However crazy, RBs success is no fluke

“Edginess” might seem an odd word to describe the corporate culture of a company that specialises in such mundane items as bath cleaners, cough pastilles and stain removers. But it is mild compared with the word that its hyperthyroidal chief executive Bart Becht prefers: “craziness”.

Crazy or not, his company Reckitt Benckiser has just turned a recession-busting performance to make its competitors (and many others in normally higheroctane sectors) cringe. Third-quarter figures out this week revealed that Reckitt was on course to achieving an above-guidance 13% increase in net revenue by the year end.

It’s not a fluke. One of Reckitt’s many qualities is its consistency; a quality exemplified by its chief executive, who joined the organisation (on the Benckiser side) in 1988. Becht was a P&G-bred marketer – and his passion for marketing still shines through in a quintessentially marketing-driven company. But exceptional management – the adherence to a few, simple golden rules – is what really distinguishes his long tenure.

Becht has demonstrated that mergers, even big mergers, really can work – even though three-quarters, as he himself says, don’t. The merger with bigger and more sluggish Reckitt & Colman in 1999 was a huge gamble that paid off. Shareholders will be similarly grateful for the success of the smaller but potentially toxic Boots Healthcare International acquisition (Strepsils to you and me) in 2005. They have no reason to fear, on present showing, the Adams cough and cold medicines acquisition, completed earlier this year, either; though admittedly it is early days.

But Becht’s more lasting achievement has been Reckitt’s organic growth model. Where others aspire to create an entrepreneurial culture within a big corporation, Reckitt appears to have done it. Reckitt is a ruthless cost-cutter, ferociously committed to a flat, lean management structure; but it also knows how to spend money. An important article of faith, fitfully observed in other companies, is that substantial marketing investment – even when, as now, times are difficult – is a precondition of success. This last quarter, for example, media spend rose 27% year on year to a remarkable 12.5% of total net revenue. How edgy is that?

Still more importantly, Reckitt has developed what it terms an “innovation machine” that has repeatedly come up with market successes. Rather like upping media spend, a heavy reliance on new product development sounds a counter-intuitive strategy to cleave to during a recession.

In fact, it is proving just the opposite. Becht claims that 40% of Reckitt sales are generated by products developed during the previous three years. More surprising still is that much of that growth is coming from premium-end, added-value items, such as Nurofen Express and Finish Quantum. The clincher, though, is that this strategy is proving a potent antidote to packaged goods manufacturers’ most poisonous enemy, own-label.

Of course, there is no guarantee that Reckitt will be able to keep up this performance through a global recession.But, until the facts prove otherwise, the company will remain the exception that proves the rule.

Stuart Smith, Editor