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HOUSEHOLD
GOODS
Obsessive delivery of
consumer-driven, marginincreasing and fast
incremental innovation
across all markets
RECKITT BENCKISER
Reckitt Benckiser, the world’s #1 household cleaning
products firm, came into being as the result of a 1999
merger between the UK’s Reckitt & Colman and the
Dutch group Benckiser. The company leads the sector in
the manufacture and sales of household cleaning products
with sales increasing on average by 7% a year since its
formation and a share price rise of 356% - compared with
a 13% decline in the FTSE 100 index. From its European
origins it continues to expand globally with its brands now
available in more than 180 countries. Nearly half of its
revenues now come from outside its home markets, with
the US and Australia accounting for 28% of net revenues
and developing markets 18%.
Reckitt Benckiser is passionate about delivering innovation.
In fact, 40% of net revenues are from products which are
less than 3 years old. Over the last year new products
were introduced across major brands with numerous lineextensions and regional roll-outs maintaining momentum.
The associated growth across the business is outpacing
much of the industry and, with the establishment of what
it calls its Power Brands, the company has achieved
number one or two positions in 75% of its markets.
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Reckitt Benckiser Key Data 2007
Innovation Scorecard
Innovation Culture
9
Total Revenues
£5.3bn
Strategic Innovation Focus
9
Revenue Growth
7.0%
Operating Profit
£1.2bn
Profit Increase
35%
Operating Margin
22.6%
Gross Margin
58.3%
New Products
8
Managed Growth
Product Margin
10
8
Investment in Innovation
9
Innovation Brand Impact
8
Media Investment
12.4%
Innovation Peer Review
8
Revenue / Employee
£239k
Alongside the incessant organic growth, 2006/2007 saw the first major
ambitious product targets and performance based reward structures.
acquisition for many years with the £1.9bn investment in Boots
This system clearly works as multiple products are launched in different
Healthcare International (BHI). The logic behind this acquisition was the
markets and the winners are spotted quickly. Successful new launches
assumption that an innovation focused consumer goods firm is more
such as that of Cillit Bang in Hungary are spotted within weeks and then
able to successfully support the retail of health care products than
scaled up for global launch in a couple of months. While competitors
pharmaceutical companies. Healthcare is acknowledged to have a
struggle to find the next big thing to drive growth, Reckitt Benckiser gets
steadier, longer-term innovation cycle driven by medical claims and
on with launching numerous incremental innovations, from which it
regulatory approvals rather than rapid new product launches. The
selects the high performers and then rapidly builds and extracts value.
acquisition has provided Reckitt Benckiser a new platform for growth
and margin improvement through products like Stepsils, Nurofen, and
Clearasil which are all now performing above expectations. Following
the success of the BHI acquisition, at the end of 2007 Adams
Respiratory Therapeutics, which owns cough and congestion drugs
Mucinex and Delsym, was also brought into the fold to further add to
the OTC portfolio, giving Reckitt a stronger foothold in the US.
Alongside its culture, another major differentiator of Reckitt Benckiser
against many of its peers is the way that consumer insight, rather than
high R&D investment drives product development. The company
works hard to identify new cross-sector trends and highlight new
opportunities for improved supplier-led innovation and employees
across the business are encouraged to challenge traditional assumptions
and approaches. Having raised operating margin from 14.4% to 22.6%
Driving all this growth is a company that has innovation as its #1
over the past six years and achieved double the like-for-like sales growth
objective. In a sector where it really is a case of innovate or die, from
of the sector’s two largest companies in 2007, Reckitt Benckiser has
the CEO down, everyone is motivated and rewarded by contribution
now set a target of 7% sales growth and 10% profit growth going
to innovation driven growth. Reckitt Benckiser’s culture is one which
forward. At this rate, there are few in the industry who would doubt
encourages innovation through a combination of limited bureaucracy,
that this innovation powerhouse will make it.
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SECTOR OVERVIEW
The household goods sector is an amalgam of several product
Benckiser’s Dettol, Vanish and Lysol make it the leader in household
groups including personal care, oral care, laundry, paper products
cleaning. Across the sector, the core trends influencing consumers’
and household cleaning. It is dominated by a number of
purchase decisions include convenience, fragrance, confidence and
multinationals such as Procter and Gamble, Unilever, L’Oreal,
product effectiveness. It will also be interesting to see the impact
Kimberley Clark, Henkel, Colgate-Palmolive, Reckitt Benckiser and
that concerns around the increase in viruses, particularly avian flu,
Beiersdorf. Some pharmaceutical corporations also have an
will have on the growth of antibacterial products. In addition, as
involvement in personal and oral care and there are specialist
with many sectors increased consumer environmental awareness
players including SC Johnson. In addition, retailers, and particularly
has stimulated a demand for less water use, less packaging and more
Wal-Mart, are beginning to penetrate this sizeable market space
eco or natural product variants.
with their own label value offerings: unsurprising when you consider
that the US oral care market alone is worth c. $7.4bn and the
household cleaning market is now touching $4.5bn. With its 8%
share of all US retail shopping, Wal-Mart’s buying power is strong.
Leading players are also keeping their eye on the growing market
for low-cost detergents, toilet tissues and soaps available through
discount stores. So far the impact on market shares has been
marginal but increasing declines in consumer confidence and fears of
Within highly competitive markets, brand association combined
a recession might change this. Finally, with the overall household
with innovative products are the key to commanding the added
products market mature in many regions and much future growth
value sales. For example the global brands of Colgate and P&G’s
now being targeted at China, Eastern Europe and SE Asia, delivering
Crest lead the oral care market; Beiersdorf’s Nivea, Unilever’s
successful differentiating innovation is seen by all key players as a
Dove and P&G’s Olay are all strong in personal care, while Reckitt
primary concern.
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HOUSEHOLD GOODS
INNOVATION DRIVERS
Geography, demographics and consumer economics all influence
here - especially given continued consumer willingness to pay premium
growth in this broad sector. In personal care there is a strong trading-up
prices for products that promise quicker and easier use. This is impacting
focus for incremental innovation as increased consumer demand for
new product development, spurring the creation of new ‘system’
convenience in emerging markets has, for instance, grown the shower
products, such as wipes, and leading to the desire for improved
gel market at the expense of the bar of soap. At the other extreme,
integration of applicator and packaging design into the innovation
areas like oral care have had a period of more radical innovation. Strip
process. Most recently the growth of task specific solutions has been
breath fresheners, electric toothbrushes, whitening toothpaste and
superseded by products offering all-in-one benefits that help to simplify
tooth gels have transformed this previously slow-moving market into a
cleaning decisions. Looking forward, “conscientious consumerism” is on
leading innovation area. Across the whole sector, there are several key
the rise. European consumers in particular are increasingly shopping
drivers having a tangible impact on how and where companies focus
with their conscience, with rapid growth in sales of organic, local,
their innovation activities. Customer loyalty to some products is
humane, Fair-Trade, and eco-friendly goods. Following the food and
relatively low, so brand-switching is a significant issue. To combat this,
drink sector, personal care and household items are now responding to
companies are all increasing their focus on successfully engaging
the commercial potential. In addition, nano-technology is influencing
consumers and gaining a better understanding of their attitudes.
significant changes. Products in development cover a wide area including
Fragrance has emerged as a key issue, propelling growth in the air care
nano-particulate controlled release systems, porous nanoparticles for
market, but also in areas such as surface cleaners, detergents and
encapsulation applications and nanofibres in cosmetics. Developments
laundry products. Several organisations have increased the depth of
are expected in hair care, body odour elimination and packaging as well
their partnerships with fragrance experts to put them ahead of the pack
as new variations of household cleaners, antibacterial agents and
in this area. That said, convenience is still the largest innovation driver
cleaning materials.
ONES WE ARE WATCHING
P&G
Kao
P&G, now including Gillette, continues to lead the personal and
Kao, the 8th largest company in the personal and household category,
household sector in terms of scale. It has set the standard for improving
is a rising star from Japan and Asia. With consistent growth over many
internal consumer understanding, time-to-market and strategic use of
years the company has recently re-organised with a greater consumer
design, and is also using its well-established Connect-and-Develop Open
focus and a drive for new high-value-added products. Despite rising raw
Innovation programme to increase revenues from externally sourced
material prices and strong competition, sales increased by over 26% in
ideas. It has also embarked on a regional growth plan with, for example,
the last fiscal year to March 2007 due largely to the success of its
Autodish entering the European stronghold of Reckitt Benckiser.
premium brands Jergens, Biore, Kanebo and Molton Brown.