RKT Reckitt Benckiser Group Plc

By Saabira Chaudhuri 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (July 29, 2020).

Lysol maker Reckitt Benckiser Group PLC is capitalizing on booming interest in hygiene during the pandemic, launching a new business selling its cleaning products and expertise to the travel and hospitality industries.

The British company, which also makes Dettol soap, Finish dishwasher tablets and Harpic toilet cleaner, said Tuesday the preoccupation with cleaning had fueled a surge in second-quarter sales. Now, it is trying to move quickly to position itself as a hygiene expert and leverage Lysol's brand recognition with a new professional-services business.

Companies across the hard-hit travel and hospitality industries, struggling to woo anxious customers, have started touting their new cleaning rituals as reassurance. Hilton Worldwide Holdings Inc., Delta Air Lines Inc. and Avis Budget Group Inc. are among those that have partnered with Lysol in the U.S. to launch -- and advertise -- cleaning programs. Outside the U.S., Reckitt has struck similar partnerships with Uber Technologies Inc. in Australia and Saudi Arabia's state-owned Saudia Airlines under the Dettol brand.

"They come to brands like this to provide a stamp of approval," Reckitt Chief Executive Laxman Narasimhan said of the company's new corporate customers. He declined to outline how big he thinks the new professional-services business could grow.

For the second quarter, sales in Reckitt's hygiene arm rose 19.4% on a like-for-like basis from the year earlier. The gain was driven by North America, where Lysol sales jumped over 70%.

The boom in demand for cleaning products -- also seen by rivals Unilever PLC and Clorox Co. -- is a welcome boost for Reckitt, which has struggled in recent years with volatile revenue growth, narrowing margins and a series of one-off mishaps that led some investors to question its business model. Now, the pandemic is opening new windows of opportunity.

Mr. Narasimhan said Reckitt is investing in its hygiene operations in once-ignored markets, including accelerating the launch of Lysol in Brazil by three months. He expects demand for Lysol and Dettol to remain higher than pre-pandemic levels and said the company would spend an additional GBP100 million ($128.8 million) on expanding manufacturing capabilities.

"When behaviors are cemented for 60 days they do become embedded in our daily lives," said Mr. Narasimhan.

Reckitt, like Unilever, has spent years trying to encourage consumers to wash their hands and clean more. Earlier this month, Reckitt said it would invest GBP25 million over several years to create a public-health research institute to generate practical, scientific research around hygiene intended to inform behavior change.

The company also said Tuesday it would invest GBP100 million in tapping new growth opportunities, including building out a sales team to sell its disinfectants to more corporate customers. The head of the company's North American hygiene business will switch roles to lead the new professional-services business in September.

Under the Delta deal, the U.S. airline will buy Lysol sprays and wipes, as well as work with the cleaning brand to gather consumer insights to help develop new disinfectants and protocols for use at airports and on flights. The companies will start by focusing on disinfecting airplane lavatories and plan to develop cleaning routines for departure gates and airport lounges.

"The lavatory is a big source of concern for a lot of people," said Mr. Narasimhan, noting that lavatories are typically cleaned before takeoff but often neglected during a flight.

Hilton has been publicizing a cleaning program it says it has rolled out to 6,100 properties across 18 brands, intended to demonstrate to guests that rooms, restaurants and gyms are being thoroughly cleaned. Hilton's Chief Financial Officer Kevin Jacobs last month said using Lysol was a way for the hotel chain to drive customer loyalty and win market share. "The customer says, okay, I like the way Hilton is doing this and so I'm going to preference Hilton," he told an investor conference.

Mr. Narasimhan said Hilton is placing Lysol and Dettol cleaning products at check-in desks and in rooms, and putting stickers on bed sheets that say rooms have been cleaned according to standards developed by Lysol.

Overall, Reckitt reported a first-half profit of GBP1.08 billion, up from GBP112 million a year earlier when results were dragged down by a settlement with the Justice Department tied to the company's former pharmaceuticals business. Net revenue for the six months came in at GBP6.91 billion, up 10.8% from a year earlier.

Reckitt's health arm -- which includes Mucinex cold medicine and Nurofen painkillers -- reported second-quarter sales growth of 5% on a like-for-like basis.

The company said it expects high-single-digit revenue growth for the full year, an update on previous guidance that it expected revenue to be better than the previous year.

However, some analysts cast doubt on whether the company can continue its hot streak next year as it comes up against this year's strong sales. "RB are having a great year there is no doubt, but we expect longer term questions to resurface," said Jefferies analyst Martin Deboo.

Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com

(END) Dow Jones Newswires

July 29, 2020 02:47 ET (06:47 GMT)

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