Reckitt Benckiser (RB) delivered its strongest ever sales growth last year as the pandemic drove demand for its cleaning and hygiene products.
After a particularly robust final quarter for its Hygiene division, the British group’s like-for-like sales rose 11.8% to £13.99bn during 2020. Adjusted operating profit edged up 0.7% on a constant currency basis to £3.30bn, held back by its investment programme launched at the start of last year and Covid-related costs.
Like-for-like sales in RB’s Hygiene division jumped 25.7% in the fourth quarter and by 19.5% to £5.82bn across the year. The group stated that the performance was driven by its Lysol and Finish brands, with robust growth in all regions, particularly North America.
At 2.8%, sales growth in RB’s Health division was more subdued in the final quarter of 2020 due to declines for its Nurofen and Strepsils brands that reflected a weak cough, cold and flu season. However, the unit still delivered growth of 12.1% to £4.89bn in the full year amid raised consumer demand for its Dettol disinfectant brand. The group said its Durex and Gaviscon brands also outperformed their respective markets.
Looking ahead, RB expects sales in 2021 to come in flat or up 2% due to tough comparables against last year’s exceptional figures. Chief Executive Laxman Narasimhan said that while he expects some of the hygiene demand to moderate over the long term, it would still be a “substantially larger underlying market” than before the pandemic.
The company spent about £745m last year on initiatives to boost growth, including the expansion of its disinfectant product distribution to more countries and markets. This has included more business customers such as providers of accommodation, travel services, public spaces and events, and offices.
Narasimhan described last year as a “turning point” for the company, adding: “We expect 2021 to be a year of further strategic progress and we remain confident that we will meet our medium-term targets.”
Meanwhile, RB announced today that it had launched a strategic review of its Chinese baby formula business, acquired with the purchase of Mead Johnson Nutrition four years ago. This has struggled to compete with local brands and the company took a £985m impairment charge on the business in 2020. It represents 6% of group sales and RB stating that multiple options were being explored.
The group also revealed that it had agreed to sell its footcare brand Scholl to private equity group Yellow Wood Partners, the owner of the rival Dr. Scholl’s brand, for an undisclosed sum.
Commenting on the sale, Narasimhan said: “Scholl is now ready for its next exciting phase of growth and, building on the strong foundations established over the last ten years, we are confident it would reach even greater heights under Yellow Wood’s ownership, with the unique opportunity of reuniting Scholl with Dr. Scholl’s.”
Dana Schmaltz, partner at Yellow Wood, added: “We are excited to reunite the Scholl brand globally to continue the legacy and heritage of the century-old Dr Scholl’s brand.”
It was also announced today that RB has agreed to acquire US brand Biofreeze from Performance Health, a company owned by Madison Dearborn Partners. The group highlighted that the topical pain relief brand has delivered double-digit sales growth.
Narasimhan commented: “Biofreeze has a strong strategic and synergistic fit with RB’s brand portfolio. We see compelling opportunities to develop the topical pain relief category globally with Biofreeze and other RB pain management brands including Nurofen, Moov and Tempra.”
RB stated that the two deals were part of moves to position its product portfolio towards higher growth brands and markets.
NAM Implications:
- Time for rivals to reassess relative competitive appeal in key RB categories?
- Besides taking a ‘re-freshed’ look at footcare and topical pain relief categories…
