Reckitt Benckiser’s low-profile chairman and managing director, Chander M Sethi, had a hectic time in India last week, discussing plans with his Slough UK-headquartered FMCG firm’s new Indian global CEO, Rakesh Kapoor. Sethi, talks to Surajeet Das Gupta & Priyanka Singh about the 1814-founded company’s life after its acquisition of Paras Pharmaceuticals. Excerpts:
You did one of the largest acquisitions in Fast moving consumer goods (FMCG) in India by acquiring Paras. How has the integration gone through?
The acquisition of Paras (in mid-December last year) had one strategic objective: to make a significant presence in health and personal care area in India, where we have been extremely strong only in the household portfolio. What it has done is it has given us a strong foothold in the health sector with all pharmaceutical trade—a reach to chemists, druggists, pharmaceuticals and hospitals. Since we acquired Paras, we have already split the distribution channel and have a separate pharma channel in top 25 cities. Secondly, we have just introduced Gaviscon in Tamil Nadu—an instant relief medicine for heartburn. It’s a unique pharma OTC product. We have introduced it with medical reference test.
What about integrating employees?
The integration has been very very smooth. Most employees wanted to stay with us; and they have stayed on. Obviously, there were some synergies and even duplications. A bulk is the sales force have been integrated. Only 30 per cent of employees have had to find jobs elsewhere.
Are you going to focus on other brands as well to make them as big as Dettol (which does a busines of Rs 2,000 crore)? Will this certain dependence on Dettol for the turnover go down in the future, with more of power brands coming in?
It would be absolutely right to say that Dettol comprise large part of our business. Even so, generally what is not known is that we have other brands too in our portfolio that are performing exceptionally well — but are not talked about. We have Harpic, which is by far the number one toilet cleaner, with 75 percent of the market share. We have Lizol—a floor cleaner which has captured more than half the market space. We have Cherry Polish, which is clearly the number one brand with a 70 per cent market share. Then we have the leader Mortein (pest controller) in our portfolio too. We have India as one of our strategic investment countries, and our overall portfolio will grow. The ratio of Dettol’s share has to reduce but not its sales per se. If Dettol sales slow down just because others are growing, then that will be the last thing we need.
How fast are you growing in India?
In the last four years, we are growing at a CAGR (compound annual growth rate) of 40 per cent. So the market is growing at 10 times the speed at which it was growing earlier. For example, the household penetration for specialised toilet cleaners five years ago used to be less than 12 per cent. Today, it is 21 per cent. Already, the market is more than Rs 400 crore.
Do you see government policy changing ,so that you can sell the OTC pharma products not only in pharmacies but in grocery stores too?
There is strong proposal made to the government to allow these products to be sold at grocery stores also. Strepsils, for example, is sold in pharmacies. The question is, would you really worry about buying a Strepsil from a nearby grocer if it’s a clean and hygienic shop. We will motivate the government to review the Act.
In the case of Reckitt, its brands are known more to consumers than the company. Is that a drawback? Are you relooking this strategy?
I think it’s a very interesting debate on whether it is better that people talk about the brand or the company. It can go on for ever. If you have a company that stands for Dettol, then it rubs off on everything. In my view, there is also a danger that if something goes wrong with Dettol, then it goes wrong with everything. However, what you are saying is right. We have internally debated this for some years now. We have actually taken two countries where are promoting company’s name rather than just brands — Germany and Brazil. Once we see the impact, we will take it further.
You have now gone quite aggressively in the management campus. Is India becoming a global hunting ground for the company?
India is certainly identified as one of the key countries for providing global talent. Earlier, we were recruiting 4-5 management trainees a year. Now, we are recruiting 15 and more of them. Earlier, we were taking only sales and marketing management trainees; now we are taking trainees for the supply chain, HR, finance. So, it’s now broad-based.
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Everybody in India is grappling today with the challenges of addressing the pyramid concept and basically looking at how to address the challenge of rural markets. How do you do it?
A key challenge is to be able to understand the right price and value. In RB, we have launched Veet hair remover, in 25-gm tubes. It is quite popular in semi-urban and smaller towns. In fact, the penetration of these tubes in smaller towns is almost half of that in metros. However, earlier it was priced at Rs 40 for a bigger pack. Another example: the 200-ml bottle of Harpic has a distribution of more than 450,000 in these smaller towns. We introduced Dettol soaps in 35-gm packs in smaller towns. It has worked.
But to address this market, do you have to create a different distribution system?
Yes. See, there is something known as a hub-and-spoke model. Effectively, it means that RB goes to 3000 towns for distribution. We have distributors who are supplied from these locations; they supply into smaller towns they cover. They then supply to their wholesale channels. For example, soaps are sold in 23 lakh outlets. There are challenges of profitability, but I think the consumer will graduate upwards as the income grows.
One major criticism that comes to you when you bought is that you overpaid for Paras?
RB makes strategic acquisitions. For example, we bought Boots healthcare, Strepsils and Nurofen out of that. We have doubled the growth rates of business of what Boots’s. The right price depends on the strategic imperatives and how big do you see the map. We think it is the best pharma purchase in this country. Time will show whether we are able to move the pharma Paras brands to the pace that we are used to. That is quite significant.