Global Economics

Booming Reckitt Vows 20% Carbon Cut


The household products giant Reckitt Benckiser's CEO says the ambitious environmental plan makes sense from a business point of view too

Reckitt Benckiser unveiled an ambitious plan yesterday to cut the overall carbon footprint of its products by 20 per cent by the year 2020.

Chief executive Bart Becht said that the company's new "Carbon20" programme will encompass everything from reducing the packaging on its AirWick fresheners to convincing buyers of its Finish tablets to run their dishwashers at 50C rather than 65C. If half of European households did that, he said, it would be the equivalent of taking 100,000 cars off the road.

It was a typically savvy bit of marketing from Mr Becht, the 50-year-old, buttoned-down, Dutchman who has run the world's biggest maker of household products since 2000, when he took over after combining Benckiser, the Dutch group he ran, with Reckitt & Colman.

At a time when consumer companies like PepsiCo and Tesco are trumpeting new carbon-reducing initiatives, Reckitt's focus on the "cradle-to- grave" life of its products seems to go further than most.

Even better, it will help the bottom line. "It makes sense from a business point of view. Consumers are increasingly concerned about climate change," he said. "We believe that, with our work in this area, it will clearly help differentiate our products, and consumers will gradually start preferring our products."

He painted the initiative as an extension of the greening effort he kicked off when he took the helm seven years ago. Yet his incarnation as a carbon warrior bemused some in the City. "I was surprised by this. Reckitt has never been considered the most environmentally-enlightened company, they are typical red-blooded capitalists. They look after shareholders first," an analyst who follows Reckitt said. "When Becht has been asked about the environmental-friendliness of his products in the past, he has shrugged them aside."

Not that investors care. Indeed, Mr Becht is incredibly well regarded by the City as the man responsible for overseeing astonishing growth and investor returns. When Mr Becht took over, Reckitt's share price was hanging around £5. At yesterday's close, its shares stood at £27.45, a more than fivefold increase since then.

"The key word is focus. They focus on a few brands, invest heavily in innovation and back it up with ad spend, and it works," said David Hallam, an analyst with Evolution Securities. "Becht is seen as the architect."

Perhaps the most notorious example is Cillit Bang, the home surface cleaner promoted in kitsch television ads fronted by over-enthused spokesman Barry Scott. Finish dishwashing tablets are a case study in squeezing as much as possible out of product. Over the past few years, Reckitt has rolled out Finish 3-in-1, Finish 5-in-1, and, most recently, Finish Quantum, with price increases every step of the way.

Mr Becht has put great focus on cost reduction and share buybacks in his drive toward hitting his perennial "4-8-12" goal: 4 per cent annual revenue growth, 8 per cent in earnings and 12 per cent earnings per share.

"They make products in not very exciting categories like toilet cleaning and pest control, but they grow their business as fast as GlaxoSmithKline and Vodafone," Martin Deboo, an analyst at Investec, said. The company also chooses its markets very carefully, focusing on niches within larger categories so as to avoid direct competition with goliaths like Procter & Gamble. "The sectors they operate in don't attract the really nasty competitors," said Mr Deboo.

Rather than an altruistic new venture, the Carbon20 programme is seen as just another shrewd business tactic. "They've done this because they have to, because they have these products that are seen as messy and full of lethal chemicals," the analyst said. "It's a barometer of the fact that environmental credentials are no longer a nice-to have, but a must-have. "

Unilever revival

Unilever may have finally turned the corner. The maker of Surf washing powder and Ben & Jerry's Ice Cream saw its shares soar yesterday after it unveiled its sixth straight quarter of sales growth and third consecutive quarter of margin improvement. It was enough to stoke hope among investors that the restructuring instituted by chief executive Patrick Cescau has built up some momentum. For years, the company could only look longingly at rival Reckitt Benckiser's share price, which has charted a steady upward march. Unilever, a behemoth of a company that suffered from a lack of focus and layers of overlapping operations and brands, has been lumpy, bumping up and down like an ECG. Yet the "One Unilever" programme led by Mr Cescau is starting to pay off. As well as laying off 27,000 people last year, the company got rid of non-core businesses and shifted focus to emerging markets. It has also focussed on a few key brands. It will be hoping the strategy will be as successful as it has been for Reckitt. " Reckitt have had eight years of stunning growth so they have been given a great rating. Unilever is almost exactly the opposite," said Martin Deboo, an Investec analyst. "Buying in now is basically a bet that they can do what Reckitt have been doing for years, which is grow the top-line and bottom line at the same time."

Provided by The Independent—from London, for Independent minds worldwide

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