Globally, Reckitt has posted 10% organic sales growth so far this year, besting all peers. And in the past five years, it has beaten all competitors with average organic sales growth of 8% and net profit growth of 17%, according to data from the company based on Credit Suisse analysis.
How that's come about has been a mystery even to competitors and analysts who've watched closely, some noting that the company isn't populated with brand-name marketers or the most powerful brands. Reckitt's 17 "power brands," including Lysol, Airwick, Finish, Mucinex, Veet and French's mustard, may be growing, but they're not the sorts of multibillion-dollar behemoths P&G, Unilever and L'Oreal own.
"The most frequent question we have been asked about Reckitt Benckiser in 2008 is, 'How do they do it?'" said Sanford C. Bernstein analyst Andrew Wood in a recent note. "Our most frequently given answer is, 'We don't really know.' ... They are simply extraordinary operators."
The fuller explanation is unexpected, counterintuitive and not always pretty.
In an industry where big competitors such as P&G and Unilever have been moving toward fewer expatriates and longer job tenures, Reckitt revels in its fluid and polyglot talent. It draws the 400 employees tucked into its U.S. headquarters in a Parsippany, N.J., office park from 30 countries. And it encourages even junior executives to switch countries and roles frequently to help foster an entrepreneurial mind-set.
"What makes us different is not so much that we have better people," said Rob de Groot, the Dutch national who became exec VP-North America and Australia/New Zealand in September and is based in the New Jersey headquarters. "We have a different culture, and therefore act slightly differently than our competition."
In an age when new media are prized, or at least often touted, Reckitt is very much sticking to the basics. The company spent nearly 90% of its media dollars on TV last year. While its internet advertising through the first half was already double its full-year internet spending in 2007, it was still only 1% of media spending. Alexander Lacik, Reckitt's North American household-marketing chief, said the company will move quickly on digital marketing once it's been "qualified," but he couldn't immediately recall the name of the company's digital agency. (Euro RSCG, New York, is agency of record for all advertising in the U.S., and the company handles digital work in-house.)
Moreover, in an industry where consensus and process are often valued, Reckitt says it values conflict and speed more. "We love conflict," Mr. de Groot said, "but only if it makes a better decision. ... Consensus can be OK, but we usually go with conflict and then one decision rather than trying to merge all kinds of positions into one outcome."
Being a package-goods company, of course, Reckitt hasn't exactly thrown caution to the wind. All TV ads must clear copy-test hurdles, and concepts must get acceptable consumer scores. "But if process goes against the principle and attitude," Mr. de Groot said, "we always go for the faster decision based on principles."
Beyond that comes rigorous application of a strategic and financial model that's simple and works. Reckitt looks to grow margins through manufacturing efficiencies and by getting 40% of revenue from higher-value products it has launched within the past three years.
Half of improvements in gross margin get invested in increased marketing spending, said Mr. de Groot, and the other half drops to the bottom line.
Even as some competitors cut or slowed marketing spending amid a turbulent economy, rising private label and high commodity costs in recent quarters, Reckitt didn't. Its spending in July and August (excluding outdoor) was up 10.8% from a year ago, according to TNS Media Intelligence, and spending through August puts it on pace to increase its 2007 outlay of $402 million by about 10% for the year.
The increased spending is producing results. Since January 2007, Reckitt's all-outlet share of household categories has risen five points, to 29%, Mr. de Groot said.
The rolling 52-week average sales growth across all outlets in Reckitt's U.S. household categories slid to 0.6% from 3% last year, according to figures provided by the company. But Reckitt's growth slowed only modestly to just under 6% in July and August.
The slowdown across all U.S. household players comes not so much from the economy as from "fewer big innovations over the past two years," said Mr. Lacik, general manager-marketing for the U.S. household business. "But our batting average has been going up, and I think that's one of the reasons why our share growth has been responding positively."
The company has high hopes for three new products that will hit shelves early next year: Finish Quantum, a higher-powered dishwashing tablet that leaves improved shine, and another step in the merger of Electrasol and Jet Dry into a global brand; Airwick I-Motion, a scented-oil air freshener activated by heat or movement in a room; and Spray 'n Wash Bright & White with Resolve Power, a color-safe bleach that promises whitening similar to that of chlorine bleach.
Primary drivers of Reckitt's growth have been diversity and fluidity in the organization, according to the company's executives.
Mr. Lacik is a poster child for the company's globalism. Czech by birth, he was raised in Sweden and speaks flawless English with a hint of French in his accent. He spent much of a 13-year P&G career in Nordic countries before joining Reckitt in Greece a few years back and coming to the U.S. last year.
The nine people on the company's global executive committee come from seven countries, as do the top 10 U.S. managers. The top 400 managers (those getting options and restricted shares) come from 50 countries. And of the top 50 global managers, 79% work outside their countries of origin, and 95% have had at least one global transfer.
It's not just for the sake of variety, Mr. de Groot said. "It's just that you've seen much of the world, and you can bring more perspective to what you're doing."
Executives also rotate frequently between assignments to the global organization -- to develop product initiatives with a three-year or longer horizon -- and the regional organizations such as the U.S., where they have profit-and-loss responsibility and focus on executing those global plans.
It's a flatter and less hierarchical organization than many, Mr. Lacik said, adding that he feels comfortable bypassing the chain of command to call Chairman-CEO Bart Becht directly -- something he'd never have tried at P&G.
Promotion comes based on merit, with no preset tenure required and an expectation of a transfer six to eight months after mastering a job. "We throw people into the pool. ... Once they know how to swim, we throw them into the next pool," Mr. de Groot said.
Much of the culture comes from the German-Dutch Benckiser side, which Reckitt & Colman acquired in 1999. While Reckitt took over Benckiser financially and the company is based in the U.K., the latter took over culturally, from Mr. Becht on down.
Over the years, the company softened the Benckiser approach, which included little training and lots of focus on acquiring talent from outside, Mr. de Groot said. Reckitt still hires from outside but has stepped up entry-level hires, promotions from within and on-the-job training to build a more cohesive culture.
Yet the potential for rapid promotion and global transfers helps create an entrepreneurial spirit by attracting and creating risk takers, he said. "You attract people who are more mobile, and you inspire mobility at the same time."
Reckitt marketing executives who came from other package-goods companies generally say they've encountered far less process and bureaucracy than at their old posts. One exception is Joanne Cotignola, marketing director on Mucinex, acquired earlier this year with the purchase of Adams Therapeutics. Ms. Cotignola welcomes a bit more process and resources than she had with a start-up. She said the integration went seamlessly, possibly because bringing new people into the fold is a way of life amid the churn at Reckitt.
And while that's been getting rarer in package-goods companies, it may not be for long. Paul Polman, incoming CEO of Unilever, began his career in the same Dutch P&G organization as his mentor, former P&G Chairman-CEO Durk Jager, and current Reckitt Chairman-CEO Bart Becht. The latter two certainly have valued speed and rapid mobility of global talent during their careers, and Mr. Polman now has an opportunity to put a similar stamp on Unilever.
So while it may look like the age of the expat is waning in package-goods marketing, it may really be just starting.
Five things you can learn from Reckitt Benckiser1. Global diversity pays. By creating a multinational culture with frequent transfers, the company has broadened its outlook and attracted and spawned more risk takers.
2. TV advertising works -- at least for now. Reckitt keeps spending more on advertising, particularly TV, and it keeps posting unbelievably strong top-line growth.
3. Conflict beats forced consensus. "In that friction, one of those sparks that flies out will be a richer idea," said Alexander Lacik, general manager-marketing of North American household products.
4. Role reversal helps. Reckitt executives cycle often between global roles with three-year-plus horizons and short-term, profit-and-loss-driven regional assignments, so they understand the people and purpose on both sides.
5. Recession doesn't have to be a deal breaker. Through a substantial economic and industry downturn, Reckitt has raised spending, accelerated sales and gained share.