Reckitt plans ‘significant’ rise in brand investment following return to profit
In 2022, Reckitt’s brand investment increased by 5.7% while like-for-like revenue grew 7.6%. As a percentage of revenue, spend decreased from 12.6% to 11.8%.
Reckitt has promised to “significantly” increase investment behind its brands to support its innovation pipeline this year, after swinging back into profit in 2022.
The FMCG giant behind the Vanish, Air Wick, Dettol and Durex brands reported a pre-tax profit of £3.07bn, following a £260m loss in 2021. Like-for-like revenue grew 7.6% to £14.5bn despite inflationary headwinds, as a 9.8% average increase in price offset a 2.2% decline in volume sales.
Reckitt’s brand investment increased by 5.7%. However, as a percentage of revenue, investment decreased by 80bps, from 12.6% to 11.8%.
Speaking to investors today (1 March), CFO Jeff Carr explained this decrease to be a result of reduced investment in Russia and the decision not to increase investment behind Reckitt’s US nutrition brands and cold and flu products. Elsewhere, brand investment was “generally in line” with 2021 as a percentage of net revenue, he claimed.
This year, investment is expected to rise considerably as the business plans to launch a stream of product innovations.How Durex evolved its innovation pipeline to keep up with cultural shifts
“We have a strong innovation pipeline in 2023 which will be supported by increased brand equity investment,” CEO Nicandro Durante said.
While he couldn’t put a figure on the increase planned, Durante said it would be “enough for us to land those innovations in the right way”, adding: “If you don’t… it’s just a waste of money”.
Both Reckitt’s health and nutrition divisions experienced net revenue growth in 2022, up 14.7% and 22.9%, respectively. However, the hygiene division saw net revenue decline by 3.1%, in large part due to a 25% decline in its Lysol disinfectant brand against pandemic levels. Excluding Lysol, the business grew 5.1%.
Compared to pre-pandemic levels, Lysol delivered net revenue growth of 45%. The brand’s performance improved sequentially throughout 2022, with the division returning to a net revenue growth of 1.3% in the fourth quarter.
Branding it a “year of strong growth” for the business amid a “continued challenging environment”, Durante noted that Reckitt is now a 28% larger business than in 2019.
“We enter 2023 as a strengthened business with enhanced financial, operational and brand resilience, and continued growth momentum. The benefits of our reinvigorated innovation pipeline and operational improvements are coming through – including a more agile supply chain and improved customer relationships,” he said.
“We have more to achieve, and will continue to see macroeconomic and consumer pressures in the year ahead. However, our financial, operational and brand strength position us well for the future.”