When Rakesh Kapoor became chief executive of Reckitt Benckiser four years ago, the UK consumer goods company lost £2bn.
Actually, this was the amount by which shares in the maker of Finish dishwasher tablets and Durex condoms dropped when it announced the departure of Bart Becht, its veteran CEO who had produced stonking returns during his 12-year tenure. The news that Kapoor, head of category development and little known to outsiders, would replace him was scant compensation.
How did he feel that day, seeing the market value of the company for which he had worked most of his professional life, shrivel by 8 per cent?
Over breakfast in a private Mayfair club, the 56-year-old can now laugh about it. “I tried very hard to tell myself it’s not personal.” Then, more seriously: “But it felt horrible . . . And I said to myself, I’m going to make sure that when I leave the company, my successor does not have to go through the same miserable feeling.”
It was not personal. Within three weeks the shares had recovered; now they are nearly 80 per cent higher.
Kapoor stamped his authority early on, setting a strategy of moving RB from a company focused on household products to one centred on higher-margin consumer healthcare: brands such as Nurofen painkillers, Gaviscon indigestion relief and Schiff vitamins, which he bought in 2012.
He also shares the same hard-driven RB devotion to cost-cutting and innovation that so endeared Becht to investors. His business mantra is: “Late to bed, early to rise; innovate like hell and advertise.” This means getting up at 5.30am to check overnight news. “An organisation is only as slow as the leader at the top . . . so if you are slow there, you’ve slowed the organisation. I have to be very quick in how I respond, how I decide.”
Personable yet forthright, Kapoor can talk unabashed to a room of analysts about Durex Real Feel condoms — “even more natural skin-on-skin feeling” — with the same enthusiasm as new ingredients for MegaRed supplements.
As for the famed RB culture, it is all about meritocracy for Kapoor: “What counts is how you perform. Meritocracy is the most important way you can drive an organisation forward.”
At RB, employees are not happy when they achieve targets: “Don’t expect me to hug you when you meet your target,” he says, folding his arms and giving a cold stare. “I will look at you and say, ‘really?’”
Kapoor has a clear memory of when the drive to outperform was instilled in him. He was born in Bareilly, a city in Uttar Pradesh, northern India, to a family of entrepreneurs. He was an 11-year-old playing with friends when his mother told him to study for his exams the next day. “What’s the point?” he replied. “I’m going to come first anyway.”
His mother said nothing but decided her son should not have it so easy. Before he knew it, Kapoor was off to a top boarding school in Delhi, where he would no longer be an effortless star pupil. “I learnt my first lesson, which is that it’s very easy for people to be happy with what they have unless you keep pushing the bar up,” he says. “That bar doesn’t need to be pushed only for other people: I have to raise the bar for myself every time. Because if I don’t, I don’t think we are going to get better.”
He took a degree in engineering, not because he liked it but because engineers got decent jobs. Next came an MBA: “because, very simplistically, MBAs got even better jobs than engineers did”.
Towards the end of his studies, he received two job offers. One was from Reckitt & Colman, maker of Dettol disinfectant and Cherry Blossom shoe polish, which later merged in 1999 with Benckiser of the Netherlands under Becht.
The other was from a small computer company.
Perhaps it was his entrepreneurial background that helped him choose the latter but after five years, still in his 20s, Kapoor found himself a big fish in a small pond and yearning to make use of his marketing MBA. So he wrote to the head of Reckitt in India and was duly recruited.
That was 28 years ago and his career trajectory has been upward ever since.
After taking the helm in 2011, Kapoor’s biggest problem has been where to find growth. Although RB boasts the highest profit margins among its European peers, sales over the past five years have grown like-for-like only in line with the sector average of 4.5 per cent, according to analysts at HSBC.
The growth motor that had been Suboxone, its highly profitable opioid addiction treatment, ground to a halt after the expiry of the drug’s patent. Kapoor took the widely welcomed decision to demerge the pharmaceutical division, renamed Indivior, in December last year, leaving both companies free to focus on their core businesses.
Growth, says Kapoor, will come in part from emerging markets, where RB is less present than many European peers. The strategy is to focus on emerging “power markets”. Some are obvious — Brazil, India and China. Others remain secret.
The other area he expects to lead to more growth is consumer health, which Kapoor says is less dependent on economic cycles than homecare products. “Macro trends in consumer health are absolutely fantastic. [People] are living longer but governments don’t want to spend on your headache, your daily cold and flu or your sore throat. They want you to basically take more ownership,” he says, citing a statistic that 10 per cent of visits to UK family doctors are for headache pain relief.
RB’s competitive advantage he believes — and many analysts agree — lies in its position as a consumer company operating in a market populated mainly by pharmaceutical companies. “I’ve always said consumer health is about mums, it’s not about molecules,” Kapoor says, to make the point that RB’s focus on brands and the consumer gives it an edge over the pharma mindset of scientific breakthrough.
Take Mucinex, the US over-the-counter cough remedy that RB bought in 2007. RB extended it with variants for colds, flu, sinus and night-time. By 2013, it was the most valuable US OTC brand, outselling the painkillers Advil and Tylenol.
Consumer health is fragmented, with the top 10 companies accounting for 25 per cent of the market and Kapoor’s aim is to be a consolidator, although some analysts view RB itself as a takeover target. The problem is that acquisitive pharma companies tend to have deep pockets, as RB experienced last year when it was outbid for Merck’s consumer health business by Germany’s Bayer. Kapoor insists he will not overpay, however: “We are going to look at this in a very disciplined way.”
For now the focus is on cost-cutting. He tells employees: “The best way to get you to give me more ideas is to take away resources from you.” Entrepreneurship “means more ideas and less money. I know that sounds draconian and Darwinian, but you need to really starve people to get the best ideas.”
The group’s latest idea, he says, is to launch personalised boxes of Durex in China, where the brand has a big social network following. Users will order boxes online with their star sign and a phrase that sounds innocent — until slapped on a Durex pack.
To persuade him to sign off on the project, the team presented him with his own personalised box, bearing his star sign, Leo.
And the message? It was “Don’t push so hard,” confesses Kapoor.
Second opinion: Bart Becht
Bart Becht is chairman of JAB Holdings, the investment arm of the Reimann family and Reckitt Benckiser’s biggest shareholder. As Rakesh Kapoor’s former boss at Reckitt Benckiser, Becht remembers him as “a smart guy, self-made and self-taught. He worked his way up from the bottom.”
He adds that Kapoor “has a good combination of being strong strategically and able to rally the troops behind what he wants to implement.”
Culled from FT
