Reckitt Benckiser Group PLC (LON:RB.) shares rose on Wednesday following news it has appointed PepsiCo’s chief commercial officer as its chief executive.
Laxman Narasimhan will become chief executive of Reckitt at the start of September, replacing Rakesh Kapoor.
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The consumer goods company, whose brands include Dettol, Nurofen and Durex, announced in January that Kapoor would be stepping down after 32 years at the company, including eight years in the top job.
Kapoor leaves the company after a difficult couple of years, with the firm having been blighted by a cyber attack, criticism over his pay and factory disruption.
Reckitt handed Kapoor a pay package of £15.2mln for 2018, an 70% increase on the previous year.
Challenges facing incoming boss
Incoming boss Narasimhan joins Reckitt as the company tries to turnaround sales at its health division, which accounts for nearly two-thirds of revenue. The health business posted a 3% rise in underlying sales growth last year, missing its target of up to 5%.
Narasimhan will also have to deal with a US Department of Justice case against a former Reckitt subsidiary accused of using a fraudulent marketing scheme to increase prescription sales of an opioid addition treatment.
Reckitt spun off the subsidiary into a separate company called Indivior in 2014 but it could still have to pay some of the fines the DoJ wants to impose.
At Pepsi, Narasimhan helped lead an “integrated long-term growth strategy” and has been implementing a digital overhaul across the business, Reckitt said.
“Laxman is an outstanding leader who brings wide experience across the consumer goods sector, both operationally at scale, and from his time at McKinsey,” said Reckitt chairman Chris Sinclair.
“He has led complex operational businesses and inspired teams across developed and emerging markets to achieve market-leading performance.”
New CEO to focus on health business turnaround
Sinclair said the new CEO’s initial priorities will be to focus on delivering outperformance, particularly in the health business unit, and to drive the group’s so-called ‘RB2.0’ strategy.
Commenting on the appointment, Russ Mould, investment director at AJ Bell said: “Given the company’s recent patchy track record, investors may be pleased to see an outsider chosen to lead consumer goods firm Reckitt Benckiser.
“Joining from PepsiCo, Laxman Narasimhan will probably have more leeway than an internal candidate to make bold changes when he takes over from Rakesh Kapoor in September 2019. This might include boosting investment in the business and its brands which has lagged Reckitt’s peers of late.”
In afternoon trading, shares in Reckitt were up 3.6% at 6,627p. The shares have underperformed the MSCI Europe Consumer Staples index this year and are trading at discount to peers including Procter & Gamble and Unilever, according to Capital IQ.