs, Congress late last year convened hearings about the potential threat posed by bottled spring water. Meanwhile, environmentalists say the stuff contributes to global warming because it takes oil to make the bottles and then truck them from source to supermarket. These critics have coalesced into the "tappening" movement, which is urging people to drink the water that comes out of your tap. Already, upscale restaurants are banning bottled water, while the mayors of San Francisco and New York are urging residents to use municipal supplies.

"WE NEEDED AN INSURANCE POLICY"

So far, Nestlé's foes in McCloud have managed to delay the plant, not kill it. But they have allied themselves with the international environmental movement and made their cause bigger than one town. "At some point you make enough people mad," says Debra Anderson, a fourth-generation McCloudite and real estate broker, whose understated and articulate manner makes her a powerful opponent. "