The bull-bear debate on Primo Brands

In Friday's e-mail, I took a look at the historical financials and valuation of bottled-water company Primo Brands (PRMB), which David Einhorn of Greenlight Capital added to his portfolio last quarter. I concluded:

Overall, this is a solid financial picture. It's a good – though not great – business, and all of the key metrics are trending in the right direction.

As for valuation, at around $21.62 as of writing this morning, the stock is trading at 16.5 times this year's consensus analysts' estimates and 14.5 times next year's. That's a modest – though not screaming cheap – multiple for a high-quality business like Primo Brands.

It's worth a closer look. So today, let's look at the bull-bear debate that took place on stock-idea website Value Investors Club...

Last November, when the stock was at $15.05, someone posting under the username "hollowcow" pitched Primo Brands (only members can view the full post). Since then, the stock has climbed 46% to close on Friday at $22.

When Primo Water merged with BlueTriton to form Primo Brands, it became the largest North American water pure play. As hollowcow notes, bottled water is a very attractive industry:

Water remains one of the most stable and steadily growing beverage categories. U.S. retail bottled water has grown ~6% [compound annual growth rate ("CAGR")] over 10 years, while the home and office delivery segment ("HOD") has delivered 1-3% volume and 3-5% revenue CAGR pre-merger.

The category is consolidated: roughly 75% of retail market share sits with PRMB, Coca-Cola, and PepsiCo... The direct delivery market is also effectively a duopoly, with PRMB holding majority share nationally. These dynamics create a powerful moat. Route-based delivery depends on local density: once established, it's hard to displace. A dissatisfied customer has few substitutes beyond tap water, filtration systems, or retail bottled water. The result is high retention, predictable revenue, and pricing power in line with [the Consumer Price Index] over time.

And he believes Primo Brands is well-positioned within this industry:

Primo is the leading bottled and delivered water platform in North America. Roughly 40% of revenue comes from direct delivery, ~48% from retail and club channels, and the remainder from exchange and refill. It owns regional spring brands such as Poland Spring, Arrowhead, and Deer Park, along with premium still brands like Mountain Valley and Saratoga. Its delivery network serves over 2 million home and office customers, supported by strong retail partnerships at Costco, Sam's Club, and major grocers.

The merger with BlueTriton in 2024 created a clear category leader with scale advantages in sourcing, logistics, and route density.

Hollowcow argues that after the merger, the company suffered from "a very public integration failure," which caused the stock to fall 58% from its March 2025 highs. But he thinks the market has it wrong in three areas:

1. "Structurally broken" delivery

The variant view is simple: the integration stumble was self-inflicted, optically worsened due to peak season timing, and most importantly, fixable... Service levels collapsed, churn spiked, customer credits (discounts) ballooned. This happens in many route-based mergers.

The recovery playbook is straightforward: rebuilding inventory buffers, re-block routes, re-staff call centers, and pace the remaining systems work. The company has done that... As route density rebuilds, while customer credits fade, margins will quickly accrete as revenue inflects back to growth. None of which is underwritten by buyside consensus.

2. Management turnover

After a tough integration and shareholder frustration, the CEO and [chief operating officer] are gone. That headline hurt sentiment, but the replacement CEO, industry veteran Eric Foss, is the right fit. Foss previously led Aramark and Pepsi Bottling Group, both large route and service-based organizations. He's equipped to stabilize operations and reestablish service credibility. Execution risk remains, but the leadership profile seems to nicely fit the problem set.

3. Sponsor overhang

BlueTriton was previously backed by One Rock Capital, whose fund remains the largest shareholder in the combined company. Private equity sponsor One Rock owns 31% of shares. The market treats that as a permanent overhang, but historical behavior says otherwise... By the time results improve, leverage should be below 3x, allowing the company to potentially offset sponsor supply through buybacks.

Hollowcow says the company has largely addressed its problems with several fixes:

• Rebuild inventory cushions to eliminate missed deliveries
• Re-block routes market by market to restore density
• Re-staff call centers to reduce churn and credits
• Stagger future integrations to avoid simultaneous disruptions
• Leverage club programs (Costco, Sam's [Club], BJ's) to refill the top of the funnel

The key is that these fixes are observable in the data. On-time and in-full delivery rates are back near historical norms, customer sentiment metrics have improved sequentially, and net customer losses are moderating. As depots stabilize, cost synergies begin to flow through.

Hollowcow concluded that since 2024:

Primo is larger, its cost opportunity is clearer, and its valuation is cheaper because the integration failed publicly. What remains is a fixable execution problem within a stable, recession-resilient category. If service continues to normalize and synergies flow through, a move back toward 10x [earnings before interest, taxes, depreciation, and amortization] puts the stock [at more than] $30 within a year.

Interestingly, hollowcow posted an "author exit recommendation" on July 6, with the stock at $25.15, because:

[Expectation] gaps have closed toward my own, the easy money has been made, and ~70% over ~6 months in a low-beta staple compels me to re-underwrite the risk/reward against my broader investment universe. I agree that there is near term juice around world cup driven premium water expansion and a possible HOD momentum surprise.

Now let's look at the bear case...

Just yesterday, someone with the username "symphony" on Value Investors Club pitched Primo Brands as a short (only members can view the full post).

Symphony believes that "the HOD business will see worsening unit economics and customer algorithm, and the retail segment of PRMB will see slower growth moving forward," specifically:

The HOD business' bull case consists of a return to growth following the merger disruption and route densification allowing for synergies/margin uplift. However, I think the HOD business is not great and faces challenges to its unit economics and customer algorithm...

[The] unit economics of the HOD business... are already suffering due to the Iran war leading to pressures on diesel prices as well as resin. However, I think that pricing will be limited as the service is already expensive and there are more tap water solutions available to consumers now. PRMB will have to resort to spending more (increased [customer acquisition cost]) to get more households onto the HOD service.

Some bulls claim HOD is a sticky business but with ~24% churn annually... and more challenges ahead, I think there are headwinds to customer retention and acquisition...

Symphony is also bearish on Primo's retail-water business, noting that:

Premium water, just like most beverage categories, is becoming an increasingly more competitive space with lots of ankle-biters and established players:

Symphony concludes, "I think the upside is largely capped with HOD very unlikely to surprise" and the "premium water story for PRMB is well understood and running out of juice."

One of my readers, Audrey S., also has a negative view of the company:

I wouldn't touch the stock with a 10-foot pole.

We have well water, so we need to "import" our drinking water. And because my husband and I are seniors and can no longer lug heavy bottles of water from the supermarket to our home, we are delivery customers.

Primo's service is deplorable, at best. Ever since Nestle divested itself of Poland Springs, the service has gone downhill – it's not reliable at all. And the ordering process on their website can be difficult, sometimes not working altogether. I have frequently had to call to arrange for proper delivery. Also, delivery charges are exorbitant so I try to order large orders much less frequently.

We would switch to a different distributor, but that one also has a poor reputation.

Thank you to hollowcow, symphony, and Audrey for your insights. I think both sides make good arguments.

Forced to go long or short this stock, I'd go long – but not with much conviction. In light of the number of current and potential headwinds, the stock isn't cheap enough to be attractive.

Fortunately, when it comes to investing, you're never forced to do anything. So Primo Brands remains on my watch list, and my team and I will continue to follow the stock.

If we decide it's time to buy, Stansberry's Investment Advisory subscribers will, as always, be the first to know. You can become a subscriber by clicking here.

Best regards,

Whitney

P.S. I welcome your feedback – send me an e-mail by clicking here.

P.P.S. My family and I had a great Labor Day weekend. My parents took the bus down from New Hampshire – a longtime tradition. And my cousin's 30-year-old son Brice flew in from Eugene, Oregon to visit New York City for the first time.

We went to the U.S. Open three times, watched Brice's alma mater, Oregon, win a tight football game, and saw a Broadway show. We also visited Times Square, the New York Stock Exchange, the Wall Street bull, the Statue of Liberty, Ellis Island, One World Observatory, and the 9/11 Memorial Museum. Finally, we had dinner with my wife Susan and our girls: