Reckitt’s ‘Power Brands’ Strategy Pays Off

If the most recent round of earnings is any indication, the recession still hasn’t let up on packaged goods companies. Kimberly-Clark, which owns Huggies and Cottonelle, for instance, said net sales fell 5.6 percent to $4.7 billion in its second quarter. Procter & Gamble, which is scheduled to report fiscal year fourth quarter earnings next week, saw net sales decline 8 percent to $18.4 billion in the third quarter. Wall Street is keeping an eye on another—albeit smaller—packaged goods company: Reckitt Benckiser. The maker of Lysol and Mucinex in the U.S. today (Wednesday) reported a 20 percent increase in second quarter sales to 1.9 billion pounds ($3.1 billion); profits were up 31 percent to 310 million pounds ($507.5 million). The increase, the company claims, was fueled by innovation and marketing investments behind its 17 global “power brands.” Reckitt has unleashed new product extensions like Spray ‘N Wash Bright & White, Resolve Deep Clean Powder and concentrated versions of its fabric care brand, Woolite. Rob de Groot, executive vp of North America and Australia, said there is a lot of room for growth. (Reckitt is a $40 billion company, compared to P&G at $83.5 billion.) The company has an opportunity to increase its presence in the U.S.—such as with the rebranding of Electrasol to Finish, and growing the Mucinex brand, which has only tapped into 25 percent of the U.S. population. De Groot (pictured) talked with Brandweek about Reckitt’s strategy and why it’s working despite the economic slump.

Brandweek: Reckitt Benckiser has been posting consistently strong quarterly earnings, as larger rivals like Procter & Gamble and Unilever have taken a hit from the recession. What’s your strategy for growing brands—and sales—in tough times?
Rob de Groot: It’s a good set of results that we’re happy to give to the outside world. It is something to be glad about. It’s also confirming the strategy that we’ve had for the last 10 years. It’s a very focused strategy. We have 17 power brands that we focus on as a company. [Eleven of those 17 power brands are in North America, including Clearasil, Calgon and French’s.] And it’s very focused on those power brands and fueling those power brands with investments. It’s something we’ve done differently than other players, which is to continue to invest and focus on our [core] brands in tough times.

The [strategy] is two parts: [The first is innovation] and [second] is investment, or money to communicate to consumers. We’re moving away from a world where we split marketing and sales and trade. We’re talking very much about our consumers and they have different touch points with which they get their information from: There is TV, Internet and in-store, of course. One of the things we started a few years ago is to communicate—360 degrees, as we call it—with consumers and we try to touch them at different moments of the day at different moments of their life. And so, our investment towards the consumer has been more multi than single point and the number of connections we have with consumers is much higher than before.

BW: Does it help to be the “smaller” competitor? That is, consumers in the U.S.—while they may know Lysol, Spray ‘N Wash and Woolite—aren’t as familiar with the Reckitt brand. Is that a disadvantage in any way?
RG: Consumers are not buying companies, they are buying brands. First and foremost, we fuel our brands with investments rather than the corporate brands. At the same time, we also address our corporate brand identity, but that is to a very focused and targeted audience.

[And so, like I was saying,] consumers are shopping for brands in these tough times, but they are also coming back to strong brands because they don’t want to take any risks. They don’t want to buy something, try it out and then find it doesn’t work. Consumers going back to strong brands in tough times is something we’re seeing happening [right now].