Boycott over Korea deaths hits drug giant
A country-wide boycott of reckitt Benckiser products in South Korea led the chemicals firm to post its weakest sales growth in five years.
the British household products group, whose brands range from cleaning products cillit Bang and Harpic to Durex condoms, claimed responsibility for 96 deaths in South Korea after its steriliser product oxy Sacsac, which was put inside humidifiers, was linked to a spate of fatal lung problems between 2001 and 2011.
reckitt said poor performance in South Korea had knocked 1.5pc off sales of its products.
Sales rose slower than analyst predictions and were up just 2pc in the three months to September, compared with a 4pc increase across the year to date.
rakesh Kapoor, chief executive of reckitt, said performance had been ‘adversely impacted’ by South Korea.
the steriliser at the centre of the scandal was among a number of products that contained PHMG, a chemical that causes harm to the lungs and irreversible lung disease when inhaled.
the use of PHMG was eventually outlawed in 2011 after the Korea centres for Disease control and Prevention published a report showing its toxic effects.
Shortly after the release of the report, prosecutors in South Korea launched an investigation into companies selling products with the chemical, including allegations that reckitt had suppressed data showing it to be toxic.
reckitt, which has set aside £300m for compensation, continues to negotiate payments to victims.
George Salmon, equity analyst at Hargreaves Lansdown, said the group’s image had been ‘seriously damaged’ following the investigation.
He said: ‘the inevitable slowdown there was enough to dent group sales. Having already set aside £300m for the issue, investors will hope that there are no further charges to come in relation to the tragic episode.’
Last month Kapoor was forced to make a fresh apology for the deaths of mainly pregnant women and infants after family members turned up at the company’s Slough headquarters.
the millionaire, who lives in London with his wife and two children, said: ‘I sincerely apologise for the injury and deaths of Korean consumers resulting from the humidifier sanitiser products.’
Kapoor enjoyed a generous pay packet of £23.2m last year, more than double the £11.2m he got in 2014, even though 18pc of investors opposed it.
Meanwhile, South Korean supermarkets have stopped stocking reckitt products amid a growing public backlash.
In May, East Asian hypermarket Lotte Mart, which sells food, clothing, electronics and toys, cleared most of the brand’s products from its store shelves.
It said: ‘not many consumers are buying the company’s products these days and we have to respond to their calls.’
reckitt sells more than 120 household items and five medical products in south Korea.
commenting on the results, Kapoor said: ‘In an environment where market growth rates have softened, we continue to make good strategic progress in all our main Power markets, particularly in India, and in china where we are driving strong development of our e-commerce channels.’