Reckitt Benckiser Plc Business Information, Profile, and History

Company Perspectives:

Reckitt Benckiser is about passionately delivering better solutions in household cleaning and health & personal care to customers and consumers, wherever they may be, for the ultimate purpose of creating shareholder value. This vision defines both our purpose and our values as a Company.

History of Reckitt Benckiser Plc

Reckitt Benckiser plc is one of the world's largest household products companies. Formed in December 1999 from the merger of Reckitt & Colman plc and Benckiser N.V., Reckitt Benckiser owns a wide range of household brands in five main areas. Surface care products, which generated 24 percent of 2000 revenues, include disinfecting, bathroom, general purpose, and specialty cleaning products, as well as polishes and waxes, under such brands as Lysol, Dettox, Harpic, Veja, Easy-Off, Mop & Glo, Lime-A-Way, Poliflor, and Old English. Fabric care, responsible for 26 percent of revenues, includes such areas as fabric treatment (Vanish, Spray'n Wash, Resolve), fine fabric treatment (Woolite), water softeners (Calgon), fabric softeners (Quanto, Flor), and laundry detergent (Dosia). Products used in automatic dishwashers, which generated 13 percent of 2000 revenues, include such brands as Calgonit, Finish, Electrosol, and Jet Dry. About 12 percent of revenues came from the company's home care category, which is comprised of air care products (Air Wick, Wizard, Haze), pest control items (d-Con, Mortein), and shoe care products (Nugget, Cherry Blossom). Finally, health and personal care products generated another 12 percent of 2000 revenues and encompassed antiseptics (Dettol), depilatories for removing unwanted body hair (Veet, Immac), denture care (Kukident, Steradent), analgesics for pain relief and cold and flu remedies (Disprin, Lemsip, Bonjela), and gastrointestinal products for heartburn and constipation (Gaviscon, Senokot, Fybogel). Reckitt Benckiser also retains a small presence in the food industry through its French's business in the United States, producer of mustards and sauces; this business line is a holdover from Reckitt & Colman, which had a rich legacy in the food industry. Geographically, 2000 revenues broke down as follows: Western Europe, 41 percent; North America, 30 percent; Asia-Pacific region, 11 percent; Latin America, 8 percent; and the rest of the world, 10 percent. Reckitt Benckiser sells its products in 180 countries worldwide.

Forerunners of Reckitt & Colman

Three sets of roots gave rise to Reckitt & Colman. The company's evolution was gradual, marked with repeated attempts to graft the stems together. At a watermill in the English countryside near Norwich, Jeremiah Colman began milling flour and mustard in 1814. The business was named J&J Colman nine years later when the childless founder made his nephew James a partner. When they outgrew their first mill at Stoke Holy Cross, Norwich, in 1854, the Colmans built the first mustard mill in Britain at Carrow, Norwich. They added mills for wheat flour, starch, and laundry bluing at the same location.

The Colman line continued to flourish, and expanded again in 1903 with the purchase of Keen, Robinson and Company, a food company that had been in business since 1742. Keen, Robinson's products included mustard, spices, and foods for infants and invalids such as Robinson's patent barley and groats.

Entry into the starch business had brought the Colmans into rivalry with Isaac Reckitt, a starch manufacturer. Reckitt had started out in business in 1819, milling flour at the Maud Foster Mill in Boston, Lincolnshire. The mill and the flour business were both left behind in 1840 when he bought Middleton's starch works at Dansom Lane, Hull. This business was a success, and he soon made his sons partners and added new products. Washing blue and blacklead for polishing grates were both added in the 1850s, and synthetic ultramarine for bluing was added in 1883.

The Reckitts formed a private company, Reckitt & Sons Ltd., in 1879, and went public in 1888. Reckitt & Sons saw diversification of its product lines as the key to further growth and moved to diversify both through in-house development and through the acquisition of interests in companies with similar products. The introduction of Brasso, a new metal polish, in 1905 led to the acquisition of several polish producers. Reckitt & Sons bought Master Boot Polish Company and the William Berry Company in 1912 and the following year joined Dan and Charles Mason in establishing the Chiswick Polish Company. Reckitt & Sons held equal representation on the board with the Masons as well as a significant share in the company.

Reckitt & Sons continued to add new products related to its original line, even through the difficult years of World War I, and throughout the following decades. In the 1930s, with the addition of a germicide, they began to add pharmaceutical products.

The third branch of Reckitt & Colman began to take shape in 1886, when the Mason family began the Chiswick Soap Company. A producer of soft soap and polishes for metal and furniture, Chiswick received some early complaints about air pollution, but these did not deter the company. Cherry Blossom shoe polish was added in 1906, and a floor polish called Mansion was added about a year later.

Although the Chiswick shoe polish business did well in Britain, the company had a formidable rival for overseas business: the Nugget Polish Company Limited. When Nugget and Chiswick had to compete for allocations of turpentine during World War I, they decided to pool their efforts. In 1929, they merged to form Chiswick Products. The new company was owned jointly by the Nugget Polish Company and the Chiswick Polish Company—in fact, the success of this merger was a model for the merger of Reckitt & Sons and J&J Colman in 1938.

The merger of Reckitt & Sons and J&J Colman was the culmination of efforts begun many years before. In 1913 the two companies had stopped competing with each other for business in South America by forming a joint company, Atlantis Ltd., to penetrate the South American market. Atlantis was so successful that they decided to unite all of their overseas businesses. Finally, Reckitt & Colman Ltd. was formed in 1938 to hold and manage Reckitt & Sons and J&J Colman, although the two companies still kept separate identities and positions on the London stock exchange.

During World War II, the companies struggled to survive supply shortages, manpower problems, and the damage done by bombings. After the war, efforts began anew to bring them together as a single entity. In 1954, a merger of the Reckitt and Colman companies established Reckitt & Colman Holdings Ltd. Later that same year, Chiswick Products became part of the organization.

The newly organized company began to concentrate its efforts on developing new business in Europe and North America while it also continued to expand its markets in other parts of the world. A major concern in the acquisition and development of new companies and products was the preservation of the high quality that had won Colman's Mustard the Legion of Honor Award in Paris in 1878. Another major aim was to continue strengthening brand name recognition.

Reorganizing and Streamlining of Reckitt & Colman: 1960s-80s

As the company grew throughout the 1960s and 1970s, a number of reorganizations were necessary to accommodate the addition of other types of businesses, notably in the leisure industry. But the company maintained its identity as a manufacturer of brand name foods, household products, and pharmaceutical items to the world market. At times the rapid changes gave rise to speculation about the direction the company would take. Comments in the press referred to Reckitt & Colman as a "sprawling" company ready for restructuring because of the weaknesses in leadership brought about by the imminent retirement of both its chairman and vice-chairman. Although the company's overseas business had grown to more than 70 percent of its total trade, only one foreign subsidiary, R.T. French, U.S.A., had a representative on the board.

In the 1970s Reckitt & Colman established new divisions to increase production efficiency and improve communication. This reorganization took two years and was described in the press as a period of "abrasive reform," but it succeeded in focusing the company's efforts on a planned expansion program. During the early 1980s Reckitt & Colman embarked upon a carefully executed program which resulted in the expansion and streamlining of the company. This program included the development of innovative products, such as a dual-purpose toothpaste introduced in 1981 to clean both dentures and teeth.

Reckitt & Colman's position in North America was strengthened greatly by its 1985 acquisition of Airwick Industries, a manufacturer best known for its air fresheners, and the 1986 acquisitions of Durkee Famous Foods, a food producer, and Gold Seal, a manufacturer of laundry aids and bath additives including Mr. Bubble. Reckitt & Colman was widely criticized for overpaying for Airwick (its purchase price was almost 40 times earnings), but within the year, Reckitt & Colman had turned the underperforming Airwick around.

Also in the early 1980s, Reckitt & Colman plowed much of its U.S. profit back into household product development following the successful but very costly launch of Bully bathroom cleaner. But the basic products from which the innovative variations were developed continued to be popular. For example, French's mustard, made by Durkee-French in the North American group, continued to be the best-selling mustard in American grocery stores.

Also as a part of the streamlining program, Reckitt & Colman sold its unprofitable U.S. leisure industry businesses and, in 1985, it sold its U.S. potato-processing business. In addition, in 1988 the company sold its North American olive, cherry, and caper business. These sales helped channel the company's resources into lucrative areas more closely related to its brand name products. The one major exception to the company's streamlining strategy was a small group of fine arts, graphics, and pigments companies that were consistently profitable.

In 1989 Reckitt & Colman continued to expand in the personal care field, buying Nenuco, a Spanish babycare company. This acquisition also meshed with another of Reckitt & Colman's goals: preparation for the economic unification of Europe in 1992. In July 1989 the company became one of the first British companies to announce a major restructuring to accommodate the continent's internal market. Under the plan, responsibility for production and marketing of certain products was divided between facilities in the United Kingdom, West Germany, France, and Spain. For instance, all of Reckitt & Colman's metal polishes began to be manufactured in Spain following completion of the rationalization in 1991.

Reckitt & Colman in the 1990s: Emphasizing Household Products

Household products came to the fore for Reckitt & Colman during the 1990s through a series of acquisitions and the divestment of additional peripheral businesses, including most of the food operations. Aiming for global growth, the company was particularly interested in expanding its presence in the huge U.S. market. During 1990 Reckitt & Colman spent $1.3 billion for American Home Products' Boyle-Midway household division. Acquired through this transaction were a number of major brands, including Woolite fabric care products, Wizard air fresheners, Easy-Off oven cleaners, and Old English polishers. Boyle-Midway had 1989 sales of $752 million, with about half coming from the U.S. market, Canada accounting for 9 percent, and France, West Germany, and Spain together accounting for about 20 percent. With the completion of this deal, Reckitt & Colman became the seventh largest household products company in the world and the fifth largest in the United States.

In 1992 Vernon Sankey took over as chief executive of Reckitt & Colman. Under his leadership, the company completed a second key U.S. acquisition in 1994, the $1.55 billion purchase of L&F Household from Eastman Kodak Company. The key brand gained through the acquisition of L&F, which had 75 percent of its $775 million in annual sales in the United States, was the Lysol brand of disinfectants and cleaners, which accounted for about half of L&F's total sales. In addition, Reckitt & Colman also picked up Mop & Glo floor cleaners, d-Con pesticides, and Resolve carpet cleaners. The company was now the fourth largest household products company in both the United States and the world. To help fund this growth initiative, the company announced that it would sell its U.K. foods business, including its flagship Colman's mustard brand. The business was sold to Unilever during 1995 for £250 million in cash. This reduced Reckitt & Colman's involvement in the food business to only its French's unit in the United States, maker of mustard and sauces. Later in 1995 Michael Colman, great-great-great-nephew of Jeremiah Colman, retired as chairman of Reckitt & Colman, ending the more than 180 years of involvement of the Colman family in the business. Alan J. Dalby was named chairman in September 1995.

In addition to Colman's, Reckitt & Colman divested a number of other smaller businesses and brands in the mid-1990s in a continuing effort to focus on core lines, particularly those that held the number one or number two position in their categories. By 1997, 80 percent of revenues were generated by household products, a significant increase from the 50 percent figure of ten years earlier. With the acquisition of four brands from S.C. Johnson & Son, Inc., North America accounted for 36 percent of Reckitt & Colman sales, compared to the 31 percent figure for Europe. Added through this £96 million ($160 million) deal were the following brands: Spray'n Wash laundry stain remover, Glass Plus glass cleaner, Yes laundry detergent, and Vivid color-safe bleach.

By 1998, Reckitt & Colman was suffering from rising costs and the effects of economic turmoil in emerging markets of Latin America and Asia, where about one-third of its sales originated. Pretax profits fell by 25 percent in 1998 and the company's stock began sinking. With shareholder pressure increasing, Sankey resigned as chief executive in February 1999, with Michael Turrell, who had been global operations director, taking over on an acting basis. Restructuring efforts began in March, but Reckitt & Colman soon embarked on a new path to revitalization. The company had an impressive portfolio of household product brands but appeared to suffer from poor management. The company turned to a merger with Benckiser N.V. as its fix, hoping that the strong management at Benckiser could reenergize its strong brand lineup.

History of Benckiser

Johann Adam Benckiser founded Benckiser in 1823 as a manufacturer of industrial chemicals based in Ludwigshafen, near Frankfurt, Germany. For the remainder of the 19th century and more than half of the 20th century, Joh. A. Benckiser G.m.b.H. thrived as a low-key regional producer of a wide range of commodity chemicals, primarily citric acid, phosphates, and citrates. The firm began diversifying into consumer goods and industrial cleaning products in 1956, the same year it launched Calgon water softener. In 1964 Calgonit automatic dishwashing detergent was introduced, followed two years later by Quanto fabric softener.

By the 1970s, Albert Reimann, great-great-grandson of the company founder, had selected Martin Gruber, a loyal company veteran, to head Benckiser. The company had remained an independent family-owned firm, and Gruber told Reimann that he would do his best to see that it remained so. With the chemical industry dominated by huge multinationals, such as Pfizer and Hoffmann-La Roche, however, Benckiser was having difficulty competing and appeared destined to slowly slide downhill. The entrance of Peter Harf into the picture started a dramatic transformation.

Harf was a management consultant with a business degree from Harvard University. Gruber first hired Harf as a consultant, then in 1981 brought him onboard as an executive vice-president to implement a radical, yet simple, new strategy for the $250 million company: divest the founding chemicals business and use the proceeds to acquire brand name consumer products. From the early 1980s through the early 1990s Harf completed 26 acquisitions. Among the first was the St. Marc brand of general household cleaner, based in France, which was purchased in 1985. Two years later Harf undertook his first major acquisition, that of the worldwide branded consumer products division of Ecolab Inc. for $240 million. Benckiser thereby gained Electrosol dishwasher detergent, Jet-Dry dishwasher rinsing aid, and Scrub Free and Lime-A-Way cleaning products, and added $224 million in revenues to its $700 million revenue total of 1986.

Although the Ecolab division had been losing money, Harf was quickly able to turn the brands into profitable ones by adopting a strategy of offering good quality products at low prices, mainly by cutting costs through reduced promotion and packaging. Countering the trend toward brand globalization that was sweeping the industry at the time, Harf also aimed to keep his brands local, building customer loyalty by appealing to local preferences. These same strategies were successfully applied to other brands acquired in the succeeding years. In 1988 Benckiser acquired Mira Lanza and Panigel, two major Italian detergent brands. The following year the company purchased S.A. Camp Group, the largest privately owned detergent firm in Spain, for $282 million. Camp controlled between 20 and 25 percent of the detergent market in Spain, with its main brand called Colon. By this time, Harf was serving as chief executive of Benckiser.

In 1990 Benckiser purchased SmithKline Beecham's household products business in the United States and Canada, which included Cling Free fabric softener. One year later, the firm regained the U.S. rights to the Calgon brand, securing worldwide control of its best-known brand. Benckiser also expanded into the emerging markets of Eastern Europe during the early 1990s and made a push into the cosmetics sector. The latter development began in 1990 when Benckiser purchased SmithKline Beecham's cosmetics business, which included the Margaret Astor and Lancaster lines. The company soon added Jovan, Germaine Monteil (renamed Monteil Paris), Germany's Bogner Cosmetics, and Parfums Joop. Then in 1992 Benckiser paid $440 million to Pfizer for the Coty fragrance and cosmetics business, which encompassed several mass-market fragrances, including Lady Stetson and Exclamation. Coty's $280 million in sales made Benckiser the U.S. leader in mass-market fragrances. By 1994, out of total sales of $3.36 billion, Benckiser's nascent cosmetics business generated $1.53 billion while detergents and household cleaning products accounted for $1.75 billion.

In 1996 Benckiser made a hostile play for Maybelline Inc. in order to further bolster the cosmetics side, but the French cosmetics firm L'Oréal S.A. triumphed in a brief takeover battle. Later in 1996 Benckiser organized its worldwide cosmetics and fragrances operations within a single holding company called Coty Inc., which was spun off from Benckiser. Harf remained chairman of Benckiser but spent most of his time in his role as chairman and chief executive of Coty. Bart Becht, who joined Benckiser from Procter & Gamble in 1988, headed up the detergent side of Benckiser starting in 1995 and then became chief executive of the company following the spinoff of Coty.

By the late 1990s members of the Reimann family, concerned about hefty inheritance taxes that might have to be paid out by their estates, finally decided that the time had come to take the company public. In November 1997, after moving its corporate headquarters to Amsterdam for tax and accounting purposes and adopting the name Benckiser N.V., Benckiser completed a very successful initial public offering, which netted $704 million for the sale of 40 percent of the firm on the Amsterdam and New York exchanges. A little more than two years later, Benckiser merged with Reckitt & Colman to form Reckitt Benckiser plc.

1999 and Beyond: Reckitt Benckiser, Global Household Products Giant

The December 1999 merger of the two companies was engineered via a stock swap valued at about $3.5 billion. Because management wanted the new firm to be based in London and to have a listing on the London Stock Exchange, the deal was essentially structured as a takeover of Benckiser by Reckitt & Colman, which then changed its name to Reckitt Benckiser plc. In addition to the meshing of the strong management of Benckiser with the strong brands of Reckitt & Colman, the merger also made geographic sense in that the Dutch company had had little presence in the Latin American and southeast Asian markets, while the U.K. firm had not penetrated Eastern Europe to any great degree. Reckitt & Colman's Dalby was named chairman of the new firm, while Harf became deputy chairman and Becht was named chief executive. In May 2001, however, Dalby retired and was succeeded by Hakan Mogren, former CEO of pharmaceutical firm Astra AB.

Reckitt Benckiser began its existence as the world's largest maker of household cleaning products, excepting the laundry detergent category. The firm intended to focus on five core areas: surface care, fabric care, dishwashing, and home care products, as well as health and personal care products. In the immediate aftermath of the merger, Reckitt Benckiser concentrated on disposing as many of its brands that fell outside of these areas as possible. By August 2001 this disposal program was completed, with the selling off of numerous brands with aggregate revenues of £110 million. Proceeds from the program were in excess of £140 million. The company, meanwhile, began seeking acquisitions in the Asia-Pacific and Latin American regions to fill in geographic and product line gaps. To this end, the company in March 2001 acquired Oxy Co. Ltd., the number four Korean household products firm, for £87 million. Oxy's leading brands included Oxy Clean fabric treatment, Tinkerbell air care products, and Cherie fabric softener. In August 2001 Reckitt Benckiser announced that profits for the first half of 2001 had jumped 23 percent, indicating that the new company was off to a rousing start.

Principal Subsidiaries: Reckitt & Colman Deutschland AG (Germany; 99.64%); Reckitt & Colman Limitada (Brazil); Reckitt & Colman Products Limited; Reckitt Benckiser (Australia) Pty Limited; Reckitt Benckiser (Canada) Inc.; Reckitt Benckiser (Poland) SA (97%); Reckitt Benckiser España SL (Spain); Reckitt Benckiser France SA; Reckitt Benckiser Inc. USA; Reckitt Benckiser (India) Limited (51%); Reckitt Benckiser Italia SpA (Italy; 99.6%); Reckitt Benckiser (UK) Limited.

Principal Competitors: Unilever; The Procter & Gamble Company; Henkel KgaA; Colgate-Palmolive Company; The Clorox Company; S.C. Johnson & Son, Inc.; The Dial Corporation; Church & Dwight Co., Inc.; The Boots Company PLC; Johnson & Johnson; Pfizer Inc.

Chronology

• Key Dates:
• 1814: Jeremiah Colman begins milling flour and mustard in Norwich, England.
• 1823: Colman names his business J&J Colman with the addition of a nephew as partner; Johann Adam Benckiser forms an industrial chemicals manufacturing firm in Ludwigshafen, Germany, which will eventually be called Joh. A. Benckiser G.m.b.H.
• 1840: Isaac Reckitt buys starch works in Hull, England.
• 1888: Reckitt & Sons goes public.
• 1938: Reckitt & Sons and J&J Colman merge to form Reckitt & Colman Ltd., although the two firms keep separate identities and positions on the London stock exchange.
• 1954: The two Reckitt & Colman firms merge, establishing Reckitt & Colman Holdings Ltd.; company acquires Chiswick Products, maker of polishes.
• 1956: Benckiser diversifies into consumer goods and industrial cleaning products and also launches Calgon water softener.
• 1964: Benckiser launches Calgonit automatic dishwashing detergent.
• 1981: Peter Harf joins Benckiser as executive vice-president to implement a new strategy: divest the founding chemicals business and use the proceeds to acquire brand name consumer products.
• 1985: Reckitt & Colman acquires the Airwick air freshener brand.
• 1987: Benckiser acquires several household product brands from Ecolab, including Electrosol, Jet-Dry, Scrub Free, and Lime-A-Way.
• 1990: Reckitt & Colman acquires Boyle-Midway, gaining the Woolite, Wizard, Easy-Off, and Old English brands; Benckiser enters the cosmetics sector with the purchase of the Margaret Astor and Lancaster lines.
• 1992: Benckiser acquires the Coty fragrance and cosmetics business from Pfizer.
• 1994: Reckitt & Colman acquires L&F Household from Eastman Kodak Company, adding the Lysol, Mop & Glo, Resolve, and d-Con brands.
• 1995: Reckitt & Colman sells its U.K. foods business, including Colman's mustard, to Unilever.
• 1996: Benckiser organizes its cosmetics and fragrances operations into a single holding company called Coty Inc., which is spun off as a separate entity.
• 1997: Benckiser goes public with the sale of 40 percent of the company.
• 1999: Reckitt & Colman merges with Benckiser N.V. to form Reckitt Benckiser plc.