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].BW: Reckitt recently launched a campaign to raise awareness of its new corporate brand identity, “RB.” (Havas’ Euro RSCG and Omnicom Group’s OMD, both in London, collaborated on the effort.) How has that campaign been aiding both corporate and brand awareness thus far?RG: It’s too early to tell . . . We just launched it. But we don’t have the pretension that the whole world is going to know [who] RB or Reckitt Benckiser [is]. It’s clearly [targeted towards] investors, but they already know [who we are]. But we also try to target very much the [younger professionals], which is much more of our strategy: To make sure people know who has been the winner in the market for the last five years and that we’re actually a slightly different company from a recruiting standpoint and it might be fun to work here. That is the heart of the campaign. BW: In March, Reckitt announced it was shifting $20 million in TV advertising dollars to online. How has that initiative been paying off?RG: It’s too early to say, “This is the best move ever.” Or, “It’s working better than other [strategies we’ve tried].” Toward the end of the year, we’ll have made up our minds over where we’ll invest more and where we’ll do something different. This is looking at Reckitt not as a whole, but brand by brand. It’s very different if you’re speaking to a Clearasil consumer than to someone who’s dealing with Spray ‘N Wash or one of our other brands.BW: How big of a threat is private label in the categories Reckitt plays in?RG: Private label is active. It’s growing actively in the market, and in the U.S., in particular. But the Reckitt portfolio grows faster in market share than private label. Yes, private label is picking up, but not at our expense at this point in time.BW: Lysol, one of Reckitt’s biggest brands in the U.S., saw a direct lift in sales as a result of the H1N1 “swine flu” virus. Has public concern over that pandemic largely gone under the radar or do you expect it to heat up again as we enter cold and flu season?RG: Lysol is one of the brands consumers are going back to. It’s also been compensating for a very soft flu season at the beginning of the year, which was good news—because it meant less people were ill—but for the Lysol franchise, it helped compensate for that. We’ve also not exploited [the H1N1 pandemic] in our commercials, which, as a company, we don’t want to do. [This outbreak] is serious. The No. 1 thing we should do as a company is educate our consumers, which we’ve done with different touch points. It’s not about saying, “Lysol kills the swine flu. Go out and buy this product.” [Regarding whether H1N1 has fallen off consumers’ radars,] I don’t think this is the case worldwide. The [number of] incidents [is] lower in the U.S., but the opposite is true in Europe. We are ready for when it comes back, but as I said, we will not exploit this in our communication. Everything we do will be very much in line with what the CDC [Centers for Disease Control and Prevention] is doing—which is educating and giving consumers the right advice.BW: Any marketing strategies/campaigns you’ve tried recently that were an instant hit that you’d like to share?RG: Finish is a fantastic example of how to create loyalty. We rebranded it from Electrasol to Finish. At the same time, we launched Finish Quantum in the U.S. That is gaining share in the market and shows extensive high loyalty. I think we should also be happy with the continued success of Mucinex. There is less of a new factor on that brand, but it has so much mileage to grow into the future. Despite being No. 1 in the market right now, it has only reached 25 percent of the consumers that it can reach. So you will see with [new] campaigning and packaging we’re taking it to the next level in the coming six months.

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Reckitt's 'Power Brands' Strategy Pays Off

Elaine Wong

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