Business - Q&A MD Reckitt Benckiser (India)

Chander Mohan Sethi, Chairman & Managing Director of Reckitt Benckiser (India) Ltd, has a hectic travel schedule ahead of him. In Chennai briefly to unveil the results of a study by the Global Hygiene Council on hygiene awareness, Sethi, who is also the Regional Director, South Asia, for this group which has a clutch of iconic brands to its name, is winging his way to Colombo that night before he heads off to Bangladesh and then to Kolkata for a similar programme.

Sethi, who has been with the company since 1984 in its earlier avatar of Reckitt & Colman, has masterminded the company’s entry into various new categories in the household products and personal care sector, in many cases virtually creating the category. As he says candidly, “Larger companies than ours wait for Reckitt to create a category and that’s when they come in.” Reckitt will continue to invest and grow its brands, he avows. Sethi took time out to speak to BrandLine on the company’s brands, their growth and his vision for the company, before he plunged into the market to get a first-hand impression of how his brands were doing on Chennai’s shop shelves. Excerpts:

What’s the outlook for the FMCG sector this year in the context of the inflationary trends in the economy?

If you take bites of five years, more and more consumers have higher disposable incomes, higher health and hygiene consciousness and want to upgrade their entire lifestyle. The second part is inflation; it’s a reality, not only FMCGs, foodgrains too; it’s a global phenomenon, stemming from the price of the barrel and its impact on derivatives which has had a major impact. There has been compounding impact on commodities; it’s also a fact that companies have been forced to look at the cost structure, innovation in ingredients, being proactive in managing costs and inputs, so it’s a whole plethora of actions that have to be taken. Partly, the cost has been passed on to the consumer. If a pure translation of costs is done, our company has not passed on one-third of cost increases. Much of it we have absorbed and taken proactive actions.

What price increases have you seen in your brands?

In the region of 3-4 per cent. We are conscious of the fact that if we increase the prices beyond what the consumer can afford it will have an impact on demand and volumes. We have taken a major initiative in right-sizing and right pricing and therefore we have been fairly innovative in the sizes of our product – if you take a product such as Veet, a depilation product, we used to have a 60 gm product for Rs 60 and have now introduced a 25 gm product, at the right price, at Rs 35. Or, if you take Harpic, a 200 ml pack is Rs 22 – a lot of right-sizing has been done. At the end of the day, Reckitt is one of the most proactive companies in making sure we understand our consumer and make sure we are passing the right value on to her.

Do most brands expect rural demand to be sustained? Would at least 40 per cent of your sales come from that sector?

Rural sales is more like 30 per cent. With the actions taken by the Government it will have some impact. The rural economy should be reasonably good. If you look at the Nielsen tracking, it shows urban and rural growth rates are neck and neck – we expect that to continue.

In your home care business your brands had large market shares. Today, there are a lot more private labels, a lot more brands; have you seen any erosion in market shares over the past two years?

Harpic continues to be 80 per cent of the market. If you look at Harpic and competing brands, others would have gained only a small share of the market. They have had to do a one-plus-one offer or at prices 25 per cent lower than ours. The fact of the matter is that the consumer believes in the brand, so even if some are tempted by price-offs most of them have stayed with the brand, but we have had to be proactive and invest much more in our brands. As far as store brands are concerned that is a reality but I believe the consumer is not looking only for cheap price but confidence in quality and that’s where we come in, in the continuous innovation in the brand.

How are your new brand launches working for you?

Each one of them been more than successful. Veet is the number one brand. In July Nielsen reported a share of Veet at 29.1 per cent whereas competing brand Anne French was 28.8; we emerged the number one brand. More importantly, if you look at the town class, we are clearly the number one brand in the six metros. If you take Vanish Shakti, it has created a market in itself in terms of stain removers – there are no products in that category. It created a new category. Take Easy Off Bang – there is no product that will take the real stain off surfaces. The rust stains on your gas stove, for instance, it removes that and consumers have said wow! The question is, how do we continue to expand this information base for consumers.

Yes, Reckitt does launch many innovative products, but it also means a lot of costs in terms of communication as we create categories. We created the specialised toilet cleaner category 20 years ago with Harpic; we created a fabric stain remover, or surface disinfectant, Lizol, these are needs of the consumer every day; the consumer had not got these specialised products that can deal with the problems every day and that’s where we come in.

But imitators are quick to jump in to the category you create, aren’t they?

The interesting thing is that without naming competitors, much larger companies than ours wait for Reckitt to create a category and that’s when they come in.

Have your new launches broken even for you as yet? Is the investment phase over?

No, for two reasons. One is I would say the expected business generation has been more than met; however, we have upped our expectations from the brands and increased our investments even further so the investment phase continues, we may say three years, but sometimes we keep on investing for the future. For example, Harpic took 25 years to get to where it is. It’s one of our four largest brands. Five years ago we used to sell less than half-a-million bottles, now we sell five million every month. It is all about providing the consumer that insight in terms of “that is what your need is and that’s what we provide and ensure the quality continues in meeting your expectations.”

What will your A&M spends be like this year? Two years ago you had a spend of Rs 175 crore.

All I can say is that I don’t like those reports that appear in the papers that we are the second largest advertiser in the country. For the relative size of the company it’s a helluva lot – I also believe that if you are in the missionary zone of creating categories, you have to keep investing. The figure would be upwards of Rs 250 crore is all I will say.