Mention the name Reckitt Benckiser and chances are you'll draw a blank look from most South Africans. Yet if they were to open their kitchen cupboards they would probably find at least one of the company's products in them.
For Reckitt Benckiser is not only the world's largest household cleaning company (excluding detergents), it also owns some of the best-known health-care brands. Among them are Dettol, Vanish, Woolite, Harpic and Nugget in the house-care market, and Nurofen, Strepsils and Disprin in the health-care sector.
WHAT IT MEANS
 Brands should be number one or two
The company is one of SA's top advertisers
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With such an array of well-known brands, it's not surprising that the company is one of the country's top advertisers: it is ranked third in terms of adspend with the SABC and among the country's top 10 advertisers overall.
"Ours is a marketing story. We invest aggressively to create and grow market categories and subsequently to maintain strong number one positions," says Nitish Kapoor, marketing director for Reckitt Benckiser's operations in Southern Africa. It is not surprising therefore that the company globally invests about 12% of net revenue in media investment (advertising) to support its brands.
It makes for good business. Since the formation of the company from the merger of the UK's Reckitt & Colman and Holland's Benckiser in 1999, revenues have increased from £3bn to £4,2bn in 2005 while net income has more than tripled to £670m over the same period.
It is one of the most consistent performers on the London Stock Exchange.
The picture is much the same at the SA operation, which is responsible for countries in the Southern African Development Community (SADC).
Jiri Kulik, GM for Southern Africa, says the group last year sold about R1,5bn worth of goods, of which about 15% were exports.
"Southern Africa is one of the most profitable operations among the 60 countries in which Reckitt Benckiser has a presence," says Kulik, a native of the Czech Republic, who has just moved to SA from Turkey, where he was the group's marketing director.
Kulik says the group has gained market share in recent years. "Our growth rate has been 1,5 times that of the market, which suggests that we are making inroads into our competitors' share."
The group employs about 600 staff in SA and more than 100 at a factory in Harare, which produces items exclusively for the Zimbabwean market.
Counting more than 50 products in its portfolio of brands means that marketing is at the heart of what the company does; and the strategy is driven by both global and local imperatives.
Globally the company concentrates on five core categories - fabric care, surface care, dishwashing, home care and health & personal care - and it endeavours to make its brands number one or two in their respective markets. The brands that are in these positions account for about 75% of group revenue. There is also a focus on what the company terms its "power brands", 15 products that are high-margin and are responsible for a large portion of sales.
A third key marketing policy is to ensure a continued flow of new products. Worldwide 40% of net revenues come from brands launched in the previous three years.
The global strategy is augmented by local marketing, which focuses on market specifics. For example, Kulik explains, the penetration of dishwashers in SA is a mere 3% compared with 30% in Turkey. "By growing the market for dishwashers through various marketing initiatives we are creating more customers for our products," he says.
Similarly, Dettol backs hygiene programmes at schools, an initiative which at the same time serves to create a market for Reckitt Benckiser products.
Kulik believes the growth of the black middle class in particular should ensure the SA market continues to grow strongly, "particularly as this market is brand and quality conscious".
"We also have a balanced portfolio which guarantees that sales growth is consistent and not subject to too many cyclical variances," he adds.
Reckitt Benckiser manufactures about 70% of its products locally, with the rest being imported. "As a rule we try to produce locally and the company has about 47 manufacturing facilities worldwide doing just that," says Kulik.
"But where specific technologies are needed we import those products as it is more cost-effective. For example, our cosmetic products come from the group's factory in France," he adds.
Though the company produces the bulk of its products at plants it owns, a portion of its manufacturing work is outsourced. In 2003 Reckitt Benckiser sold its Durban plant to plant management and Enaleni Pharmaceuticals, and awarded it the contract to manufacture some of its flagship brands, like Dettol, Codis and Disprin.
Enaleni has used this contract to expand its operations into the generic drug market and has also acquired additional export contracts to Nigeria and China.
For now, Kulik does not envisage new investment in local production capacity.
"We have scaled up to where we want to be," he says, adding that cost competitiveness among the company's various international facilities is crucial. "When the rand was strong the costs of producing here were slightly high, particularly in view of the emergence of China as a low-cost producer.
"But with the rand at its current weaker level the cost of manufacturing in SA is competitive again," Kulik says.
Like other multinationals, Reckitt Benckiser is grappling with SA's black economic empowerment (BEE) policies and is working to ensure compliance with BEE charters.
"We believe we are meeting the vast majority of BEE requirements, including procurement and management training," says Kulik. For example, he points out, Enaleni is a BEE company.
But he rules out a sale of a stake in the local operation. "It is the group's strategy to control 100% of all its divisions. Even in countries where we were forced to sell shares, such as in Pakistan, India and Indonesia, we have bought back those interests at the earliest opportunity".
The group has also embarked on a strong drive to recruit local black skills, having launched a graduate training programme where 10-15 people are trained every two years, of which the bulk join the company. About 20 expatriates work in SA at any one time, but many South Africans are also recruited to other Reckitt Benckiser operations around the globe.
"It's a truly multinational company, with 12 different nationalities among the top 40 executives and 40 nationalities among the top 400," says Kulik.
SABMiller CEO Graham Mackay is a nonexecutive director of the global company.
