Reckitt Benckiser to invest an additional £100m in brand building

Reckitt Benckiser (RB) will introduce a raft of cost-savings measured to fund an additional £100m in building brands such as Finish, Vanish and Calgon in growth markets, a move that comes as it announces an overhaul of its company structure (see box below).

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Measures including freezing fixed costs and changes to supply chain projects will be introduced, the company says, “to fuel investment” in its 19 key “power brands” in 16 “power markets”, mainly developing markets.

The move to re-invest operational savings into marketing follows a similar one by Coca-Cola. The soft drinks giant announced yesterday that it was to invest the bulk of $400m in brand building over the next four years.

RB will introduce a new “Brand Equity Index” to measure the efficiency of its investment in brand building across TV and print, digital and social media.

The new index will replace the “pure media” measurement. The company says the change reflects efforts to embrace digital marketing channels such as the launch of its first social commerce initiative in the UK, which will see it selling a Cillit Bang variant exclusively on Facebook.

In a bid to improve accountability and better measure return on investment, some consumer promotional and marketing costs will be moved into “cost of goods”. The company the move will “focus our commercial organisation on better decision making around our promotional strategy”.

Rakesh Kapoor, CEO, says: “2012 will be a year of transition and investment. We need to reshape our strategy to enable us to continue our track record of outperformance. RB’s relentless focus on building brands will continue. We will be increasing our investments in high rates of innovation and brand equity building.”

The changes were announced as the company posted a 13% increase in total revenue to £9.5bn during the year, beating targets of 12% growth.

Like for like growth increased 4% while operating profit was up 11% to £2.5bn during the year.

Structural changes include:

  • Refocusing around its “core” categories of health, hygiene and home. The company says these areas will grow to account for 72% of revenues by 2016, up from 67% now.
  • A restructure of its geographic regions, which sees the North American and European markets merged to “increase the speed, quality and consistency of our in-market execution and to drive cost savings”.
  • The RB food and pharmaceuticals businesses will be reported as separate business streams.

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