At first glance, the drab industrial town of Slough doesn't look like a hotbed of innovation. But Slough, a half hour west of London by train, is home to one of Britain's most creative companies: Reckitt-Benckiser PLC. Although it hardly qualifies as a household name on its own, Reckitt's cupboard is full of tried-and-true brands such as Spray 'n Wash, Woolite, and Lysol. And by quietly improving on old favorites and pioneering new brands, the British company has emerged as one of Europe's top performers. Its stock has more than doubled since 2000, to $29. In fact, experts say, $6.7 billion Reckitt has become an industry superstar, at times outshining Procter & Gamble and Unilever with its new products and marketing prowess. "Reckitt has led the way," says Julian Hardwick, analyst at ABN Amro (ABN) in London.
Reckitt's strong suit is finding niche markets with growth potential. Instead of trying to compete in the saturated area of laundry detergent, for instance, Reckitt has focused on the growing segment of automatic dishwasher products, where it now boasts a leading 40% share worldwide, according to consultancy Euromonitor International. That's thanks to innovative products like the Finish Protector. Developed after Reckitt fielded complaints from consumers, the Protector aims to prevent the cloudy film and fissures that can appear in glassware after frequent dishwasher use. The device, which clips on a dishwasher rack, contains a piece of glass with a high zinc component that eliminates harmful elements from the water. The product has sold well since its debut two years ago and has yet to be copied by competitors. It's so effective that Reckitt Chief Executive Bart Becht, 48, uses it on his best goblets. "I actually wash my crystal in the dishwasher now, which I would have never even thought about before," he says.
Products like the Finish Protector have put a sparkle into Reckitt's finances. Operating margins have climbed from 12% in 1999 to over 19% today, comparable to P&G's. And while both Unilever and Colgate-Palmolive (CL) issued profit warnings last fall, Reckitt raised its own full-year targets. Goldman, Sachs & Co. (GS) is forecasting an 11% rise in pretax profits this year, to $1.6 billion, on a 6% gain in revenues, to $7.6 billion.
Formed by the 1999 merger of Reckitt & Colman PLC of Britain and Benckiser of Holland, Reckitt prides itself on the intensity of the research and development process that goes into its cleaners and other products. The company exhaustively polls consumers in several countries to assess their needs. A recent addition to its line of household cleaners is the Dettol Easy Mop, which dispenses floor cleaner with a squeeze of the handle, eliminating the need for a bucket -- just the sort of convenience today's harried consumer is willing to pay a premium for.
Reckitt faces a couple of challenges. It has already warned that exchange-rate fluctuations will crimp reported sales growth for 2004. And with more than half of its revenues generated in Europe, Reckitt clearly is vulnerable to the area's anemic economy. How can it cope? "The most efficient way has been innovation," says Eva Quiroga, an analyst at UBS in London. A new variety of Lysol? If a consumer somewhere needs it, Reckitt will make it.
By Laura Cohn in Slough, England