Reckitt Benckiser in brands clear-out

Lucy Baker
Thursday 16 March 2000 01:00

Reckitt Benckiser, the newly merged consumer products group, yesterday announced plans to sell off 75 of its underperforming brands and promised to increase after-tax profits by 25 per cent in 2000.

The Disprin to Finish group, which was formed last year by the £5bn merger between the UK's Reckitt & Colman and Benckiser of The Netherlands, said revenue growth for 2000 would accelerate by 5 per cent, slightly more than originally forecast, and after-tax profits by 25 per cent at constant exchange rates.

The company said it would increase its media spend on its 50 star brands, including Lemsip flu remedy and Vanish fabric care tablets, to 10 per cent of group revenues in the coming year. The move mirrors an earlier announcement by Unilever, the Oxo to Persil group, that it would focus on just 400 core products from its 1,600-strong portfolio.

Reckitt Benckiser shares closed up 32.5p at 489p, despite a 20 per cent drop in 1999 profits, in line with analysts' expectations. Underlying pre-tax profits were down £71.6m at £288.7m on sales down 1 per cent at £3.05bn.

Bart Becht, the former Benckiser chief who now heads up the enlarged group, accused the former Reckitt management of "milking the business" by underinvesting in brands. He said: "It's a bit like the plant that hasn't been watered for four to five weeks. You have to give it water or it will die."

Mr Becht would not name any of the products on the block, but he said they would not include any well-known names in major markets, such as the UK. It is understood that the brands to be sold are mostly Reckitt & Colman products which contribute about 7.5 per cent of group turnover, less than £3m each.

The post-merger integration was, Mr Becht said, "completely on track" to deliver the £38m of cost savings which the company had earlier promised for current year.

He said the group would probably be ready to make "a major acquisition" in 2001 to boost its presence in countries such as Japan, Korea, the Philippines and India and to strengthen its position in markets such as healthcare, where existing products include Lemsip and Disprin.

Mr Becht also promised to deliver a detailed internet strategy later in the year.

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