PARIS -- Source Perrier S.A. hopes to tap a spring of new growth in the United States.
Responding to the decline of the dollar and a near-saturated European market, the French bottler of Perrier sparkling mineral water is sinking major investments into new business activities in the United States.
Last January, Perrier bought 50 percent of Dairy Fresh Co., a large California cheese retailer, for an estimated $20 million. Perrier plans to use the firm as a vehicle to step up exports of Roquefort and other French cheese brands it owns.
And in June, the Paris-based company announced that its U.S. subsidiary had agreed to purchase BCI Arrowhead Drinking Water Co., the largest spring-water bottler in the United States, from Beatrice Cos. Inc., for a figure believed to be between $400 million and $500 million.
Though Perrier has not released financial details of either acquisition, analysts welcomed the diversification actions by its 72-year-old chairman, Gustave Leven.
"Perrier and its management had fallen out of favor the last couple of years as competing water brands like Badoit have taken off in France and England," said Susanna Hardy, a stock analyst with London broker James Capel & Co. "It looks like they're now getting out of the doldrums."
She was particularly enthusiastic about the Arrowhead acquisition, noting that Perrier has been a "dollar-sensitive" company because of its significant export activity to the United States. Arrowhead, she said, will offset the effects of the lower dollar on the parent company's bottom line.
In 1986, although Perrier's net earnings increased 13 percent over the previous year's to 250 million francs ($41.6 million), its profit margin was slim relative to total sales of 10.3 billion francs.
"Assuming they paid a fair price, the Arrowhead deal looks like a very positive move." Hardy said.
Leven, chairman of the company since 1946, declined to be interviewed. A company spokesman agreed to discuss corporate strategy on condition that his name not be used.
The Arrowhead purchase, which is subject to approval by American regulatory authorities, will double Perrier's U.S. sales to $460 million and make it by far the leading marketer of bottled spring water, with about one-third of the $1.4 billion U.S. market.
Projections for that market's growth sparked Perrier's commitment.
"We expect a 20 percent annual growth rate in the U.S. for bottled water over the next five years, which is much more than in Europe," the spokesman said. "It makes sense that a group like ours should take advantage of this opportunity."
In France, Perrier and its sister brands, Vichy, Contrexeville, Saint-Yorre and Volvic, hold an estimated 45 percent of the segmented bottled water market. However, per capita bottled-water consumption in France is the highest in the world, at about 70 liters a year, and as a result annual growth rates have slowed to less than 3 percent a year.
BCI Arrowhead, based in Monterey Park, Calif., produces Arrowhead, the best-selling bottled spring water in California, the Ozarka brand in Texas and Great Bear in New Jersey.
The spokesman said there could be "opportunities for rationalization" among Arrowhead units and four smaller U.S. spring-water companies purchased by Perrier in the past decade: Zephyr Hills in Florida, Poland Spring in Maine, Calistoga in California and Aasis Water Co. in Texas. However, he said all the brand names would be retained.
In contrast, Perrier's management is looking at its stake in Dairy Fresh as a kind of market research in its effort to rebuild sales of Roquefort cheese in the United States. Exports to the United States of sheep's-milk blue cheeses made in the Roquefort region of France range between 500 tons and 600 tons, about half the level consumed following World War II.
"The best way to learn about a market is to participate in a company that has contact with the consumer," the spokesman said. "Thanks to Dairy Fresh, the leading cheese retailer in California, we'll be able to learn the characteristics of the American market, which eats a lot of cheese, but in ways very different from the French market."
He noted, for example, that blue cheese is usually spread on nutbread in France, while it is crumbled into salad dressings by Americans.
Perrier is betting that, eventually, Americans will become more refined in their eating habits, he said, and when they do, Roquefort cheeses will be well positioned to make gains.
"In 1958, Americans knew nothing about wine, but now, 30 years later, it's clear that they have learned how to appreciate it," he said. "They can do the same with Roquefort, the king of cheese."
Perrier owns a 54 percent stake in Caves de Roquefort, a company accounting for 85 percent of the cheeses produced in the Roquefort region.
Meanwhile, Perrier's flagship product, Perrier Sparkling Water, continues to set sales records. Its fully integrated bottling plant in Vergeze produces close to 1 billion bottles of water a year, of which about 60 percent is exported.
U.S. sales of the little green bottle, shaped like a bowling pin, rose about 6 percent last year, to 250 million bottles. That increase is due largely to the market's reaction to fruit-flavored Perrier, introduced in late 1985.
Jacqueline Delage, an analyst with Banque Paribas, called Perrier's launch of the three-flavor line "a great success."
The new product line, in France called Zeste, was launched in April.
The Perrier spokesman projected a significant improvement in the company's overall performance in 1987, thanks in part to a 10 percent price increase in January on Perrier water sold in the United States. That price hike, the first in 10 years, has not affected sales, the spokesman said.