THE ACQUISITION KING: RECKITT BENCKISER
“We are what we repeatedly do. Excellence, then, is not an act, but a habit.” – Aristotle
There is an ever-growing scrutiny whenever one hears the term ‘Mergers and Acquisitions’. It elates the bankers but frightens the general investor. It is right to be frightened, according to a KPMG study, 83% of merger deals fail to bring value to the table. On an even more sour note, research from a Harvard Business Review report suggests a M&A success rate of just 10-30%. These are abysmal numbers!
Personally, I too look at M&A activity with scorn. However, sometimes, you uncover a company that has largely been doing the unthinkable, inorganic M&A driven growth, repeatedly, and with great success.
This company, Reckitt Benckiser or simply known as ‘RB’, now owns a vast medley of market leading brands. Reckitt Benckiser, as the name suggests, isn’t a person’s name, it’s an entity formed from the merger of three independent companies.
Reckitt Benckiser as a company has existed since 1999, but its roots can be traced back to the early 1800s.
The first cog, Benckiser, was founded in Germany by a chemist, Johann Adam Benckiser in 1823 and primarily served as a specialized chemical company manufacturing hydrochloric acid, ammonia, and ammonium chloride. Across the English Channel, the second cog, Reckitt and Sons was founded in Hull in 1840 and manufactured household products such as polish, laundry blue and starch. And the third cog, J&J Colman, a flour mill and mustard maker, set up operations in Norwich in 1814.
What I cover next in one line took almost a century otherwise!
The early 1930’s saw a flurry of unbelievably successful M&A activity amongst Reckitt Benckiser’s predecessors. These were the formative years of the Reckitt Benckiser that we see today!
Reckitt and Sons acquired Harpic Lavatory Cleaner in 1932 and today, Harpic, is the No 1 selling toilet cleaner in the world.
1933 saw the introduction of ‘Dettol’ by Reckitt and Sons. Dettol was introduced as a disinfectant in hospitals, primarily used to disinfect skin during surgical procedures and to protect mothers from illness post childbirth. It cemented itself as a legacy brand in the early 1940s and grabbed an absurd 85% market share in the antiseptic liquid market. It contributed significantly towards reducing the morbidity rate of sepsis during birth by an impressive 50% within 4 years of its launch and hence became a brand that doctors swear by even today!
Reckitt and Colman Ltd, was founded in 1938 after a merger between Reckitt and Sons and J&J Colman. This new entity now housed food and household products. However, the focus of this new company was poised predominantly towards household health and hygiene products than foods.
Veet, the now No 1 depilatory brand, was acquired in 1969 from American Home Products Corporation.
1985 saw the acquisitions of popular Airwick (founded independently in USA in 1943) and Carpet Fresh brands. These opened the door to the ‘air care’ segment, with Airwick being particularly popular and now ranking as the No 2 brand worldwide serving over 80 countries. Over the years, they have expanded Airwick’s product line to cater to more niche and newer segments such as gels and auto sprays. Lysol, another cleaning and disinfecting brand, was acquired from Lehn and Fink in 1994.
Benckiser too got on board with acquisition activity, mopping up dishwashing brand Finish in 1987. Presently, Finish has grown to become the undisputed market leader in automatic dishwashing and is sold in over 70 countries. Vanish was acquired from Ecolab in 1987 and is now the leader in the global stain remover market for textiles.
These companies seemed to have a penchant for acquisitions, prudent acquisitions, which helped them establish themselves in the consumer health and hygiene space. Most of these acquired brands have now gone on to become ‘power brands’.
In 1999, Reckitt and Colman merged with Benckiser NV to form Reckitt Benckiser (RB) with their headquarters in Slough, England.
This mega merger enabled RB to bring multiple power brands under the same roof and enabled them to maximize sales channel utilization for existing products as well as newer products.
Under the astute leadership of CEO, Bart Becht, from 1995 to 2011, Reckitt Benckiser grew at a rapid pace thanks to a highly focused approach on core ‘power brands’ and improving supply chain management. Throughout these years, the customer loyalty and outreach that was built over decades, was capitalized upon and new products found easy acceptance in markets. During his tenure, Reckitt Benckiser was an outperformer on the FTSE 100, with its market value soaring five-fold.
The company has consistently reaped the benefits from its focus on power brands; these 19 power brands now contribute to around 70% of annual net revenues.
In 2005, they acquired Boots Healthcare International which brought three key brands into their fold; Nurofen’s analgesics, Strepsils sore throat lozenges, and Clearasil anti acne treatment.
Mucinex brand was added after the acquisition of Adams Respiratory Therapeutics in 2008. Scholl’s footwear care and Durex condoms brands were welcomed into the fray following the acquisition of SSL International in 2010.
Business Week also noted that “40% of Reckitt Benckiser’s $10.5 billion in 2007 revenues came from products launched within the previous three years.”, which I believe is a testimony to their strength in sales channels and the ability of identifying and catering to the needs of the masses.
In 2014, Reckitt Benckiser’s name was changed to simply ‘RB’.
2017 saw the acquisition of Mead Johnson Nutrition, adding Enfamil, an infant formula brand into their ever-growing product range which also stands as the No 1 family of milk formulas.
Today, RB has come a distant mile from its simple roots to becoming a leading global consumer health and hygiene company having operations in over 60 countries, with products being sold in over 200. It has been successful in developing a bond of trust with its consumers which has allowed their brands to dominate the market.
The RB of today does owe a significant amount of its growth to its (predecessor’s) outstanding acquisitions. However, RB’s unique and rare ability of enhancing and developing synergies in their product line and business model cannot be overlooked!
RB truly is the unrivaled king of Mergers and Acquisitions!
I have thoroughly enjoyed working on RB’s story. Unfortunately, I have had to omit a few of their ‘power brands’ in this post to ensure that it remains a quick and light read for you.
In case you wish to know more, here is a list of their key brands:
Hygiene – Harpic, Vanish, Finish, Mortein, Air Wick, Lysol, Calgon, Cillit Bang, Woolite
Health – Dettol, Durex, Nurofen, Mucinex, Strepsils, Scholl, Veet, Gaviscon
Nutrition – Enfamil, Nutramigen