The keys to Reckitt Benckiser’s success

The keys to Reckitt Benckiser’s success
Market Leader autumn 2008

The first question people often ask is: ‘Who is Reckitt Benckiser?’ Our company name may not be familiar but our brands – Finish, Dettol, Nurofen, Vanish, Durex, Strepsils, VEET, Air Wick – are very well known. Most of them are literally household names found in kitchens, bathrooms, medicine cabinets and bedrooms nationwide.

But the company itself is in fact only ten years old – the result of a merger between the German company, Benckiser and the English company Reckitt & Colman. We are a truly global company with 27,000 employees, operating in more than 60 countries across the world, and selling in 200. At the time of the merger we were a £3bn company. We’re now an £8.45bn company, having outperformed all of our global peer group year on year. We have seen net revenue (sales) growth in high single digits and double-digit growth in net income (profit) every year since 1999. In 2010, growth was 6% and 17% respectively.

Reckitt Benckiser (RB) market capitalisation has also quadrupled in the past ten years and is now around £20bn. As evidence of this success, we have moved from being in the bottom 25 of the FTSE 100 to being in the top 25.

 

 RB’s BRANDS

RB’s business is driven by 19 global Powerbrands (see diagram), which are all in categories that have good growth potential and global reach.

These are supported by a portfolio of strong, local brands, also leaders in their own markets; for example, in the UK this includes the brands Lemsip, E45 and Optrex.

 

 The RB VISION

RB’s vision is very clear: improving people’s lives through delivering better solutions which make a real difference. This means an ongoing commitment to constant and continuous innovation. Typically one-third of RB’s global net revenue comes from products launched in the previous three years. But there are other features of the RB culture that I believe lie behind our success and make the RB business different from many other companies.

 

 SPEED OF EXECUTION

RB may be smaller than many of its major competitors but it has a culture which is based on speed of thought, decision-making and execution, and it is this that has made it more successful. This is achieved partly because of a very flat management structure, but also because of RB’s ‘can do’ culture – and the entrepreneurial spirit found at every level. A very good example of how quickly we are able to move is the case of the Air Wick air freshener product called Freshmatic.

In 2004, while we were already the leader in aircare in the UK, we realised that a great deal of innovation was going on in this market and to stay ahead of our competitors we needed to make a real step change. The biggest segment in this category then was the standard aerosol, the one that you spray all the time. But the drawback was that after a few minutes the fragrance dissipates and you can’t smell it any more. So we saw the opportunity to develop a product that would deliver fragrance in a continuous way.

We looked at the sort of air fresheners that you find in public bathrooms which need to do this, and decided to bring this concept to the consumer market.

The important point here, however, is how quickly the whole Freshmatic project was accomplished. It took only eight months from the moment that we tested the concept with consumers to the moment that we launched into the market in the UK. This not only included the need to build a factory in China but also added a whole new technical dimension to the products. We were having to deal with wires and cables and batteries – a production process that was new and complex.

We launched the first Fresh-matic product in the UK in 2004, and within 12 months it had been rolled out to 60 countries. But being RB it didn’t stop there. Subsequently there have been regular innovations to the product including the introduction of the first ever motion sensor air freshener. The most important thing is that once the consumer insight/ need had been identified and the product idea generated, we did this quickly. RB created a whole new market segment. This segment now represents approximately 15% of the global sales of all air fresheners.

 RB’s business has many global powerbrands in categories that have good growth potential and global reach

 

AN OBSESSION WITH BRANDS

Marketing is at the core of RB. Everyone working in the business loves and is excited by our brands. In fact, I would go as far as to say we are obsessed with them. So much so that RB believes in maintaining very high levels of marketing investment, even in a downturn.

We believe that we must continue to communicate with our consumers. It’s like a friendship. When you stop talking to your friends, the friendship becomes a bit weaker and allows room for new relationships and naturally we never want that to happen.

RB’s objective is to strengthen our friendship with our customers and consumers every day.

To this end, in 2010 the company invested 10.7% of net revenue in media spending alone, and when you add in the rest of the marketing mix the spend is significantly higher. Unlike many other companies, this figure has gone up year on year despite the economy. The 2010 increase in media spend was a 5% increase on 2009.

This is also demonstrated by the fact that in the UK, RB is in the top ten overall advertisers and is the third biggest TV advertiser. Few people would expect a company of our size to be such a large TV advertiser in the UK, but it underlines the fact that our obsession for the brands is matched by a consistent investment in media and marketing.

We are also swiftly becoming a major investor in digital spending where RB is pushing marketing boundaries. For example, at the end of 2010 in the UK we launched an iPhone application for Nurofen – the first for any healthcare brand. We also recently launched an interactive Facebook page for Lemsip. So, even in OTC remedies, which is perceived to be a more traditional sector, we’re trying to innovate all the time. We try to communicate with our consumers in those areas where they get their information, and this changes with their needs and demands.

The company has even created two ground-breaking global business games on Facebook. The first, PoweR-Brands, launched last year and is focused around our brands. In the first three months after it was launched it had three million hits on the site, 161,000 active users of the game, and already ranked in the top 800 games out of 89,000 games in Facebook.

Early in 2011 a second game, UrbAN THRILL, centred on the popular Free-running sport, and also based on the company’s Powerbrands, was launched in ten RB markets – including the UK, USA, Brazil and Russia – across Facebook, portals and our website.

Designed to create awareness of RB among graduates and people early in their business careers, we want them to know how entrepreneurial the culture here is, and it makes our job so much easier if people already understand something about us and are self-selecting. It is one more innovative way of bringing our brands, and in this case our culture, to consumers using the digital space – the importance of which is growing.

A TRULY GLOBAL COMPANY

A global company can be defined in different ways. In RB we see our employees as ‘global citizens’ – working for the global company not individual markets alone. For instance, among the senior operating management team there is an American running Germany; a Belgian running Brazil; and I am an Italian running the UK business, and I’ve worked and lived in the States and in Brazil.

We encourage our employees to move around a lot because we believe that sharing learning about what works and what doesn’t work in different countries, and challenging the local status quo, is a key element in RB’s recipe for success.

But being truly global doesn’t mean that everything is decided at a global level, with each country just implementing central plans. On the contrary, at RB our strategy is to optimise all the benefits of being a global player while maintaining a very high level of involvement from the local countries.

For example, in the UK, as a lead market in many categories, my team is involved in the development of most innovations, most advertising campaigns, in fact in every decision that is about strategy for our brands.

I think this is a key differentiating point for RB compared with our competitors. It allows all the benefits of global brand development while maintaining a closeness to the consumers in the different countries, which we believe is critical.

A VERY ENTREPRENEURIAL CULTURE

The RB philosophy is that good ideas come from anywhere – and that once they are accepted we should give full support, responsibility and credit where it is deserved. A recent example of our entrepreneurial approach is Brasso – a little can of metal polish that is over 110 years old.

This is clearly a brand that hasn’t received much innovation in its long life. But in February of last year, a first-year graduate came to me with an idea. He wanted to produce a variant of Brasso for cleaning iPods, TV screens, computer screens, phones and other similar uses.

So I told him to prepare a business case, come back in a month and if the management team liked it and saw its potential, we would develop it. This product – Brasso Gadgetcare – was launched a few months later by the graduate who was involved in everything including pitching to all the major retailers, even those outside our normal customer base, such as Comet, Amazon and PC World. Indeed, in this case we delivered not just what we believe is going to be a successful product in a new area but also one that enhances the Brasso brand equity.

The point is that success needs an environment where people at every level are encouraged to speak up, to express and defend their views. We should allow ideas to flourish and above all we need to listen. My colleagues and I really believe in ownership at an early stage.

 CONSTRUCTIVE CONFLICT

This means not always looking for consensus. It’s about being fast, agile, spotting opportunities, and doing what it takes to get to market first. Sometimes that means not waiting to gain consensus but encouraging everybody to contribute early on; really listening to their suggestions but then someone having the courage and support to make a quick decision.

That is RB leadership. Most importantly, once you take a decision, you must have 100% commitment of everybody involved, despite the fact you didn’t look for consensus. And this means having good debates, heated debates, being direct, being straight. But ultimately a deal has to be put on the table, and together the team will agree the plan to best support it.

APPROPTIATE REWARDS

RB offers the freedom and the responsibility to develop new ideas from an early stage and we also provide the opportunity for very fast career development.

This means disproportionate pay for disproportionate performance – but, in the end, it is the total RB culture that attracts and keeps people here and which is incredibly motivating.

SOCIAL RESPONSIBILITY

Undoubtedly, RB is a driven environment but that doesn’t apply just to our commercial dealings. That passion is also evident in the way we look at our environmental and social responsibilities. Recently, for example, RB took the top spot in the FTSE 350 for carbon disclosure and carbon performance, alongside the Royal Bank of Scotland.

This is a very important achievement for us because a few years ago we launched our very ambitious Carbon 20 initiative which promised a programme reducing our total global carbon emissions by 20% by 2020. We have clear KPIs linked to this in everyone’s objectives but milestones like this prove it is a target we can, and will, reach.

We are also one of the key commercial supporters of Save the Children. We have already raised £4m for the charity since 2006 and we have now set a target to raise another £6m. But we don’t just give money – that is not the RB way.

We are also encouraging all our teams to ‘do something big’ and this includes hundreds of our employees from around the world, at every level, visiting the projects we are involved in to provide positive physical support, or raising cash as part of our own RB Global Challenge. This year, for example, includes 65 people from around the RB world making a challenging journey and rebuilding children’s infrastructure in Brazil.

At RB everyone at every level is responsible for, and enters wholeheartedly into, everything we do. Most of all it is the responsibility of all of us to always be looking for new, effective ways of doing it – ways that make a real difference.

Being truly global doesn’t mean that everything is decided at a global level. On the contrary, at RB our strategy is to optimise all the benefits of being a global player while maintaining a very high level of involvement from the local countries

This article is an edited version of a presentation given at the Marketing Society Conference November 2010 by Camillo Pane, general manager of RB’s UK business. www.rb.com