Reckitt Benckiser trumpets £100m brand spend increase for record revenue

Reckitt Benckiser has credited its decision to increase investment in its brands by £100m globally last year for fuelling a “strong” performance last year that saw annual revenues rise to record levels. 

Reckitt Benckiser trumpets £100m brand spend increase for record revenue

Global revenues at the FMCG giant, which is behind brands including Durex, Nurofen and Cillit Bang, passed £10bn annually for the first time last year, up 5 per cent year on year. Fourth quarter net revenue also increased by 5 per cent to £2.5bn.

Reckitt says it increased investment behind its brands to 13 per cent of net revenue, equating to a £100m increase compared to 2012. Reckitt uses its own Brand Equity Investment criteria to define the increase, which is a sum of media advertising, digital activity and consumer and B2B education programmes as a percentage of revenue.

The increased investment was focused on health and hygiene “power brands” – such as Strepsils, Dettol and Harpic – as well as on newly acquired brands such as Schiff. Reckitt launched its first vitamin products earlier this year with the introduction of MegaRed to markets including the UK and says it has “confidence in the potential” of this category.

Rakesh Kapoor, chief executive officer at Reckitt, says: “Our strategy for growth and outperformance through driving health and hygiene power brands together with our focus on 16 power markets is delivering results.

“We continue to invest in our business to drive sustainable value creation. In 2013, we invested an incremental £100m behind building our brands. We have confidence that our pipeline of innovations, power brand roll-outs and brand investments will deliver another year of high quality growth.”

Reckitt says it put in a “strong performance” in Europe and North America, where a 12 per cent rise in revenues offset a 2 per cent decline at its “Rumea” division, which includes Russia, the Middle East and Africa. Like other consumer goods companies, Reckitt has expanded rapidly into emerging markets in recent years but now faces a slowdown in these countries.

Reckitt also posted a “significant” increase in gross margins last year, up 1.5 percentage points to 59.4 per cent and driven by “mix, pricing, cost optimisation initiatives and private label discontinuation”. Reckitt, like rivals including Unilever and Procter & Gamble, has been keen to reduce the level of discounts and promotions that became commonplace during the recession, instead hoping to prove value through product innovation.

Speaking to Marketing Week last year, Reckitt’s marketing director Jerome Lemaire admitted it was a “big mistake” to do more promotion, saying it led to a “short-term market spike” but didn’t help to grow the market in the long term. He said Reckitt hoped to reduce the level of promotion over the next year.

Reckitt has also named drugs industry veteran Howard Pien as the new chairman of its struggling pharmaceutical business. The firm announced it would review its options for the unit last year. Revenue at the business fell 8 per cent year on year in 2013.

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