Byline: Vicki M. Young

NEW YORK — Arrogance lost International Flavors and Fragrances Inc. some customers, but a single unified structure is expected to reposition the company for future success in the marketplace.
That was the conclusions of Richard A. Goldstein, chairman and chief executive officer, speaking during a conference call Thursday about disclosure of IFF’s restructuring plans. The new IFF will be organized globally under the broad umbrellas of business development and operations, rather than into separate divisions for flavors and fragrances.
“We have lost our preeminent position as a result of being number one. IFF also developed an attitude of arrogance,” Goldstein told analysts. He explained that it was the company’s arrogance that gave competitors the chance to narrow the gap between them and IFF. The ceo also noted that the company fell short on something it should never have lost sight of: IFF’s focus on its customers and their needs.
“Customer service,” the chairman said, “was not a priority+.Our customers are larger than ever. If we don’t give them [what] they want when they want it, they will go somewhere else.”
He emphasized that the key action to turning the company around is a major restructuring that focuses on customer service — with the global support that matches the customers’ global needs — and the selection of a management team to lead IFF.
Under the new structure, business development will drive the operation while the operations group will be responsible for delivering the products that customers want, when and where they want them.
Another key change is the implementation of a single regional manager covering each of IFF’s major geographic clusters: North America, Europe, Latin America, Asia Pacific and the newly constituted Central Asia, Africa and Mideast region, which includes the Indian subcontinent. The regional managers will work with and be supported by both business development and operations under the new matrix structure.
The single regional manager structure was in response to customers who said that they wanted a single point of contact at IFF, Goldstein said.
Carlos Lobbosco, formerly president of IFF’s worldwide fragrance division, will become executive vice president for business development. The executive vice president for operations post will be filled by Wayne Howard, who joins IFF. Clint Brooks joined IFF on Oct. 2 from Abbott Laboratories as vice president of research and development. Julian Boyden, chairman and ceo of Bush Boake Allen, a recently announced acquisition of IFF, will join IFF as executive vice president and head up the IFF/BBA integration team. All members of the new management team report directly to Goldstein.
The reorganization will cost IFF between $90 million and $100 million in pretax charges over the next 18 to 24 months. The company expects to take a third-quarter charge of $7.5 million, or 5 cents a share, for head-count reductions. Goldstein said during the call that the company is likely to take separate charges in connection with its BBA acquisition, but declined to indicate a range for those charges.
The company said in its statement that, excluding nonrecurring charges, it still expects to record 33 cents in earnings per share for the third quarter and $1.55 for the year. The restructuring is expected to yield annual savings in the range of $25 million to $30 million by the year 2003, with a portion of the savings reinvested in the business. That number, the company pointed out, is incremental to the expected $70 million in savings from IFF’s acquisition of BBA for $970 million, which is expected to be completed by yearend.
“Some people may think we are taking on too much too soon,” Goldstein said, explaining that some viewed getting the house in order a priority before taking on such a major acquisition. However, the ceo pointed out that BBA will be an “important catalyst for change from day one as we look for synergies.” He added, “At the end of the day, we will be more coherent and efficient than if we were to reorganize ourselves first and then take on an acquisition.”
Goldstein noted that IFF will not be satisfied until the company firmly establishes its position as the leader in flavors and fragrances, and that in the end, “We will be bigger and better than when we began.” The combined business, he noted, will be evenly split between flavors and fragrances.