With competition putting the bite on Reckitt's marketshare, the company goes searching for a brand new product to reclaim lost ground.

By  Ranju Sarkar

There's nothing official about it, but Reckitt is stodgy no more. Two-and-a-half years after Pranab 'Prince' Barua took charge at Reckitt Benckiser (India)-the new appellation after Reckitt merged itself with Benckiser's household products business in December 1999-I meet the ex-Lever man between 8 and 10 pm on a foggy winter evening in Delhi. As I leave, I see teams from marketing and Reckitt's advertising agency, McCann Erickson, waiting to see Barua. Wow. Not so long ago you would have hardly found a soul in the office-at 5:15 pm.

Ever since Barua took over in September 1998, he has tried to transform the laid-back and complacent FMCG company into an aggressive player. In many ways, he has succeeded. The new Reckitt is a leaner, meaner, sharper company. At the same time, Reckitt's major problem-despite some of the strongest brands in the business (Dettol, Cherry Blossom, Harpic), it has failed to jump onto the fast lane-continues to plague Barua.

The new-found aggression

Reckitt's old order has withered away: only two out of the eight-strong senior management team can remember the good old days. Some 40 per cent of the managers are new, with less than one-and-a-half years of experience. Thirty-year-old MBAs can now dream of being marketing managers at Reckitt, unthinkable just a short while ago. ''There's so much happening in the company, that most people realise the need to perform. People are not happy being mediocre,'' says Barua, who has recently reduced Reckitt's workforce by a third, through a VRS.

And the young blood has delivered results. Reckitt's direct coverage has jumped from 3.5 lakh outlets in 1998 to 5 lakh outlets. And thanks to improved working capital management, Reckitt's gross margins have gone up by 4.5 percentage points in 2000, allowing for greater spending on marketing and promotions. Then, he points to the six product extensions in 2000. Says A. Mahindran, CEO, Godrej Sara Lee: ''Reckitt has become more aggressive, which is reflected in its marketing. ''

The challenge

Problem is, all this is yet to reflect on the bottomline. The company's topline (estimated at 15 per cent) and bottomline (50 per cent) growth for 2000, does not camouflage Reckitt's low margins (less than 5 per cent). Specifically, Fast-Moving Consumer Goods (FMCG), in smaller, urban-oriented product categories, like Nestlé (7.2 per cent) and Gillette (8.29 per cent), score above Reckitt. The squeeze in profitability is due to a steep increase in ad-spends; the promotions budget for the Reckitt Group (including Dettol, which was spun off into Reckitt Piramal, a joint venture with the Piramals) has increased by around 19 per cent in 2000.

Barua promises to improve profitability by next year: ''We are still in an investment phase and will match the profitability of our peers over a period of two years.'' However, the stumbling block is Reckitt's presence in niche categories. There's surface-care (Lizol), lavatory-care (Harpic); home-care (Mortein, Cherry Blossom, Hays, and Wizard); fabric-care (Robin); health & personal-care (Dettol, Disprin, Gaviscom); and auto dishwash (Calgonit).

Although Reckitt has big brands (Dettol's marketshare: 85 per cent; Harpic: 82 per cent, and Cherry Blossom: 75 per cent), the company has been unable to sufficiently expand the categories they occupy. Barring Mortein, which the company has grown to a Rs 200-crore brand in six years, Reckitt's product categories are limited and urban-oriented except blues, which is a mass market category. Innovation and increasing consumer awareness are the key; unfortunately, Reckitt has done little on both fronts.

Barua doesn't seem to be in a tearing hurry to expand these niche markets; he calls them the soldier categories. He would instead continue to focus on Dettol and Mortein ('opportunity categories') which account for 75 per cent of reckitt's business. He says: ''I am not so worried about the shoe-care or surface-care segments. For the next 15 years, we will not get into any new categories.'' So, how does he plan to sustain growth?

Grow or not to grow?

While Mortein has done exceedingly well-growing by 87 per cent in 1999-it can hardly be expected to continue growing at that pace. Growth is already down to 26 per cent in 2000.The market for coils and mats is slowing down, offset by 35 per cent growth in the vapouriser segment. Although Mortein has a presence in all segments, it has a dominant share only in coils (35.60 per cent), moderate in mats (14.2 per cent) but negligible in vapourisers (1 per cent). Says Nitish Kapoor, Marketing Manager (Pest Control), Reckitt: ''We'll soon re-launch the vapouriser with superior product performance.''

Increasing marketshare in vapourisers to a targeted 12 per cent by Q1 2002 is going to be an uphill task. All Out, the brand leader in vapourisers and refills, enjoys a 60 per cent share, while Godrej Sara Lee's Goodknight controls a 29 per cent share. Warns Rajesh Kothari, Analyst, smifs Securities: ''The challenge is to develop a strong second line of business that will reduce the dependence on pest control.'' Compounding Reckitt's problems is a declining market for powder blues (it fell 15 per cent in 2000). In liquid blues, Jyothi Laboratories' Ujala (62.70 per cent) has emerged as a market-leader VS Robin (6.40 per cent). If that wasn't enough, Reckitt Piramal's OTC growth gamble has failed. Unhappy with the small number of OTC products been launched, there was reportedly pressure on Reckitt from Benckiser to call off the joint venture, post-merger. Potential legal issues have stymied a break-up. Says SMIFS' Kothari: ''No great benefit has been achieved through the joint venture.''

Barua, for one, disagrees, and stresses the JV allowed it to launch OTC products like Gaviscon, Fybogel or Disprin. ''We don't have the capabilities in the pharmaceutical business,'' he explains, while admitting that, ''a lot of work has happened in the OTC business, but not much has been launched.''

So, Barua has to quickly look for options. Says Hozefa Topiwala, Analyst, ask Raymond James: ''Reckitt has to grow new products.'' The obvious choice is liquid blues, which enjoys a mass market and can generate the topline volumes Reckitt is looking for. But in a low-margin and yet highly competitive category, winning back marketshare is always difficult.

By doing a Nirma on Hindustan Lever, Ujala has succeeded in overtaking Reckitt's Robin. Thanks to clever advertising, Ujala enjoys a huge consumer pull, and is available in an additional nine lakh rural outlets. Reckitt is planning to relaunch Robin with a new price-value equation. Admits Santanu Bhanja, Marketing Manager, (Blues), Reckitt: ''We underestimated a small new brand and our response was late.'' The question is, is it already too late?

Despite the challenge, Barua has few options but to make the Robin re-launch work. For, while Benckiser holds the No. 1 position in fabric-care and dishwashing categories in most European countries, they are niche products. Reckitt is in the process of testing out several products, including Benckiser's fabric-care products like Vanish, Calgon, and NapiSan, and hair-removers like Veet. Expect these launches to be staggered over the next two years. Adds Barua: ''We are looking for products for which there's already a habit in the country.'' Read that as a desperate search for a mass-volume product. Even a stodgy one will do.

Issue Contents  Write to us   Subscriptions   Syndication 

INDIA TODAY |  INDIA TODAY PLUS | COMPUTERS TODAY
TEENS TODAY | NEWS HOME | MUSIC TODAY | ART TODAY | CARE TODAY

© Living Media India Ltd