Reckitt Benckiser's Next CEO Has ‘Tough Act to Follow’ in Departing Becht
Reckitt Benckiser Group Plc CEO Bart Becht
Chris Ratcliffe/Bloomberg
Reckitt Benckiser Group Plc outgoing CEO Bart Becht.
Reckitt Benckiser Group Plc outgoing CEO Bart Becht. Photographer: Chris Ratcliffe/Bloomberg
Reckitt Benckiser Group Plc (RB/) shareholders may have their best returns behind them as Chief Executive Officer Bart Becht steps down after more than a decade at the helm of the household-cleanser company he formed.
Rakesh Kapoor, 52, named yesterday to take over in September, may struggle as sales slow in Europe and competition intensifies, analysts including Carl Short of Standard & Poor’s said. Under Becht, Reckitt Benckiser’s comparable sales growth has risen more than 5 percent a year since 2005 and posted double-digit net-income growth in eight of the past 10 years.
The new CEO is “not going to produce the same kind of growth we’ve seen over the next decade,” Short said. “Becht is going to be a very tough act to follow, especially given that we’ve entered much more challenging conditions for consumers in developed markets.”
Becht, 54, who led the company through the 1999 merger of Benckiser NV and Reckitt & Colman, has increased market value more than sixfold with a steady stream of product innovation such as Lysol hands-free soap dispensers and mergers and acquisitions including last year’s purchase of Durex condom maker SSL International Plc. Reckitt Benckiser’s stock fell 7.5 percent yesterday, the most since 2003.
The Dutchman “seemed to define Reckitt’s culture to us,” said Martin Deboo, an analyst at Investec. “We see this event as strongly negative for the shares.” He cut his recommendation from “hold” to “sell.”
‘Best CEO’
The maker of Cillit Bang cleaner and Nurofen painkillers has already said sales in 2011 will probably rise at a slower pace than last year as European revenue stagnates amid a slowdown in consumer spending. Reckitt Benckiser gets a smaller percentage of sales from emerging markets than competitors including Unilever and Colgate-Palmolive Co.
Still, Becht was “arguably the best CEO I’ve come across in the short 20 years I’ve had of doing this job,” said James Edwardes Jones, an analyst at Espirito Santo in London. “Statistically, the chance of getting another one at the same company is not great.”
His departure makes Reckitt Benckiser “marginally” more likely to be a takeover target, as Becht was such a star that it would have been harder for a larger company to buy the Slough, England-based firm, Edwardes Jones said. That would have been a deterrent for a company such as Colgate to make an offer.
‘Powerbrands’
Reckitt Benckiser, which makes Vanish stain remover, is facing increasing competition at the fabric-care unit and a potential generic alternative to its Suboxone heroin-dependency drug. The company is looking to expand sales in emerging markets through purchases of new businesses or “powerbrands,” it said in February.
Reckitt reported full-year comparable sales growth of 6 percent in 2010, compared with Unilever’s 4.1 percent growth. The company said it expects revenue on the same basis to increase 4 percent this year.
“Investors, in our view, are coming to terms with a sustainably lower rate of sales growth from the company than has been the case in the past,” Edwardes Jones wrote in a note.
Kapoor, who has overseen marketing and research at Reckitt Benckiser since 2006 as executive vice-president for category development, started his career at Reckitt & Colman in 1987 in India. That may be beneficial for the company’s expansion in emerging markets, Short at S&P said.
Reckitt Benckiser’s growth has been aided by innovation of products including Air Wick air-freshener products, though the company may face increased competition from rivals Unilever and Procter & Gamble.
“The glory days seem to be over,” Deboo at Investec wrote. “And now the architect of it all -- who we would have backed as the best guy to lead the renaissance -- is going.”
To contact the reporter on this story: Clementine Fletcher in London cfletcher5@bloomberg.net.
To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net.
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