International Fragrances & Flavors Inc. is betting on an innovation-fueled future. It has launched a campaign to reassert its past leadership in research and development as a means of gaining greater growth and share in the hyper-competitive supply industry. Andreas Fibig, a veteran of the pharmaceutical industry, who joined IFF as chairman and chief executive officer in September 2014, talked about the company and its history during a recent far-ranging interview.
This story first appeared in the July 8, 2015 issue of WWD. Subscribe Today.
IFF was once “the undisputed leader in terms of innovation, in terms of pioneering new discoveries,” he noted. “What we want to do is find our way back. It’s really important that we invest more again and very decisively in our research and development,” Fibig continued. “Being a catalyst for innovation…is really something which we have to emphasize more going forward.”
Nicolas Mirzayantz, group president of fragrances at IFF, agreed the time is right. “There is an appetite for innovation and a willingness to engage differently. That was not there five, 10 years ago,” he said. “There is a meaningful change in the marketplace.”
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IFF’s determination was driven home by the company’s Vision 2020 statement, which declared its intention to “win where we compete” in the numerous product categories and geographic regions. It is one of four pillars, including breakthrough innovation, ability to form partnerships with customers and broadening the portfolio through acquisitions, partnerships and collaborations.
That was illustrated by IFF’s binding offer to buy Lucas Meyer Cosmetics of Quebec City, Canada, an unusual move for a fragrance company. “This [acquisition] will strengthen our product offerings and enable IFF to be our customers’ partners of choice in the very attractive skincare and hair-care segment,” asserted Mirzayantz.
The company is also open to collaborations. Mirzayantz noted that IFF is collaborating with biotech labs on the West Coast in search of “very critical ingredients to provide a sustainable supply.”
Asked where IFF now stands, Fibig replied, “close to number three, number two.”
Mirzayantz added, “there are some categories where we are the leader, some where we’re number two.”
IFF’s total revenues edged past $3 billion in 2014, while Givaudan topped the rankings at 4.04 billion Swiss francs, or $4.4 billion. Firmenich rounds out the big three, while Symrise completes the top four.
Fibig sketched out a changing market. “We see a lot of pressure from our customers on the cost side, we see companies — let’s say not core — are coming into our business, and we see regulatory demands, whether on the flavors or fragrance side.”
IFF has targeted some areas where it wants to be seen as the clear leader and one of them, in the fragrance area, is a microencapsulation delivery system, which Mirzayantz said IFF has pioneered. There has been “a profound shift in consumer demand,” he said, toward technology that breaks microscopic capsules to create a sense of freshness in shirts, for example, through the friction of washing, or ironing or simply wearing. The delivery system that began with detergents “now has moved into personal wash, into home care and is about to go into hair care,” Mirzayantz said. “Think about the concept of fragrance on demand.”
The executives also stressed that the pipeline is stuffed with new molecules, including captive chemicals and botanicals, to drive perfumery creativity. Mirzayantz added that innovation also means cost optimization. “How do we provide access to more naturals, to more categories at an affordable price, still driving the overall consumer liking and creating some quality of the value? It’s really multilayered innovation.”
Fibig underscored one of the three enablers in the Vision 2020 plan — sustainability. “It’s the right thing to do,” he said, and “many of our customers are selecting their partners up to a certain investment in sustainability, which goes nicely with health and wellness.” This goes handin- hand with developing responsible products using green chemistry, “or let’s say transparency in terms of labels.”
Fibig stressed that the goal is to grow the company “disproportionately fast.” He noted that IFF is now spending about 8 percent of total sales on research and development. “With a growing top line, you will see more growth and absolute dollars for R&D as well.”
Along with its vision statement, IFF also issued annual financial targets for 2016 to 2020, which included 4 to 6 percent currency-neutral sales growth, 7 to 9 percent currency-neutral profit growth and 10 percent currency-neutral growth in earnings per share. In addition, the company forecasted $500 million to $1 billion sales growth in that period through acquisitions.
Like its competitors, IFF has been widening its footprint overseas, but now it’s time to come home. “We want to refocus on the U.S.,” said Fibig. “The U.S. market is still the biggest market and it’s our home market. We have the biggest footprint of all our competitors,” he continued, adding that IFF is the only U.S.-based company. “There is actually no reason that we are not the leader in this marketplace.”
Looking at IFF’s performance curve, Fibig said, “this company had a not-so-good phase, probably in the Nineties until 2008 or 2007. And then the previous management team did a good effort to bring this company back and now our job is to accelerate the growth and to capitalize on it.
“What is really an important indicator for us is in how many of our businesses we are winning, particularly in the areas where we believe we are strong, like encapsulation technology and delivery. We want to make sure that in these areas we are really leading the pack.
“The second one is whether we can attract the right talent to stay within the company. It’s more of a softer measure, but an important one.”