Reckitt Benckiser, the maker of iconic home-care brands such as Dettol, Disprin, Harpic, Mortein, Krack and Strepsils, has committed to invest Rs 100 crore towards Prime Minister Narendra Modi's Swacch Bharat campaign, its global CEO Rakesh Kapoor has said.
In an interaction with CNBC-TV18's Shereen Bhan, Kapoor said the company's purpose of "healthier lives and happier homes" was deeply connected with what the government was trying to do with respect to its cleanliness campaign.
Further, India offers the company not just tremendous opportunities with respect to its growth potential but Modi's Make in India campaign also fits in with its focus of manufacturing products in the country to export worldwide as well.
Below is the transcript of the interview on CNBC-TV18.
Q: Your stated objective and your stated purpose is to convert this into a company that is driven by health and hygiene and coincidently that seems to be the ideology of the new prime minister as well. Modi's Swach Bharat campaign seems to be an effort to move India towards a debate that we actually haven't had in this country about health and hygiene. So, a strange sort of coincidence there but what does this mean as an opportunity for you?
A: Reckitt Benckiser has had a tremendous track record of success over many decades. We have outperformed our markets, we have delivered great shareholder value and I had the incredible privilege of taking over as the CEO about three and half years ago. My first challenge was how is this company going to drive the same level of outperformance, how are we going to be successful in the next decade and more and what do we want to do?
The first thing we started to talk about in the company was what do we stand for? Why do we exist? What will happen if we did not exist? It is questions like that that told us that health matters but not just that health matters, hygiene is the foundation of that health. If I clean my hands properly, if I keep my surfaces disinfected, if I follow basic hygiene practices in terms of toilet cleaning, we will live healthier lives and a healthy life is a happy life.
So, when we put all of this together we came with a very simple and incredible purpose for this company, which was around healthier lives and happier homes. So, it gives me great pleasure as an Indian but as a global CEO that my company today and its purpose and what it stands for is in some form deeply connected with what the government is trying to achieve through the Swach Bharat India campaign. We have committed Rs 100 crore over the next years to galvanise India and our efforts in India to take part in this whole movement.
Q: Moving away from the Swach Bharat Abhiyaan to talk about the India story and I remember you said previously that emerging markets are often overestimated in the short term and under estimated in the long term. Everyone has been negative on India up until the last 12 months in fact up until the last six months there has been sort of trepidation on whether we should invest or not invest in India. Reckitt Benckiser is a long-term India investor, you have been in the country for over six decades now. In the current context where there seems to be much more of a renewed enthusiasm to move ahead with reforms, how does India now stack up in the emerging market basket which is clearly your area of focus and opportunity?
A: Everyone tends to underestimate the long-term opportunity on markets like India: always getting very unexcited if something goes wrong in the short-term and missing the big picture. The reason is simple. If you think about growth in emerging markets which to my mind are secular you will never see linear growth rates in any market. You will always see periods of great growth but followed by periods of some compression or difficulty.
However, if you draw a trend line between these periods of growth and depression you will find quite a nice linear movement. The second thing is very mathematical. If you compound the growth rates of markets like India, let us call them double digit growth rates over a long period of time you can just start to think about how significant that growth opportunity stacks up to be.
Reckitt Benckiser has been in India for over six decades, we have a very long-term opinion and position on India. We don't look at the headlines of the last quarter gross domestic product (GDP) growth and decide whether we should invest. We are going to invest in India, we have a very significant opportunity here and we will play our part.
Q: Given the kind of opportunity that you see in the Indian market, give me a ballpark sense of what we could see in terms of incremental investments from Reckitt Benckiser into India across your various businesses and brands?
A: First of all, we have been investing in India every year. I don't think we start to think about Indian investments for short period of time. We think about India not just as an epicenter for investment for emerging markets, I think our opportunity for India and our investment in India can play a much more important defining role for how we do business globally.
I will give you a couple of examples of that. We bought through an acquisition we had made a few years ago with Paras Consumer Health and a plant came with it in Baddi in Himachal Pradesh. It was a nice plant but it was not a global plant offering us global capabilities for manufacturing high quality, high-end healthcare products.
Over the last few years we have invested behind this plant, this plant recently cleared FDA clearance for manufacturing global brands and global products in this plant.
So, our investments are not just designed in India for driving growth for our brands in India, for our consumers in India, we are looking at India as a epicenter for doing business globally and our investments in healthcare plants in India is an example of that.
Q: Will it be also the manufacturing epicenter because you just talked about this plant which is now FDA-compliant. Is it likely to be the manufacturing epicenter because that is what the prime minister is asking investors to do?
A: Again he is saying the things that I love to hear -- Make in India. We have been making in India and as I have said recently to you how to do we make in India not just for India but for the world. Our investment in our healthcare capabilities is a step in that direction and we will constantly look at these opportunities as we decide how we invest.
When we put our investments for manufacturing particularly we don't always do that for one country at a time. We think about that capability and how it can enable us to grow our brands and our business geographically and India is one of those markets, which offers companies like ours with deep heritage, expertise and knowledge of using this as a base for talent, manufacturing and global expansion.
Q: You talked about the Paras acquisition and you preempted my question because I was going to ask you whether you are scouting for more acquisitions and whether the acquisition strategy is going to be driven by assets or the ability to bring assets like the factory that you just talked about or is it going to be driven by the ability to bring brands into your portfolio?
A: We are a brands company and it is brands that drive value for our company. So, our strategic determination of which brands and assets we want is built around whether they fit with our portfolio and what we are trying to achieve. I just talked about being a company which is driven by healthier lives, happier homes – so do we have brands here which can enable us to play that part in a much more enriching way; that is one aspect.
The other aspect is a very financial one. Do we create value for our shareholders by paying the price we do which is inevitably a premium over what the traded price might be and we look at some of those criteria to decide. That is the basis on which we bought Paras Healthcare because it gave us incredible brands like D'Cold, Moov, Dermi Cool etc. However, it also gave us the capability which came with it. We used that capability for global expansion which creates even more value.
So, we are looking out for these kinds of assets but it has to be a strict criterion of being both strategically attractive and financially attractive where we can create some value.
Q: Anything on the horizon and is it likely to be in the healthcare space or in the home care space?
A: We are looking out constantly, we are looking out on a worldwide basis and I have to say that of the acquisitions we make, we reject a lot more. However, I don't want to leave our viewers at least with a message that this is a company, which is about acquisition.
A vast majority of our growth is organic. Our people walk in every morning to work not because they think there is some acquisition coming through, because there are fantastic brands in their hands that they can create fantastic work for and that is the bulk of our focus: organic growth. However, we know that our healthcare industry around the world is very fragmented.
Just to give you a context, the top 10 players in consumer health form less than 30 percent of the total industry. So, this industry is going to consolidate over very long period of time.
Q: And you see yourself at the epicenter of that consolidation?
A: We see ourselves as one of the people who should be on the side of aggregators.
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