Ad Spending, Price Hikes Help Fuel Sales Gains for Reckitt Benckiser

CEO Credits Growth in Eastern Europe but Says Volume Is Flat in U.S.

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BATAVIA, Ohio (AdAge.com) -- Reckitt Benckiser continued to use steep increases in ad spending to defy a worsening global economy and slowing category growth in the U.S. and Western Europe last quarter -- it turned in a 10% increase in organic-sales growth.
Globally, sales rose 24% for Reckitt last quarter.
Globally, sales rose 24% for Reckitt last quarter.

Reckitt today raised its target for full-year all-in revenue growth, including currency and acquisitions, to 13% from the prior 11%-to-12% target in light of better-than-expected third-quarter results.

Profit rose 31%
Globally, sales for the marketer of Airwick, Lysol and Finish rose 24% for Reckitt last quarter, including impact of currency and the acquisition late last year of the Adams Respiratory business, to around $2.8 billion. Net income rose 31% to around $480 million.

In its North America and Australia region, Reckitt had organic sales growth of 6%, up 23% if the impact of acquiring Adams, including Mucinex, is included.

Reckitt hiked marketing spending faster than sales last quarter -- it was up 27% (or 15% in constant currency) to 12.5% of sales, or around $350 million globally. That was up 0.3 percentage points from a year ago.

Flat sales in Western Europe
But good news for Reckitt isn't necessarily good for competitors. Chairman-CEO Bart Becht said on a conference call that the company's gains in Western Europe and North America came on flat volume and sales.

"There is no growth in Western Europe," Mr. Becht said of Reckitt's household, personal-care and over-the-counter drug businesses there, adding the same assessment of the U.S. "The strength of the growth on a global basis is coming out of Eastern Europe and the developing markets, which are growing in the teens [percentage growth]."

Overall, he said global growth in Reckitt's categories slowed by about a percentage point compared with last quarter. Despite that, Reckitt saw its 10% increase in global organic sales come from about six points of volume growth and four points from price, despite private label picking up about 0.1 to 0.2 percentage points of share in the categories where the company competes, Mr. Becht said.

"We are gaining share at a much faster pace," Mr. Becht said of global results. "There are some markets where private label has gained in importance," he said, but added: "We are not losing share to private label."
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