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Reckitt picks PepsiCo executive as CEO, going outside for first time

Stock MarketsJun 12, 2019 09:48AM ET
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© Reuters. FILE PHOTO: Products produced by Reckitt Benckiser; Vanish, Finish, Dettol and Harpic are seen in London

By Siddharth Cavale

(Reuters) - Consumer goods group Reckitt Benckiser has picked PepsiCo (NASDAQ:PEP) executive Laxman Narasimhan as its next chief executive, becoming the latest industry heavyweight to turn to a company outsider to tackle faltering growth and new media-savvy rivals.

Narasimhan, PepsiCo's global chief commercial officer, is the first external candidate to be appointed as CEO at Reckitt since the maker of Durex condoms, Nurofen tablets and Dettol cleaners was formed in 1999.

The 52-year-old takes over as CEO on Sept. 1, replacing Rakesh Kapoor, 60, who has led Reckitt for more than eight years and said in January he would retire this year.

Analysts welcomed the appointment, saying the new CEO would inject a fresh perspective to a company facing industrywide challenges to growth, though some said it raised doubts about the fate of Reckitt's restructuring plan.

The appointment is the latest in a series of external hirings as major consumer goods groups look to make up ground lost to smaller brands that have done a better job selling online and connecting with millennials on social media, while also facing investor pressure to boost efficiency.

Analysts had tipped Reckitt's health division operations chief Aditya Sehgal and hygiene home president Rob de Groot as potential internal successors to Kapoor.

In the end, Narasimhan's experience running large scale consumer businesses in developed and emerging markets helped him beat out 60 candidates reviewed for the job, Reckitt Benckiser Chairman Chris Sinclair told Reuters.

"He has got great perspective, but first and foremost we saw him as a consumerist and a consumer marketer and that's what set him apart," Sinclair said.

At PepsiCo, the chief commercial officer position held by Narasimhan will now be filled by the company's Greater China CEO Ram Krishnan, the U.S. drinks maker said.

As well as industry challenges, Reckitt has faced company-specific setbacks in recent years, including a safety scandal in South Korea, a failed product launch and a cyber attack.

Kapoor launched a restructuring plan, dubbed RB 2.0, to split the group into two business units – one for health and one for hygiene and home products - under the same parent company.

Reckitt said on Wednesday Narasimhan would be charged with delivering the plan, due to be completed in 2020, but some analysts suggested he might have other ideas.

"The appointment of a new, external CEO is bound to raise questions regarding the timing of the end of the group's RB 2.0 plan and whether it will ultimately lead to a split of the company," Liberum analyst Robert Waldschmidt said.

Sinclair, however, said Reckitt was on track to complete the 2.0 program by mid or late 2020 and that Narasimhan agreed with the plan.

'FRESH PERSPECTIVE'

Jefferies analyst Martin Deboo questioned why a company already smaller than rivals Procter & Gamble and Unilever (LON:ULVR) wanted to "descale itself", which could hobble its ability to compete in emerging markets.

Reckitt shares were up 1.6% in afternoon trading on the London Stock Exchange.

At least three analysts welcomed Narasimhan's appointment.

"Narasimhan's strategic and leadership background make him a strong fit for Reckitt. We believe he will bring a fresh perspective to both the business and to investors," Morgan Stanley (NYSE:MS) analyst Richard Taylor wrote in a note.

Narasimhan led Strategy, Global Category Groups and Global R&D in his capacity as Chief Commercial Officer at PepsiCo.

Prior to that, he headed the beverage maker's Latin America, Europe and Sub-Saharan Africa operations, managing annual sales of 14.5 billion pounds ($18.5 billion) - more than the total annual sales of Reckitt Benckiser. At one time he was also chief financial officer of the group's Americas Foods business.

Narasimhan studied mechanical engineering in India before moving to the United States for an MBA degree. Before joining PepsiCo, he worked at consultants McKinsey for two decades, where he advised on large consumer and healthcare deals.

Reckitt picks PepsiCo executive as CEO, going outside for first time
 

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