RB Pumps up Spending in Developing Markets

Shifts Ad-Reporting Procedure, Which CEO Kapoor Calls 'Outdated' in Digital Age

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Reckitt Benckiser, after seeing its once industry-leading growth slow the past year, is reorganizing to put more emphasis on developing markets, cutting overhead to invest around $160 million more in marketing globally.

Rakesh Kapoor
Rakesh Kapoor

RB also plans by next year to stop telling investors how much it spends on media and instead focus on a broader measure of brand-building investment, including such areas as social media or programs aimed at medical professionals. The move comes as such rivals as Procter & Gamble Co.and Unilever in recent weeks have talked about the growth of digital media in their mix helping them moderate marketing spending.

RB's restructuring announced today combines the Parsippany, N.J.-based North American unit into a new Europe and North America unit based in Amsterdam. But a spokesman for the company said in an email, "There are no current plans in place for any employee headcount reduction in the U.S." He added: "We'll continue to look at our operation to ensure we are as efficient as we can be."

Jiri Kulik, who had been RB's top U.S. marketer, has headed to Miami, where he's now senior VP overseeing the company's Latin America operations, after a little over a year as general manager-U.S. marketing. The Miami office will move to Sao Paulo this summer.

Taking Mr. Kulik's place is Laurent Faracci, who most recently was global category director for Lysol and Dettol and previously has been a marketing director in Germany and general manager in Hungary and Romania.

Frederic Larmuseau, who previously held the post taken by Mr. Kulik, has become senior VP-North America. He'll report to Rob de Groot, who becomes exec VP-Europe and North America, based in Amsterdam. Mr. de Groot previously headed the North America, Australia and New Zealand unit.

The latter two countries become part of a Latin America and Pacific unit headquartered in Singapore. Russia, the countries of the former Soviet Union and Africa become part of another unit based in Dubai.

Overall, the goal is to help get developing markets from 42% of RB's sales to 50% by 2016 and make its more profitable health and hygiene brands such as Mucinex and Durex a bigger proportion of the company. As Rakesh Kapoor, who succeeded longtime RB CEO Bart Becht last year, puts his imprint on the company, he's looking to shift both management and marketing spending to achieve that goal.

Speaking to analysts and investors today, Mr. Kapoor said "there's a fundamental organizational imbalance between where the opportunity is , where the major consumer clusters are and where the organization resource is ."

To change that imbalance, he said RB expects to shift its management, now about two-to-one focused on developed markets, to "50-50 by the end of the year." He also expects marketing spending, now about 44% in developing markets, to shift in that direction.

RB spent about $1.8 billion on media globally last year, a similar 11.8% of its $15 billion in sales as last year.

By 2013, Mr. Kapoor said the company will stop talking to investors about media spending and instead focus on its "Brand Equity Index," which covers traditional media spending along digital and social media, medical professional programs and consumer educational programs. The company did not discuss specifics of the index.

Mr. Kapoor called the traditional reporting of advertising and promotion spending "outdated." For "avoidance of doubt for 2012, we will report media as we always did before," he said. "And we will show you that we will invest more on media as a percentage of net revenue in 2012 also."

To discourage managers from using price promotion to boost sales figures, RB will also make its financial reporting more like that of its U.S.-based peers by taking some trade or consumer promotion costs now treated as expenses and deducting them from net sales instead.

After beating most competitors on top-line growth for much of the prior decade, RB saw its organic top-line growth slow to around the middle of the pack last year at 4%. And the company is opening the door for somewhat slower growth in 2012, where it's new target would be to grow 2 percentage points faster than its markets, which it expects to grow 1% to 2%.

But RB beat analyst expectations for the fourth quarter for sales and earnings, and, combined with the announced changes, that sent its stock price up 3% in London trading.

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