Since the merger in December 1999 of Dutchbased Benckiser and the UK’s Reckitt & Colman, the combined company’s sales have increased by an average of 7% a year, and its share price has risen by 356% compared with a 13% decline in the FTSE 100 index. Bart Becht, head of Benckiser, became chief executive of Reckitt Benckiser after the merger and is now one of the highest paid bosses in the UK.
Last year’s results showed sales up 7% to £5.3bn and profits up 15% to £905m. Becht attributes his company’s success to its innovative and entrepreneurial culture – up to 40% of Reckitt’s sales come from products that are less than three years old. Innovation is driven by insights into consumer habits rather than by high R&D expenditure.
Becht set a 7% target for sales growth in 2008 and 10% for profit growth, which he intends to meet by continuing the push into consumer healthcare. In 2005 Reckitt bought Boots’ OTC drugs unit, and in January finalised its $2.3bn (£1.25bn) takeover of Adams Respiratory Therapeutics, an American maker of OTC drugs.
Reckitt’s marketing spend is equivalent to 12% of sales, but Becht does not plan any cuts. He admits that rising commodity prices will result in higher prices for consumers in some cases, though he does not think this will affect sales, since his firm’s products are necessities and represent a small fraction of total household spending.
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