ABN Amro called time on GlaxoSmithKline's soaraway share price yesterday, leaving the drugs giant 27p weaker at 1,401p. Although the Dutch broker expects a robust set of third-quarter results from GSK later this week, it believes this is already factored into the group's stock price. Cescau moved into Niall FitzGerald's shoes, first as joint executive chairman, and now that the roles have been separated, as chief executive.While M. Cescau continues to beaver away at reshaping the company, having abandoned formal growth and earnings targets while he resettles the business model, his chairman, Anthony Burgmans, is off reviewing the company's corporate structure, including its split domicile and listing.
It may also have been caused by the extensive brand cull the company engaged in some years back.Patrick Cescau, the chief executive, continues to insist that this was the right thing to do, and it certainly fits in with the modern fashion in brand management. The old Unilever strategy of "shelf packing", where the idea was to occupy as much of the supermarket's available shelf space as possible by offering myriad different brands, may have been the more effective one.Reckitt seems to generate new brands, or variations of older ones, almost by the day There's no doubt which approach has worked best It is now almost exactly a year since the French-born M. Yet to concentrate all your efforts and resource on fewer brands may also discourage the creation of new ones. While Reckitt has surged ahead in recent years, Unilever, its larger Anglo-Dutch rival, has stalled.OK, so the comparison is not, strictly speaking, fair. For a start, the two companies are not in exactly the same product categories. Reckitt is strong in household products, such as Dettol antiseptics and Vanish stain removers, while Unilever's brands are mainly in foods and personal hygiene.Reckitt is also a lot smaller, making above market trend growth easier to achieve.
Yet the fact remains that Reckitt has managed to be a good deal more innovative and fleet of foot over the past five years than Unilever, and this is the main reason why Reckitt has been growing more strongly. Just look at the unlikely growth of its household-cleaning product, the absurdly named but obviously hugely popular Cillit Bang.This is not to say that Unilever has entirely given up on innovation. It has some great new products coming to the market, particularly in the area of health drinks, one of which has so impressed a Dutch medical insurance company that it distributes the product free to all its policyholders to help reduce levels of cholesterol.Yet across the piste as a whole, there's plainly been an innovative deficit, which I cannot help but think is not entirely down to doomed efforts to meet short-term earnings targets. The company has moved out of the art-deco splendour of its nearby home while the building undergoes refurbishment.It is Unilever's turn to report third-quarter figures next week, and although they are likely to show renewed signs of progress, it's a racing certainty they won't be anywhere near as good, either in terms of top- or bottom-line growth, as Reckitt. All of a sudden, the pin-up boy of the consumer-products sector was announcing a set of results which, for the first time in years, fell short of the City's, admittedly high, expectations of him.Yet although the results may have been disappointing by Reckitt's standards, it was still the sort of performance that would have had them dancing for joy round at Unilever's temporary head office near London's Blackfriars bridge. It therefore seems rather unlikely that the present fashion for consolidating closed life funds will spread to pension funds. Be that as it may, shareholders ought eventually to get something back assuming mortality rates don't show further dramatic improvements.
