Promotions boost Reckitt Benckiser in Europe

29 July 2010

LONDON: Reckitt Benckiser, the household goods group, will continue to utilise promotions in Europe, where this strategy has proved essential given the "virtual absence of market growth".

The manufacturer of Finish and Dettol reported that spending in the various categories in which it has a presence in the region are likely to remain flat this year, after local sales fell 1%, to £1.8bn ($2.8bn; €2.2b), in H1 2010.

As a result of this hostile environment, Reckitt boosted its investment in special offers and discounts, amidst fierce competition with its rivals to attract price-conscious consumers.

"The heavy promotional spend, we believe, is paying off," said Bart Becht, Reckitt's ceo. "We are holding our own. Our market share position on a volume basis is virtually unchanged."

"The performance within Europe is largely driven by the virtual absence of market growth and heavy promotional spend rather than market share movements."

Conditions have been less adverse in North America, which has delivered higher revenue and share gains than Europe, all while maintaining prices at close to the normal level.

"In contrast to Europe, where we are spending more on promos, in North America, we're spending less," said Becht. "This explains the substantial difference basically that you have between Europe and North America.

"Part of the lower promo spend is because … Wal-Mart is running fewer promotions at the moment because of their policy of cleaning up their stores."

Emerging economies also require a distinctive approach, as many of the sectors that Reckitt boasts a leading role in have not reached a critical mass.

For example, toilet bowl cleaners, dishwasher detergents and aircare offerings are yet to achieve widespread uptake in Eastern Europe, Latin America and Asia Pacific. 

"All of these categories in a lot of these countries have to be created," said Becht.

"A dish detergent category has to be built from scratch, which starts with us basically trying to create dishwashing penetration [and] advertising [that] people should have a dishwasher."

Looking ahead, Becht suggested there was considerable room for expansion in future. 

"As disposable income rises in these markets, people are more open to try [good] in these categories and use these specialist products," he said.

"We are not even into the rural areas. We are still establishing these categories in the urban areas and that's true if you go to Russia, to Brazil, to India, to China."

Data sourced from Seeking Alpha; additional content by Warc staff