Cleaning products firm still believes where there's muck there's brass

LONDON BRIEFING:The world's largest maker of household cleaning products looks anything but stupid, writes Fiona Walsh.

BART BECHT, chief executive of Reckitt Benckiser, made the mistake earlier this year of calling his company's products "stupid".

Fearful of having "done a Ratner", he swiftly backtracked, explaining to journalists that he meant simple instead - simple, but extremely useful.

The world's largest maker of household cleaning products is looking anything but stupid after a recession-busting first half performance saw double-digit increases in earnings and revenues - with the promise of more to come for the full year.

Reckitt's stable of household- name brands, which it calls "power brands," ranges from Cillit Bang to Dettol, Harpic, Vanish and Airwick. It may not be a glamorous sector but it's certainly profitable and one which Becht believes is about as recession-resistant as they come.

Product innovation - or the art of selling us something we didn't know we needed - is one of the keys to the company's success.

In recent years, it has pushed the boundaries on a vast range of really rather dull products, introducing advances such as plug- in air fresheners, multi-fragrance fresheners, car- fresheners, liquid cleaners, gel cleaners, three-in- one cleaners - not forgetting wipes to deal with almost every household eventuality.

The importance of the relentless innovation at the group is underlined by the fact that as much as 40 per cent of its revenues come from products that are no more than three years old.

That process will continue. Just when you thought there was nothing more you needed in the household department, Reckitt is lining up a new "intelligent" Vanish Oxi Action cleaner, which seeks out "invisible" stains.

Also hitting the supermarket shelves soon will be a laundry product that not only provides protection from limescale build-up in washing machines, but also in clothes.

These higher-margin new products are backed by some serious advertising. Reckitt revealed earlier this week that its already substantial marketing spend surged by 16 per cent over the first half, taking the total to £415 million, or more than 13 per cent of its revenues.

That is a big figure, even for a consumer products company. Unlike some of its competitors, Reckitt has upped its spending even though advertising rates have softened, which would have allowed it to cut back while still maintaining its brand support.

Despite the higher spending, operating margins at the group strengthened from 20.4 per cent to 20.8 per cent over the second quarter.

As other consumer product companies increasingly warn of the impact of the spending slowdown, Reckitt has so far suffered no ill effects nor has it seen any sign of shoppers trading down to cheaper own-label lines.

It also managed to push through some price rises in the first half and plans further increases later in the year, which it says will more than offset higher commodity costs.

Credit crunch or no credit crunch, Becht is confident that customers will carry on spending to keep their toilets clean, their surfaces sparkling and their homes smelling fresh.

Grim for North

ANY AMBITIOUS executive considering taking on the challenge of restoring the wonder to Woolworths will have had second thoughts yesterday as shares in the ailing stores chain slithered to another new low.

Behind the 14 per cent plunge, to just 5.56p a share, was news of a further sharp fall in sales over the past six weeks. Down by 3.2 per cent in the 25 weeks to July 26th, the decline accelerated to 6.7 per cent in the final six weeks of the first half.

Blaming the spending slowdown and using the retail sector's traditional excuse of "the wrong kind of weather", chairman Richard North accompanied the grim trading update with yet another strategy shift.

As it continues the search for someone to replace former chief executive Trevor Bish-Jones, who quit last month, the company plans to refocus itself on small and medium-sized stores in market towns. It will concentrate on the parts of the business that are profitable, North told the City.

Retail is not rocket science but North's simplistic survival strategy left analysts distinctly under-whelmed.

The well-regarded Bish-Jones tried virtually every strategy to restore the retail chain's fortunes but still failed.

The Woolworth board gives every impression that it is simply rearranging the deckchairs on the Titanic - and the chances of getting anyone of quality to join the sinking ship are receding by the day.

Fiona Walsh writes for the Guardiannewspaper in London