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Losing steam...

May 18, 1999

Highlights

  • Reckitt & Colman of India Limited (RCIL) - a 51% subsidiary of Reckitt & Colman Plc., UK, is a major player in the household cleaning and pharmaceutical products segment of the FMCG market. It manufactures antiseptics and soap (Dettol), anti-cold (Disprin), shoe polish (Cherry Blossom), house cleaners (Lizol, Harpic), insect repellantS (Mortein) and fabric whiteners (Robin).

  • In March 1998, RCIL set up Reckitt Piramal - a 3-party JV between RCIL (20% stake), Nicholas Piramal (40%) and Reckitt & Colman, UK (40%) to lend marketing thrust to its over the counter (OTC) pharmaceutical products. It transferred the marketing and distribution of its most established brands, Dettol and Disprin range of products to this JV.

  • Though RCIL forgoes the marketing margins on the above products, it will earn distribution fees on products distributed through its 400,000 plus retail outlets. Also, higher volume growth will materialise since the JV can tap on Nicholas Piramal's better doctor detailing and a distribution network that is better geared to distribute OTC drugs.

Products

  • Household care is currently RCIL's fastest growing business (36% per annum). RCIL offers a broad range of products in house cleaning, lavatory care, floor/shoe polishes, fabric care and insect repellant as part of its household care segment.

  • Competition is intense in the specialised household cleaner (surface care) segment where RCIL's Lizol (internationally called Lysol) controls 41% market. Lizol competes directly with Lever Johnson's Domex, which controls the remaining 59% market.

  • Though RCIL's Harpic dominates the toilet cleaners segment with a 75% market share, it contributed only 5% to FY97 turnover. The company's Cherry Blossom range of shoe polishes also controls the market with a 75% share.

  • In the insect repellant category, RCIL's Mortien corners a 16% market share and is growing annually at 40%. Mortien competes directly with Johnson Lever's Raid and Bayer's Hit. Godrej has recently surfaced in this category by acquiring the Goodknight brand.

  • The new products category (i.e. products that are less than 4 years old) contributed 20% to RCIL's turnover and will further consolidate with brand extensions.

Future

  • Reckitt is increasing its distribution reach from the current level of 400,000 retail outlets to 600,000 outlets with greater emphasis on rural penetration. RCIL has also invested in information technology and networking to boost its supply chain management.

  • Focus on household products business with new product launches under Lizol and Mortien brand names, supported by higher advertising spends and retail visibility to gain volumes.

  • Franchise extensions of strong brand names like Dettol, Lizol into shaving creams, glass cleaners, car cleaners, air-fresheners will boost brand recognition and strengthen the bottomline.

Concerns

  • Intense competition in household products with Johnson Lever's will put pressure on margins in this price sensitive segment. The pressure will be on Reckitt to match Lever's huge advertising budgets to sustain customer loyalty.

  • The company's claim that higher volumes and dividend income from the Reckitt Piramal JV will compensate loss of marketing margins is yet to take shape.

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