Reckitt loses a problem-solver CEO just as it was finding its footing

Laxman Narasimhan cleaned up Reckitt Benckiser Group Plc but he’s not staying around to admire the shine at the maker of Dettol and Durex. After three years as chief executive officer, he’s decided step down on Sept. 30. It’s an unexpected move. On Thursday morning, the company said Narasimhan will return to the US for family reasons. Later in the day came an announcement that he will become the new CEO of Starbucks Corp. Senior independent director and former British American Tobacco Plc CEO Nicandro Durante will step into the role on an interim basis while Reckitt searches for a successor.

The departure is a blow to the consumer-goods company and its shares fell as much as 6% in early trading.

Narasimhan inherited a mess from predecessor Rakesh Kapoor, under whom Reckitt had acquired Mead Johnson for $17 billion in 2017. That stretched the company thin, leaving it vulnerable to a series of blunders, including a cyberattack. Narasimhan quietly set about restructuring Reckitt, most notably selling off its Chinese infant formula business for $2.2 billion.

His efforts were beginning to pay off when his departure was announced. Reckitt was one of the few consumer-goods companies in the most recent earnings season to upgrade its outlook for both sales growth and profitability. So, a new CEO will inherit a company with the heavy lifting mostly done.

In some ways, that will make the job trickier. The new boss won’t have the clear to-do list Narasimhan had when he arrived, allowing him to tick off problems as he solved them one-by-one. Instead, the new CEO will have to deliver on the strategy set out by Narasimhan — and not mess up.

One item outstanding is the $7 billion disposal of the rump of Mead Johnson, which sells brands including the infant formula Enfamil. But perhaps the biggest loose end is a possible merger with Haleon Plc, the consumer-health business spun out of GSK Plc in July. Narasimhan’s credibility, along with Reckitt’s value, had risen just as Haleon’s shares had shrunk, strengthening Reckitt’s hand. There is another M&A possibility: Johnson & Johnson is spinning off its consumer operation.

The new CEO will be able to make his or her mark by deciding where Reckitt fits in an industry rapidly reconfiguring itself. The challenge is to make the right strategic calls and, if Reckitt does do a deal, expertly manage the integration process.

When it comes to Haleon, time may be on the new leader’s side. The litigation against makers of Zantac, including GSK, are scheduled to go to trial this year, with proceedings lasting into 2023. Once these are finished, Haleon – and Reckitt – will have a better idea of the severity of any exposure to Zantac.

That timeframe could give the new CEO a chance to settle in and build credibility with investors.

Narasimhan was fond of saying that Reckitt was a good house in a great neighborhood, with the potential to be a great house again. Now, someone else will be moving in, and must embark on the next phase of the makeover.