Reckitt Benckiser Group plc: Even Giants Can Be Growth Companies

Reckitt Benckiser Group plc (LON:RB) has grown at the pace of a small cap.

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If I were to ask you what a growth company was, most investors would think of fast-growing small caps. But seasoned investors know that growth can take many forms.

Many companies start from humble beginnings. There are hi-tech spin-offs from universities, internet sensations that are created from someone’s bedroom, and retail chains that grew from a market stall. After all, a company is often just the crystallisation of one person’s idea.

A giant that has grown at the pace of a small cap

But Reckitt Benckiser (LSE: RB) has found a different route to growth. Founded by the merger of Reckitt & Colman and Benckiser at the turn of the century, the company took the opportunity after the merger of completely reinventing itself. Since the merger, the new company has 7-bagged. This is a giant that has, over the past decade, grown at the pace of a small cap.

From companies that seemed mundane and unexciting has emerged a company with an incredibly positive attitude to innovation and to developing brands.

Established consumer goods giants Unilever and Procter & Gamble have shown how to maximise the value of a brand. From one product, Dove soap, has emerged shampoo, shower gels, deodorant, skincare, Dove Men+Care and a myriad other products.

Reckitt likewise has taken brands and, through innovation and creativity, launched a whole range of products. Vanish is now not only a powder, but a gel, a liquid, a spray and tablets.

Effectiveness, variety and fun

You wouldn’t have thought that a company that used to produce just mustard and detergent would have grown into such a global giant, but I think Reckitt has grasped what customers want from consumer products. They want effectiveness, variety and, basically, fun.

I am also impressed by the way Reckitt Benckiser invests in research. There are very few sacred cows in this company: that’s why, instead of being tied to the past, it looks to the future. This means a lot more step-change research, rather than incremental improvements, and this often results in products that lead the way in their particular category.

The company has grown by building its in-house brands, and also acquiring unloved brands and investing in and developing these brands. I expect Reckitt to continue acquiring and building brands to increase its sales in its core markets of Europe and the States. Plus it has much scope to grow further by expanding into emerging markets such as India and China.

That’s why I expect this business to continue growing, and why this company still merits a place in your investment portfolio.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Prabhat owns shares in none of the companies mentioned in this article. The Motley Fool owns shares in Unilever.

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