Primo Water announces retroactive tariff exemption, refill agreement in Mexico
Primo Water announced earlier this year it accelerated the rollout of cashless payment technology to its outdoor reverse-osmosis refill machines, committing to installing 6,000 units by December 31, 2018. Primo exceeded this target by several hundred units and is now entering phase II of the rollout to the remaining locations, which is anticipated to be completed by June 30. This technology not only brings more payment options to consumers but also brings real-time telemetry alerting. The devices enable consumers to choose from a variety of EMV-certified or chip-card payment methods. The system capabilities will also provide Primo the ability to remotely monitor its outdoor refill machines and ensure the machines are in continuous operation. Also, the Office of the U.S. Trade Representative recently granted product exemption from the Section 301 import tariffs on certain products manufactured in China, including Primo's full-size water dispensers. The exemption is retroactive back to the implementation date in July 2018 and will remain in effect through December. The exemption will allow Primo to work with its retailers to reduce the future on-shelf pricing. Primo believes the lower sales price can drive consumer demand of its water dispensers and generate future water households. Lastly, Primo entered into an agreement with a Mexican partner creating the framework for establishing a business in Mexico to sell reverse-osmosis water through indoor and outdoor self-service refill drinking water machines. Primo has been working over the past 18 months to solidify the framework and best approach to bring refill to Mexico. Once the agreements are fully negotiated and implemented, Primo will provide the expertise in refill through the license of certain of its intellectual property and know-how for the Mexico refill business and the supply of self-service refill drinking water machines. Primo will have the option to acquire the Mexico refill business upon the attainment of either certain financial milestones by the Mexico refill business or after six years.