Fresh start after Kapoor
THE announced departures in the same week of Bart Becht from JAB Holdings and Rakesh Kapoor as chief executive of Reckitt Benckiser mark the end of an era.
Both men were inveterate deal makers, supreme at branding and made fortunes for themselves as well as the Reimann family which sat behind both companies.
The transformation of Reckitt from a minor league business known for Cillit Bang toilet cleaners into a global healthcare giant with a market value of £41bn, placing it just outside the top ten in the FTSE 100, was a great ride for investors. But it tailed off in the last year or so.
Kapoor’s idea for restoring value was to split the company into two divisions: consumer healthcare and home and hygiene with the prospect, one supposes, of two separate quotes.
In spite of being such a big beast Reckitt never really came to grips with modern governance. Chairman Adrian Bellamy was replaced last year after 14 years at the helm by former Mattel boss Chris Sinclair due to shareholder pressure.
It also has been responsible for outsized rewards for executives. Bart Becht left with a cheque worth £100m and Kapoor has earned an even bigger £116m so far. The pay has made it an outlier at time when there has been a focus on fat-cattery.
There have also been questions about the wisdom of the group’s most recent deal, a £13bn purchase of US baby formula group Mead Johnson in 2017 in a move designed to give it a foothold in China.
More worrying in reputational terms has been the triumph of marketing and the creation of super-brands over almost everything else. The result has been a number of regulatory mistakes. In Australia it was punished for misleading branding on leading painkiller brand Nurofen.
But this was as nothing to the scandal in South Korea, where a former Reckitt executive is serving a seven-year jail sentence after being found responsible for the manufacture and sale of a disinfectant linked to the death of up to 100 people. That led to Kapoor’s pay being slashed.
Reckitt has let it be known that it is looking inside as well as externally for Kapoor’s replacement. Often the best companies do well with home-grown succession.
In Reckitt’s case an outsider, who is less captive of a stale, inward-looking culture, might be the jolt needed.
Movie wars
IF ENTERTAINMENT were shopping then Cineworld would be M&S and Netflix would be Amazon.
The difference for the moment is that Cineworld looks to have found a formula by which it can still compete with Netflix.
The UK- based group’s strategy for survival in a world of streaming is to expand its footprint, as demonstrated by the purchase of Regal Entertainment in the US, doing up its picture houses and praying for blockbusters which bring in the punters.
That means opening new sites, closing poor venues and refurbishing wherever possible. It is also embracing IMAX laser technology for the finest images.
So far so good, with income up 7.2pc and 308m bums on seats in the last year when it was assisted by such titles as Avengers: Infinity War in the US and Mamma Mia! Here We Go Again in Britain. The more the movies remain a ‘going-out’ experience the better that will be for the company.
But there is no escaping the fact that Netflix, with huge production budgets, is gunning for it and other traditional outfits.
Netflix is refilling its pipeline of original productions by raising its subscriptions in the US by 8pc. As the dominant streaming player it has the pricing power, although Amazon Prime is in its slipstream.
A bigger threat to both Cineworld and Netflix is posed by AT&T, Disney’s Hulu and NBC (part of Comcast), all of which are racing to fill the streaming space.
The force awakens all over again.
VW bogey
THE emissions hangover for the German car industry dragged down output in the last months of 2018. Volkswagen still has much to do if it is to restore its reputation.
A full page ad in the European edition of the New York Times, paid for by a consumer group, urges the controlling Piech family to clean up VW which it alleges is seeking to resell 300,000 recalled cars.
Recovery at VW could take longer than hoped for – in spite of a new alliance with Ford.