By Adam Jones
Reckitt Benckiser is merging its North American and European operations into a single business run out of Amsterdam in an unusual move that demonstrates the growing importance of emerging markets to multinational consumer goods groups.
The maker of Finish dishwasher tablets and Durex condoms also said it would divide its emerging markets business into two entities, one featuring Latin America and Asia, the other covering areas as diverse as Russia and sub-Saharan Africa.
Rakesh Kapoor, Reckitt chief executive, argued that the decision to merge its North American and European businesses reflected a convergence in consumer tastes on both sides of the Atlantic.
?We find increasingly higher levels of similarity between Europe and North America in terms of consumer behaviour and consumer needs,? said Mr Kapoor, who succeeded the long-serving Bart Becht at the helm of the group last year.
It no longer made sense to manage the two businesses separately just because of their geographic separation, he argued, adding that other companies needed to confront the same issue.
Reckitt declined to say how many jobs would be lost as a consequence of the move, announced as part of a new strategy released alongside its annual results on Wednesday.
However, the aim is that the transatlantic merger will save it ?30m annually from 2013.
Mr Kapoor said resources would be shifted east and south as part of a plan to get half of the company?s sales from emerging markets by 2016, excluding its ?non core? food and pharmaceuticals arms. The current figure is 42 per cent.
The new division serving Latin America and Asia has been given the acronym Lapac, while the other emerging markets reporting area has been called Rumea.
Brands in the health and hygiene categories – such as Nurofen ibuprofen pills and Dettol disinfectant – will be prioritised as part of the shake-up. Reckitt is also planning to shut down its private label manufacturing operations.
Under the new strategy, Reckitt said it was looking to deliver average annual like-for-like sales growth 2 percentage points higher than its markets over five years. It estimated that its markets would grow by between 1-2 per cent in 2012.
Analysts at Panmure Gordon, the broker, said Reckitt was trying to ?engineer better growth out of fairly insipid market growth rates?. Unilever, the rival consumer goods group, had a better outlook for sales growth, they added.
In 2011, Reckitt?s sales rose 12 per cent to ?9.49bn, aided by the acquisition of SSL International, the maker of Durex, and India?s Paras Pharmaceuticals.
Like-for-like sales growth was 4 per cent at constant exchange rates in 2011, down from a growth rate of 6 per cent a year earlier. Like-for-like sales growth was 3 per cent in the fourth quarter of 2011.
Full year pre-tax profit rose 11 per cent to ?2.38bn in 2011. Diluted earnings per share were 237.1p, up from 213.8p.
Reckitt shares, which have broadly tracked the rise in the FTSE 100 over the past three months, rose 2 per cent to ?34.55 in early morning trading in London.
? The Financial Times Limited 2012
