Reckitt show the power of focus
The last 10 years of growth at Reckitt Benckiser are pretty impressive. The market value of the company has increased an eye-popping seven times, to £21billion, according to an article in The Times. And if you had been smart enough or lucky enough to buy shares in 2000, you'd be sitting on a return of 400%. At the heart of this success is the power of focus, a key theme in our new book. Let's look at what Reckitt have done well.
1. Brand focus
Reckitt have done a great job at focusing on their key brands and driving growth through innovating on them, rather than trying to create new brands. The top 17 brands were 40% of revenue in 2000. By 2010 they now account for a whopping 71%. As CEO Bart Becht says, “Rolling out new brands globally is a very expensive exercise. It’s
much more likely that you will see the bulk of new innovations in our
2. Category Focus
Not only does Reckitt focus on key brands. It also focuses on markets where i) it can gain or maintain leadership, ii) the markets have growth potential. It sounds so simple. But many companies still don't do it. They stick in markets or categories where they are a challenger, often because of internal power games or just because of historical intertia.
Not Reckitt. They certainly follow our favourite motto: FOLLOW the MONEY. Here's Becht again in another Times article: “We focus disproportionately on
categories where we have strong leadership positions." For example, they are global market
leader in automatic dishwasher powder, with the Finish and Electrasol brands.
Another key theme of the new book is the importance of leadership
within the company to gain and maintain brand leadership. Look at any
growth story, and behind it you're likely to find a human story. And
Reckitt Benkiser is no exception. CEO Bart Becht joined the company
back in 1999, and is still at the helm in 2010.
4. Focus on emerging markets
Much of the company's growth has come from emerging markets, and Becht expects this to continue. As he says, "If you were to count the number of household personal care products in
an Indian household compared with a Western European household, it
would be staggering. You would get less than ten in a household in
India and seventy or eighty more here.”
In conclusion, an amazing growth story that is another illustration of the power of focus. Not complex to talk about. But bloody difficult to implement. It seems to help if you have a Dutch ex-P&G guy at the helm, as is the case for Reckit and also Unilever with Paul Poleman who I recently posted on here.