In an interview to CNBC-TV18’s Forbes India Show, Rakesh Kapoor, chief executive officer, Reckitt Benckiser explains the progress the company has made so far and how his journey has been till date. Kapoor started the company Reckitt Colman in India 25 years ago. Reckitt Benckiser is more commonly found in everybody’s homes as different brands like Dettol, Strepsils, Harpic, Cherry Blossom, which is now "Cherry" Charlie, Durex, Vanish, Airwick.
Q: You are having more and more Indians heading global companies, but when you joined Reckitt Colman, 25 years ago, did you think you will rise up to this?
A: You don’t think about your career in so many steps. You think about your career one step at a time and you can only do that provided, you do a great job at what you have been dealt with. So, I never thought about 10 steps in my life. I just thought of about the job I had at that time and tried to do it the best way I could. That took me to the next job and so on and so forth.
Q: You took over from Bart Becht, a man who is credited with really pushing Reckitt Benckiser into the big league with a number of acquisitions and that was the DNA. You took over Boots and Adams in which you are pretty closely involved. But is that time over? Is it consolidation time? Or are you still scouting out?
A: Although, we have some pretty interesting acquisitions over the last many years, but the whole story of Reckitt Benckiser is one of organic growth. If you strip out all the acquisitions – the last decade has produced a growth rate on a compounded basis of 7 percent per annum. That puts us at the top of the league in our industry. So, I think acquisitions have played a role, but Reckitt continues to be an organic growth story first and foremost.
We bought some brands both in India with Paras and in North America with Schiff. All of these play a role, but by and large the story still will be an organic growth story.
Q: Your site says, by 2020 you would like to atleast double revenues and you would like to see your power brands driving this. In India other companies have tried, the concept of power brand, but haven’t quite succeeded. How do you define a power brand and can you have a set of power brands that will work across geographies, in a developing market as well as in developed markets?
A: Earlier this year, just a few months after I had taken over as CEO, we decided that we needed to reshape the strategy of this company to be successful in the next decade. I just talked about how successful we have been in the last decade. We were one of the best-performing stories in our industry and clearly it is important for us to think about how we want to be successful in the next decade. Apart from that- thinking through the strategy was to really go back to the basics and the basics of who we wanted to be as a company, what we wanted to stand for and the purpose of this company .
Our purpose was having healthier lives and happier homes and I would like to explain the whole thing about power brands in the context of healthier lives and happier homes. That’s the reason why we created three planks or three platforms for our portfolio- health, hygiene and home. Now they also are connected. They seem like three discrete platforms, but to my mind, they are all connected. They are connected because you do need good hygiene to have good health and a healthier home is a happier home. We can unite the whole portfolio of our power brands within the umbrella of health, hygiene and home. We have 19 power brands around the world. So, there are some brands that provide hygiene; Dettol is a great example of that. You can wash your hands and keep them hygienically clean. You can keep your surfaces clean and hygienically clean.
Q: However, these 19 power brands are equally powerful all over the world. Or do you decide that in a particular country you will focus on one brand and another country, you’ll focus on some other brand?
A: Our ultimate goal is to have 19 power brands in all the countries. Now it is true that at this stage we do not have 19 power brands in every country, certainly not in India, the United States or in the United Kingdom (UK). And that offers us a tremendous opportunity to expand our power brand portfolio over time. That is something we call white space opportunities.
Q: When you say expand, do you mean expanding your existing 19 brands in all geographies or expand into other power brands as well?
A: Our first objective, which is called the organic story, is to take these 19 power brands and make them successful everywhere in the world. For example, in India in the last couple of years, we have launched Mucinex. We have launched Gaviscon and ofcourse Vanish a couple of years before that. So, we do take our power brands and take them into different parts of the world. We have just launched Vanish in test markets in China. So, these are things that we want to do. We believe 19 power brands can be important and successful in every market that we operate in the world.
Q: Do you tread emerging markets (EMs) differently from developed markets? Since consumer is centre of your existence, how is the consumer in EM different from that of developed market?
A: Apart from power brands, we also have a concept called ‘power markets’. Power markets is something we need to define very clearly for this company, simply because we do know that the world economy is not on one single track, there are possibly three different tracks that the world economy is on. The fast track of India and China; the medium-track; markets like Germany which are doing reasonably well and there are some slow tracks economies like Greece and Portugal don’t make pretty reading.
We have used a simple way of classifying markets and we have come up with 16 power markets, which will shape the growth of this company. A majority of these power markets are in developing or EMs. So we don’t really think about growth for developed versus developing, but we think about power markets. We focus our resources and provide additional dimension of growth through this power markets.
Q: India is not in your top six markets?
A: We don’t actually give out details by markets. Like which is our top market or the second market. We have a heritage of 80 years in this country, and India is a tremendous market for us. I hope it will continue to be a tremendous market for us.
Q: The sentiment around India vacillates between euphoria and despair. Either India can do nothing right or India can do no wrong? Where is it in your opinion today?
A: If you take a short-term view about anything, you are going to have problem. I am one who takes a long-term view on our key markets. India is a great story for everyone. One can get myopic, mired in daily headlines but I don’t want to read these daily headlines about India. I want to read the long-term story on India and the long-term story is fantastic.
Q: What drives acquisitions? In the context of Paras Pharmaceuticals, you bought over Paras, you sold some brands to Marico. What drives these decisions?
A: We have a very simple and clear acquisition strategy. In the context of the acquisitions we have done, we want to buy companies which can add to our power brand portfolio. We believe those brands have the opportunity to go globally. For example in the SSL acquisition we did, we got Nurofen, Strepsils. Clearasil is an example of adding power brands to our portfolio. We could take those power brands around the world. We are rolling out Nurofen and Strepsils in many markets
The second type of acquisition we have done and will do is where we can build a geographic platform, where we don’t have one. Paras Pharma fits nicely in this kind of a strategy because in India, which is one of the most important markets for any company, you want to have a healthcare platform and we did not have one. Paras gave us that capability. It also brought us wonderful set of brands like Moov (topical analgesic), D-Cold which is for cold and flu. There are also other interesting brands like Dermicool, etc.
The third type of acquisition which we have done just now, is when we bought Schiff Nutrition in the US. In that scenario, we enter a new category. Vitamins, minerals and supplements (VMS) is a USD 30 billion category, growing at 4 percent per annum and we believe that offers us exciting opportunities in the years to come hence, we chose Schiff.
These are the types of acquisitions we do for a simple reason of building new power brands, entering into new categories or building geographic platforms.
Q: You made it to the Forbes Most Innovative Company list. You’ve made that atleast 2-3 times and you are right in the top 10-12. As a philosophy, you say that your company grows through innovations yet you spend a very little amount on research and development (R&D) per se. So how does that trade off?
A: It is a very interesting thing because innovation is not about R&D spending. If you think about it, the biggest R&D spenders in the world are the healthcare and traditional pharma companies and our R&D spend is under 2% of net revenue
Innovations are about ideas and ideas are not dependent on just R&D, it is dependent on people. So either a company is innovative or its not. It needs to be in your DNA, in your blood and Reckitt Benckiser’s blood basically flows with innovation.
Q: You have grown organically but you have also grown a large amount by acquisitions? How do you keep this blood of innovation flowing into companies that you have just bought over? Or do you look for innovative companies before you pick some up?
A: When we get companies, we get them because the brands are interesting or because we want to build geographic platforms. We don’t rely necessarily on new companies to bring us innovation. If it brings innovation, then that is good.
The most important way to be innovative is to have a culture inside the company which breeds entrepreneurship; where risk taking is okay, where you can allow people to win big, even if they fail small, and where you do not punish a failure just because somebody had the courage to take an idea and drive that idea.
Q: What is your idea of risk taking?
A: Innovation is not just about branding, it is not just about marketing. It is about how you go to market; it is about how you drive a supply chain. It is about how you buy a product and about how you advertise. So, if it is in the DNA, it is not just affecting one side or one part of the function, but across the whole company. One of my job as the CEO is to make sure that the culture of innovation thrives in this company.
Q: You spend 12 percent of your revenue in advertising, 90 percent of that in television. Recently when you found that the dishwash market was not growing faster than you thought it would in the US, you moved out from TV to educating the customer as you called it. What does it mean or what medium did you use?
A: What we want to set in this market is not just brand equity. Brand equity for us is not just traditional advertising, advertising on different mediums or doing much more social media, social marketing. It is also educating consumers. So for example, in more than 35 countries around the world, we go and educate mothers, new mothers on hygiene practices. The touchpoint really, is hospitals. We educate nurses and we go to schools and do programmes. We go to 3,500 schools in India and talk about how to keep yourself hygienically clean. How to do better hand wash because we do believe a company like ours can only live our purpose, when we do not just advertise or market, but also educate. I am not talking about education just in better hygiene and Dettol, but also in Harpic and I can go on and on. We have social programmes on all of these brands, which is very important for us.
Q: Let me just get back to the medium that you use, because so far TV has been primarily your medium of choice. What will drive you to newer digital media? What will determine your shift to different media?
A: No, TV is very important and it will stay very relevant. It is a very important medium, but the fact of the matter is, that today’s consumer wants to be empowered and when they want to be empowered, they want to have a voice and somehow TV alone does not allow you to have a voice back. That is why brands want to engage with social media, because they want the consumers to participate in the story of the brands and we want to do that too.
So what we are doing is really radically shifting our mindset in our company to embrace some of those new opportunities that now marketers have. When I was born, we just had black and white television and there was a shift to colour. Now, the wonderful world of marketing means that new brand managers, young brand managers who have access to so many fantastic media are allowing consumers to participate. For example, very recently we have launched a new Durex condom, which is designed completely by people. We ran a contest amongst millions of consumers to design the next generation of condom and packaging.
Q: How do you measure success in digital?
A: Interestingly, some of the metrics on digital are even more sophisticated than they are on television or on print. Digital can be very targeted. It can be very one-to-one. So you actually know, which person, how many people came and interacted with your advertising or with your web.
So, the metrics are even more sophisticated and we have spent a lot of time to actually find out a metric, through which we can isolate, but also add the amount of impressions we are making on digital media, television and print and then look at the return on investment. That is why we have significantly increased our investment in the digital space around the world.
Q: How much percent of your advertising is in TV now? It was 90 percent. Is it still 90 percent?
A: In some markets including in India, it is still over 90 percent. However, in markets like the US, we are now delivering more than 30-40 percent of what is called our share of impressions or share of voice, throughout the digital world.
Q: You touched upon China and you have been in India for about 80 years. China is relatively new maybe 20 years. What is the potential in China? How easy is it to build brands there?
A: We are young in China. Building brands anywhere is not easy. Building brand is very painstaking. You have to be dedicated to it and it cannot be done overnight. You can destroy a brand overnight but you can’t build them overnight.
In China, we are young but we are making progress. We have made progress over the last few years. Infact, we have an Indian running the operations in China which is amazing. I have much more confidence about our progress in China. I do believe that in the years to come, this is going to be a very exciting market for us.
Q: Is the consumer different there? Are there common brands that do well in both the countries? Are there brands that are exclusive to the country?
A: The BRIC countries represent a very large consumer cluster, but apart from these BRIC clusters or BRIC consumers, you also have two very other powerful clusters in the emerging markets which we want to recognise and have recognised. One is the Arab cluster and then there is another very important cluster, which I believe will add substantial value for companies in the next decade. And that cluster is the African cluster. We have got six very significant consumer clusters around the world. In the past, we used to handle all of these six clusters through one lens called developing markets.
However, we have now broken up those to six clusters and changed the developing market footprint to include two distinct areas. We have these six clusters being managed by regional heads who are looking after these consumer clusters. We have got a two area organisation servicing these six clusters rather than one. So, we have made a fundamental change in how we approach consumer clusters, because we believe there are differences amongst these six clusters.
Q: Can you point out significant differences, interesting differences that you have?
A: Take the attitude to cleaning as an example. In Latin America, consumers clean their homes and polish their floors much more frequently than people in China or in India. As an Indian, I know that we do love our cleaning, but the intensity with which Latin Americans would clean and polish their homes is much more intense versus what is right now in India. Attitudes to germs are different to around the world. Some people have more laissez-faire to germs and some are much more concerned about germs. Some of these mindsets are different. Some of these markets are also in different stages of revolution. That also makes them different.
Q: The Arab market is not normally taken out as a block. What made you look at it? Are you among the earliest to do that? What is the key differentiation that you saw there?
A: The fact of the matter is the Arabs follow us, certain customers, certain way of life. You have to recognise and respect that and as consumer marketers, our job is to understand precisely, exactly what they want and how they want it. So, the way we talk to Arab consumers, the way we advertise, the way we brand our claims, we have to take those sensitivities, cultural sensitivities in mind.