IFF at Barclays Conference: Strategic Turnaround and Growth Plans

On Thursday, 04 September 2025, International Flavors & Fragrances Inc. (NYSE:IFF) presented at the Barclays 18th Annual Global Consumer Staples Conference 2025. CFO Michael DeVoe outlined a strategic plan focusing on a turnaround, emphasizing improved financial performance and innovation. While the company faces macroeconomic pressures, particularly in North America and Greater Asia, it remains committed to long-term growth and value creation.

Key Takeaways

• Sales Guidance: Lowered to the bottom of the 1% to 4% range due to economic challenges.
• Free Cash Flow: Maintained at $500 million, with a focus on net working capital management.
• Strategic Reinvestment: Plans to invest $20 million in 2024 and $100 million in 2025, targeting R&D and capacity expansion.
• Operational Focus: Emphasis on productivity improvements and portfolio shifts towards high-value products.
• Market Growth: Targeting mid-single-digit growth and improved EBITDA margins.

Financial Results

• Sales Guidance: Adjusted to the lower end of the 1% to 4% range amid economic pressures and reduced consumer packaged goods (CPG) volumes.
• Free Cash Flow: Reaffirmed at $500 million, with capital expenditures projected at 6% of sales.
• EBITDA Margin: Aiming for a 23% margin, aligning with industry peers, excluding the Food Ingredients segment.
• Growth in Divisions: Fine Fragrance has seen double-digit growth, particularly in Africa and the Middle East, increasing from $5 million to $70 million.

Operational Updates

• Core Business Focus: Prioritizing Taste, Scent, Fragrances, and Health & Biosciences (H&B).
• Health Business: Reinvestment in R&D with $20 million planned for 2024 and $100 million for 2025.
• New Leadership: A new general manager for Health started on September 1st, focusing on marketing and commercial strategies.
• Productivity Initiatives: Plant rationalization, procurement optimization, and reformulation are key strategies.

Future Outlook

• Health Business: Expected improvement by 2026, with above-market growth anticipated by 2027.
• Fragrance Ingredients: Recovery projected to start in 2026, shifting towards specialty molecules.
• Food Ingredients: Undergoing a strategic review, with potential divestiture being considered.
• Emerging Markets: Strengthening presence in emerging markets, particularly in H&B.

Q&A Highlights

• Health Business Challenges: Addressing challenges through increased R&D investment and new leadership.
• Fragrance Ingredients Strategy: Shifting towards higher-value specialty molecules.
• Productivity Initiatives: Aimed at funding reinvestment and improving margins.
• Market Growth Analysis: IFF’s exposure to local and regional customers compared to larger peers was discussed.

For a detailed understanding, readers are encouraged to refer to the full transcript below.

Full transcript - Barclays 18th Annual Global Consumer Staples Conference 2025:

Unidentified speaker: Okay. We’re going to get started. So next up, we are pleased very pleased to welcome back Michael DeVoe, International Flavors and Fragrances CFO. Mike, it’s great to have you here in your new role. Mean, you’ve been here a million times at the conference, but first time as CFO.

So congratulations again. Wanted to just start maybe with some near term questions. But actually, before I do, I want to reflect a bit on where the business stands today. You’ve been at the company a long time. You are certainly the most tenured on the executive team, and you’ve been through lots of ups and downs.

So what would you describe as IFF’s greatest strength today and greatest areas of opportunities opportunities for improvement?

Michael DeVoe, CFO, International Flavors and Fragrances: Yeah. First, thank you for having us. It’s always a pleasure to be in Boston this time of the year, so thank you for that. I’ve been IFF seventeen years now, so it’s and it’s been a great journey. I think fundamentally, what’s kept me in IFF is still true today, which is it’s a great business, right?

When you think about what we’re trying to achieve on a day to day basis, the impact that we have on the world, super positive, super exciting, so there’s an engagement aspect. It is a business that has a limited number of competitors. It is a business that is focused on innovation and R and D. We have a very good value proposition, or 1% to 4% of the cost of the end product, which drives a lot of the repeat purchases. So I’d say, structurally, everything is in really good in a good spot.

Where we are today in IFF perspective and what excites me the most is this focused prioritization, getting back to basics. It’s an opportunity for us to really we went through an expansive amount of growth over the past five or six years with two big real big deals. Now where we are as part of the portfolio, we’re in a spot where the core businesses, taste or flavors, scent, fragrances, H and B are kind of the core elements of it. We’re working on, which I’m sure we’ll talk about on the food ingredient side, opportunities on that side of the businesses. But for IFF, we’re number one, number two in a lot of those key markets.

So we really have a really good competitive strength. And so what we’re trying to do now is we’re really trying to make sure we are doing the best we can to service our customers through innovation and through R and D. That is what is the most exciting aspect of kind of the day to day piece of it.

Unidentified speaker: Would you think it’s fair to describe IFF today as a turnaround story?

Michael DeVoe, CFO, International Flavors and Fragrances: In part, to be very honest. I actually I’d probably say it’s 80%. It’s really getting back to our core values, our core business, right? How do we do things in a disciplined manner? And so for me, stepping into the CFO role, and I had the fortune to work with a lot of people over the last seventeen years at IFF.

So I know what worked, what hasn’t worked. The beauty of where we are today and the trajectory we have, Eric coming in, Eric is really big on accountability. He’s really big on execution. He’s really big on making sure the business is own end to end model, which is super important. So you have no longer across the conversations, one point of contact to making sure they’re driving the business results.

For me, as a CFO, it’s really about return on invested capital, like how do we actually get to a point, not in mechanism we want to obviously improve that, but how do we use that to making sure the investments we’re making and the areas of focus are driving the highest return pieces of it. So that’s a key criteria for me as a focal point. The second piece is really on cash flow dynamic. And so if you look and you benchmark us, we haven’t had the best cash flow performance relative to where we’ve been. A lot of that was because of deals and a lot of divestitures.

And so for me, it’s how do we get more focused and how do we drive that now going forward. So there’s a lot of opportunities, which we’ll talk about as we go through.

Unidentified speaker: Okay. So just in fact closer in now. So let’s just revisit second quarter earnings. Can you talk about what’s changed to take your annual sales guidance down to the lower end of the range? How much of it’s macro driven versus IFF specific?

And if you could talk about it from a geographic perspective, that would also be helpful.

Michael DeVoe, CFO, International Flavors and Fragrances: Sure. We started the year in February. We actually gave a guidance range of the 1% to 4%. So fundamentally, we reconfirmed that the last two quarters. The lower end of that was because of some of the uncertainty we expected to see over the course of the year.

Obviously, part of it is macro driven, right? There’s a lot of uncertainty in the world. We see a lot of changing news day to day that can have some impacts overall. And so we wanted to be we wanted to make sure we gave a big enough range that we can perform in any situation. So point number one.

We indicated more recently that we’re going be towards the lower end, towards that one ish percent part of the guidance range. And that was really driven by the fact that in the second half, we always knew that there would be a little bit of softness. But I think what’s happened is the macro got a little bit more pressured. I think when you look at some of the CPG volumes, you can see they’re much more muted, as we go forward. And so between that those two areas and then a high comp, specifically for Q3 in some businesses, we knew we’d have a pressure point in the second half of the year, which is why we’ve got it down towards the lower end of that range.

When you look at it on a regional perspective, I think Europe and Latin America are actually doing pretty well, more broadly speaking, across all the businesses. The two commonalities where we see across the businesses a little bit more pressure is in the North America market specifically. I think all four divisions were down in the second quarter in North America specifically. And in Greater Asia, there’s some pockets in there that are a little bit more challenged overall. So regionally, have a little bit of a different story depending on where you’re looking.

Unidentified speaker: Okay. Let’s talk a little bit about more about Fragrance Ingredients and Health. Sure. We’ve estimated that those two businesses combined are roughly $1,000,000,000 in sales or 9% of company Correct. Okay, that’s correct.

Michael DeVoe, CFO, International Flavors and Fragrances: We need

Unidentified speaker: to fact check first. Okay. So starting with Health, can you just give an overview of like what this business is? How long you’ve been aware of the challenges that you’re experiencing within it? And when can we expect to see a step change in R and D that will help the

Michael DeVoe, CFO, International Flavors and Fragrances: Yes. Yes. Absolutely. It’s a great question. It’s a key question we’ve been getting since the earnings call, frankly.

Primarily, it’s the probiotics business, okay? That’s the biggest bulk of that business overall. The H and B business is a fantastic business. This is the enzymes, cultures, cultures, probiotics business. So good margins, good growth, long term and short term performance.

So really good business. When you double down into that business, the health business is the one area which is primarily the probiotics business. That business has it’s been a little bit lumpy performance. And so the CAGR of that business has been probably low single digits over the past couple of years. And when you think about the market performance, it’s probably a mid single digit type of grower.

So there is a little bit of a gap there. So we knew over the last couple of years that there was a bit of challenge points. Specifically, when you look at it by region, China is a big market for there and North America is a big market. And in those two markets, there’s a pressure point. In China, we see general macro pressures in probiotics market overall, so that has pressured us a bit.

And then in North America market, it’s a little bit better than China, but still a little bit muted. But then you have a separation. There are some customers that are doing very well and some customers that are not doing as well as the other ones. Our position is with some customers that haven’t performed as well as they should have. And so it’s a little bit of a customer mix dynamic.

Fortunately, we’ve made a lot of changes there. We started, if you remember, Lauren, a big conversation on reinvestment in the 2024. And so we started to make some investments in the Health business, specifically on the R and D pipeline in ’twenty four and continuing in 2025. That’s super important because it was a $20,000,000 investment in 2024, dollars 100,000,000 investment in 2025, not all health or H and B, but the whole business. And so we tried to make a reinvestment to build that product pipeline.

Health was one big area. So the R and D pipeline that will come is going to be very, very strong. So we’re excited about the progress we’re making. At the same time, we more recently changed some of the general manager leadership role. And so we have a new person that just has recently started that comes with great experience.

She started September 1. And so a little bit more focused on marketing and commercial orientation, which will help us now making sure as we think about our customer segmentation, our go to market strategy, launching some of this innovation a bit stronger. So as we go forward in the business, I actually think 2026, we should improve. And I think when we get to the back half of ’twenty six and ’twenty seven as some of those new ingredients, we should get to a point where we’re at or above market growth rates from that perspective.

Unidentified speaker: Okay. So it doesn’t matter. So win rates or just the natural time line that it takes for marketing win commercialization?

Michael DeVoe, CFO, International Flavors and Fragrances: Life cycle.

Unidentified speaker: Product Product life cycle. ’6, we could start to see some

Michael DeVoe, CFO, International Flavors and Fragrances: Yes. Some of those investments we started to make in 2024 will start to come now.

Unidentified speaker: Yes. And come to market in the ’6, it. I Okay. Great. And then within Fragrance Ingredients.

So there, is it a case of underinvestment because it isn’t really seen as a core business? Can you just talk a bit about maybe business trends? And I know that this business historically, as we’ve talked about it, ups and downs over the So years, it tends to ebb and flow a what is it why is that the case? What does it really take to launch new captive molecules and some of the low cost competition that I know you’re facing? Isn’t that always the case?

Michael DeVoe, CFO, International Flavors and Fragrances: Yes. It’s always been the case, to be fair. And there is ebbs and flows. And I think that’s an important aspect because while there’s some short term pressure today, you should start to see a recovery as we go forward into 2026, to be fair, in that business. So I’m not super negative on it.

The business, remember, it was built at a legacy from an IFF standpoint. And so when you look at some of the portfolio we had, we had really proprietary molecules in the ’80s and ’90s and early 2000s that are no longer on patent. And so the purpose of that business is basically to sell excess capacity. So we’re going to market whatever we don’t consume internally, we’re selling externally. That is subject to competition with low cost providers.

And so and that’s the more generic versions of some of our product base. And that’s where we see the biggest pressure point, to be clear. Where we see actually growth is on the specialty. And so stuff that’s proprietary to IFF that only we have, that’s on patent, that we’re bringing to market, those are the areas that have been performing quite well. What we’re trying to do is we’re trying to shift it a bit.

The more generic commodity types of businesses will probably improve as we go forward. You probably have another couple of quarters of down, which is embedded in the guidance piece of it. And then after that, we’ll start to see that recover. But more importantly, we’re making investments to try to change that portfolio of demographic and shift it more towards the specialties, the higher value adds proprietary to IFF. That will protect us in the long term versus more low cost providers because it will be intellectual property remain at IFF overall.

Unidentified speaker: Okay. So a little bit of underinvestment then from the standpoint that you’re captive molecule, please, currently the smaller piece?

Michael DeVoe, CFO, International Flavors and Fragrances: Yes. I think it’s a focal point, right? You want to make sure you drive differentiation. The key for us as an industry overall is innovation and differentiation. And so the more ingredients, the more tools you have in your toolbox, the better you’ll be.

And so I think I’m not sure I’d call it lack of investment or lack of focus on some of those areas. The team is now fully focused on making sure we make that portfolio shift overall to make sure they’re driving a couple of molecules every year to bring to market. Yes.

Unidentified speaker: Okay. Great. And then just aside from these two areas, Health and Fragrance Ingredients, any other parts of the portfolio where you think IFF has been underinvested? Or maybe did you have you lost competitive edge? And if so, kind of what are you doing to fix them?

Michael DeVoe, CFO, International Flavors and Fragrances: I think the portfolio actually is pretty strong. When you compare taste versus our best in class competitors, they’ve done very, very well. Same on the scent side, agnostic of the fragrance ingredients piece of it. On the H and B, we talked about health. I think the one area where there’s a concentrated effort to make sure we add capacity, and this is why we talked about an elevated level of CapEx for a couple of years, is in enzyme capacity.

And so it’s a really great business. And so the more fermenters we can have in the market, the more demand we can capture in there. So when you think about the incremental returns and margins on it, very, very strong. But that’s one area that we started to talk about in 2024. Part of that elevated CapEx investment in this year and the next two years will be related to some of those investments, more broadly speaking.

And that’s the one area where I think that’s incrementally more than where we are today.

Unidentified speaker: Okay. Great. And then on the flip side, right, really strong performance still from taste and also from fine fragrance, well, which and fragrance has been well ahead of broader end market trends. So can you discuss where the strength has been coming from? Is it new wins, existing business, local, regional versus global?

Any kind of color on where this outperformance comes from?

Michael DeVoe, CFO, International Flavors and Fragrances: Yes. The taste has been broad based, honestly. When you look at the Uvraj, a gentleman that joined us two years ago, ran the Nourish business, now took over the taste side. His entire team has done a very, very good job. Their focal point, number one, was to grow their product pipeline.

And so they’ve done a very good job. So if you look at the product pipeline size of new potential businesses, it’s increased significantly. Part number two was then, okay, now we have a bigger piece of it, how do we get our win rates up? And so they’re now punching well above what I’d say is their fair share in in terms of overall win rates. And so that combination, really, when you look at the performance more recently, it’s new win driven.

The volume on existing business has been pretty consistent. And so the incremental growth that we have is really around new wins related to commercial performance. In some of the categories, I think the two areas that stand out to me is on the beverage side and on the dairy side. Those are the two areas where we have the best growth performance, and a lot of it is through innovation and through new wins in terms of commercial performance. So that’s the taste piece of it.

U. S.

Unidentified speaker: Scents? Yes. On Fine Fragrance. Fine Fragrance.

Michael DeVoe, CFO, International Flavors and Fragrances: Fine Fragrance is a great success story as well. So double digit growth for a couple of years now. And so the history, if you look at that business, it’s been a little bit choppy. You have a couple of years of good and then maybe one bad and a couple of years of good and kind of you get the steady Eddie growth of 3%, but it’s a little bit volatile. The team has done a really good job in two areas.

One, I think fundamentally, market is driven by social media. And so when you look at some of the developed markets, the trends that we’re seeing from a social media perspective on layering, use of consumption, different types of applications is driving a little bit of buoyancy in the business. So the team has done a very good job to sure they’re winning new business there and with new launches. And then part number two, specifically in Africa and Middle East, it’s been a big growth market. And so I think when you look at that business a couple of years ago, it was very small, 5,000,000, dollars 7,000,000.

And now it’s in excess of $70,000,000 So it’s had a lot of nice growth in there, and that’s really around credit to the team. A person at least at Sabria is running that business. She made a big investment probably about six or seven years Africa specifically to making sure she is first to market to partner with some of the key customers there. That key those key customers have now grown quite significant, and that has been a bit of the tailwind that we’re seeing overall. Okay.

Unidentified speaker: Let’s talk about Food Ingredients. So how much of that business is left post the Bunge deal? That’s actually sorry, should say it differently. How much of what’s left is differentiated post the Bunge deal versus more commoditized? Are there parts of the business that make sense to hold on to have in terms of reformulation the parts that are used within taste?

Michael DeVoe, CFO, International Flavors and Fragrances: Yes. It’s a good question. If you think about that business, it’s about it was $3,500,000,000 rough estimate, 3.4 The recent transaction that we announced on the crush, Alessitin divestiture that we have, I think was around $240,000,000 that will go through your kind of around $3,000,000,000 $3,100,000,000 left. You have emulsifiers, sweeteners, texturants, systems that are kind of embedded in there. It is a little bit of a uniquely different business than I’d say the Flavors, Fragrances and H and P business.

It is one that is much more it’s a little bit lower growth, higher capital intensity, a little bit more you’re managing that business for fixed asset absorption than the other businesses are a little bit more value add contribution when you think about the margin profile. So it’s a uniquely different business. It is a good business, a solid business. When you think about what’s left, the team has been so focused on making the margin improvement. They went from 9% in 2024.

I think they were 12% I’m sorry, 2024. 12% in 24%. I’m I’m looking at Mike to check for those that are on the webcast. 24%, they were at 12%. And I think this year, they’ll be in the mid teens range once you normalize for this.

So they made a fantastic improvement overall with keeping top stable. And so as we think about the business going forward, we’re trying to figure out what the connection points are for IFF. If they are limited, what do we want to do with the business overall? Fundamentally, the question that we ask ourselves strategically, does it fit in the portfolio? If it does not fit, how do we actually maximize the most value for it?

And then if there is connections, how do we keep those connections tight with the rest of the business or remain co.

Unidentified speaker: Okay. So like pros and cons of divesting the remainder. I mean, might it have impacted your competitive positioning with the industry? How would it change your growth profile? Would your growth profile, frankly, be more like your peer set if you did not have this business?

Michael DeVoe, CFO, International Flavors and Fragrances: Yes. I mean, I think when you look at it from a growth profile and probably from a margin profile, that business has been a bit of a drag in the last couple of years overall, and it’s 30%, 35% of the business. So when you look at the key questions, again, versus benchmarks, your benchmarks your peers are growing mid single digits and you’re growing low single digits. The answer a big part of that is going to be the Food Ingredients business piece of it. So I actually think if you do move away from that business, you’ll see growth go up more towards your peer set, which is in that mid single digit range.

And your margin profile should improve a couple of 100 basis points as well because, again, I referenced before a 14%, 15% EBITDA margin aspect of that business. So if that kind of moved on, RemainCo would be a bit stronger both on top line and from a margin profile, much more comparable to the European peers.

Unidentified speaker: Okay. But then competitively, in terms of your ability to reformulate compete and so on, I mean, what are the implications or?

Michael DeVoe, CFO, International Flavors and Fragrances: I don’t think so. I think from a competitive perspective, you try to keep the connection points than if there are areas that you want to work with. Obviously, if it was not part of IFF, and we haven’t made the decision yet, but if it’s not part of IFF, then the reality is how do you make those connections and how do you keep those connections strong to support both businesses. But I think more broadly speaking, the buyers are different, very candidly, and so not necessarily a core part of it. You’re not going put yourself at a deficit by not having it.

Unidentified speaker: Okay. Perfect. Just turning to profitability. So when you took down the sales guidance to lower end of the range, you didn’t do the same EBITDA. So can you talk about the puts and takes to profitability and where you have more flexibility going forward?

Michael DeVoe, CFO, International Flavors and Fragrances: Yes. Productivity is a big it’s a big agenda item for us, and it will be a bigger agenda item as we go forward now. Obviously, if there’s a potential divestiture as well, it becomes a bigger piece of the conversation. When you think about productivity, it’s always been part of the IFFT day. The team has always done a good job of driving productivity across the board.

More specifically, in Food Ingredients, just to give you a couple of tangible examples, plant rationalization, procurement optimization, driving big benefits overall in Food Ingredients this year and will continue for the next couple of years. On the H and B side, it’s been much more about yield improvements, how do we actually extract more value out of some of the productions. But as they go forward, Leticia, new business unit president, started about a year ago, she’s really focused on expanding margins. And so she’s doing a very similar exercise that the Food Ingredients team has done. And so there’s a couple 100 basis points of margin that we’re trying to go after within the H and B business through some of the productivity initiatives.

So that’s an area of opportunity. And then the legacy IFF or Flavors and Fragrance piece of it, in that business, it’s really around we call it business margin revolution, which is reformulation, looking at some of our portfolios, how do we actually get better in terms of improvements overall from a reformulation perspective. And those are driving, what I’d say, is business unit performance. Then at the corporate level, to be fair, we’re being focused on making sure we take out as much overhead as we can, very candidly, that has lower value aspects to it. So Eric’s been on stage, talked about consulting spend, some of these onetime costs.

How do we actually drive that out there? We’re trying to push that now going forward. So when you put it all together, productivity agenda has been strong and will continue to be strong as we go forward.

Unidentified speaker: Okay. How should we think about timing in terms of productivity flowing through in a way that is funding reinvestment? You talked about the big step up in reinvestment that began at the toward the end Does of 2020 reinvestment run ahead of cost savings given the ground that needs to be made up competitively? Or with the productivity and reinvestment that’s happening this year as we go into 2026, have we kind of reached the end of that cycle?

Michael DeVoe, CFO, International Flavors and Fragrances: Yes. I’d like to time it, to be fair. I’d almost like to be a one for one deal. If we continued reinvestment, we have to generate it self funded through productivity initiatives as we go forward. I’ll be very honest, in 2025, we invested $100,000,000 because we had a tailwind of an incentive compensation reset.

And so we took that opportunity to really reinvest that back in the business, and which is a significant investment overall. So now as we go forward, absent of CapEx, because I know I talked about capacity expansion, some ERP stuff, some deferred maintenance CapEx that we have to catch up on. Absent of that, I think everything else we have going forward really needs to match. If we want to reinvest, we have to self fund part of that reinvestment. Of course, there will be a case that that’s not the case, but the majority should be much more of a kind of a one for one going forward.

Unidentified speaker: Okay, great. Switching to cash flow because you mentioned So it at the outset as in May, you reiterated the guidance for $500,000,000 in free cash, and that included CapEx around 6% of sales. Does that still hold? If it doesn’t, kind of what’s changed?

Michael DeVoe, CFO, International Flavors and Fragrances: No, still holds. I think there’s some ebbs and flows. To be fair, in the second quarter, see the inventory get a little bit higher because demand came down a bit. We’re taking all the actions to be more blocking and tackling on payables, receivables and inventory. So I’d say net working capital, we’re trying to make second half improvements.

Some of the Reg G related charges, divestiture taxes, we had some benefits. So there’s some moving parts. But broadly speaking, I still think we’ll be in that $500,000,000 range for this year.

Unidentified speaker: Great. Maybe some more strategic So medium term IFF and your peers have been performing better than multinational customers, right? And we’ve talked about that being because of the exposure to local and regional How does IFF’s exposure to this basket of customers compare to your larger peers to your other peers?

Michael DeVoe, CFO, International Flavors and Fragrances: I think for the most part, it is pretty similar. There are some puts and takes. Some of our peers in sense may have a little bit more exposure on the local regional side than we do. We’re probably a little bit stronger on the global nature. And so the team has really done and Anna is stepping in long term better in IFF, stepping in as the business president role about two years ago, is really focused on trying to get that expansion with some of those local regional players in some key markets around the world.

So that is a focal point for us in that business. On the taste side, it is pretty consistent. I think you’ll see it’s about maybe 60% is going be local regional within that business. And so the team has done a good job. Think that’s pretty consistent overall.

And I would say it’s probably the similar level, Novo Niesis versus the H and B side with maybe a little bit of a caveat that on H and B, we need to get our emerging market presence a little bit stronger in some areas. And that was part of the reinvestment that we had in 2025.

Unidentified speaker: Okay. And a few years ago, you talked about building up the Tastepoint business as a way in The U. S. To cater to smaller customers. Is that still Yes.

Okay. That’s Tastepoint. Okay. It make sense that maybe you could explain what that is. But are you able to replicate that across other businesses or geographies?

Michael DeVoe, CFO, International Flavors and Fragrances: Yes. Yes. So TastePoint was born out of two acquisitions we made. I’m forgetting the year, but it was probably almost ten years ago now. David Michaels and Ottens, two small Philadelphia based flavor houses.

Essentially, what we did is we purchased them, we combined them together and created a taste point model, specifically geared towards smaller customers and private label. And so what we did is we bifurcated the business at our South Brunswick facility in New Jersey. We made that much more global center in terms of creative center and manufacturing plant. And on the taste point side, that new taste point model was really geared towards smaller customers. Why that’s important is pack size, speed of execution, quality standards, everything that’s associated with different businesses, we felt we have incremental market share to gain if we can serve them uniquely different.

It’s been a very good success story for IFF overall. We’ve expanded that model on the taste side to now Europe and Greater Asia over the last couple of years. So it’s now spread. So I feel like they have a really good blueprint on it. The Sense team is now starting to have more conversations about that profile.

Haven’t gotten there yet, but we’re starting to think about how do we have a similar type of model for the scent side, specifically in North America as an opportunity going forward. So more to come, but it’s an area that we’re trying to recreate.

Unidentified speaker: Okay. Great. Let’s talk about reformulation, a huge topic. So many food companies have already been talking about phasing out synthetic colors by twenty twenty six, twenty seven. I want to talk a little bit about the practicalities of that.

So I know IFF’s own natural colors business is very small. I think you guys said around $50,000,000 in sales. Can you scale that up, if need be, so you can participate in this big industry trend?

Michael DeVoe, CFO, International Flavors and Fragrances: I don’t think it’s a core business, very candidly. It’s a part of a business, but the reality is for us, scale, I think we’re probably less than $50,000,000 to be candid. So we’re not a meaningful player in it. There are opportunities that we can benefit, but I think those opportunities are probably on the fringes and a little bit smaller. So when I think about that going forward, that’s not a focal point, at least for us right now.

Unidentified speaker: Okay. So let’s think maybe more broadly in terms of reformulation around other elements So of ingredient maybe first talk about how IFF has benefited in the past from regulatory in other regions?

Michael DeVoe, CFO, International Flavors and Fragrances: Yes. I mean just one quick example, and I worked on in the past in a previous role I had at IFF, legislation in Mexico around sugar reduction, right? So there was an opportunity to say you had to reduce your sugar consumption in Mexico. And so what we did is we worked with our some customers to say we have a sweetness modulation platform on the taste side. And so what allowed us to do is have them reduce their sugar concept, avoid a duty charge by using some of our technologies in terms of modulation.

So there was a market that existed. It was amplified through reformulation and allowed us to capture more than our fair share in terms of market share but also wallet in the grand scheme of things. Similar type of phenomenon in Europe. So these regulation changes, I know some people get concerned aspect of it. The beauty of the business and candidly the industry is that we have the opportunity to compete on various ends of the spectrum.

And so reformulation is not necessarily a bad word. We see it as an opportunity as we go forward because we have bright people that can figure out solutions to help them achieve that. So I think it could be a net positive from here in some of our legacy businesses as we actually work with our customers to get healthier, better better for you types of products to market as they think about innovation.

Unidentified speaker: Okay. And if color is the, let’s call it, the most visible catalyst for reformulation at the moment, even if it’s not a core business for you, does reformulation to swap out color give you opportunities on reformulation as part of that process? Because everything changes, right? You change the color, everything It’s formula.

Michael DeVoe, CFO, International Flavors and Fragrances: There could be opportunities that if we’re not the incumbent that we can compete on more briefs. And that’s part of the project pipeline that I was talking about is actually pretty high. And some of that’s coming through some of those reformulation efforts, more broadly speaking.

Unidentified speaker: Okay. Do you think for the industry that because of these this discussion around reformulation ingredient profile, that that’s a catalyst for faster growth for the industry over the next couple of years?

Michael DeVoe, CFO, International Flavors and Fragrances: I think it’s solution oriented approaches. And I don’t mean bundling of solutions. I mean how do we work with our customers in some of those areas that are going to be challenged. It could be an opportunity and a bit of a tailwind, frankly speaking, as we compete on some of that stuff. So I do think it’s an opportunity.

Again, that reformulation, opening up briefs, those are opportunities for us to compete. We want to compete. We have one of the best teams in the industry. So how do we actually use that team to compete? And that gives you an opportunity to do that overall.

Unidentified speaker: Okay. Great. Switching to financial targets and our last

Michael DeVoe, CFO, International Flavors and Fragrances: two minutes. So

Unidentified speaker: sorry, CFO. So it’s been a few years since IFF has given specific medium term financial goals. Don’t worry, I’m not expecting you to give them today. But if you could help us frame kind of what underlying Specialty Ingredients market growth is within the categories in which you compete and what that should look like in the medium term.

Michael DeVoe, CFO, International Flavors and Fragrances: Yes. Maybe I’ll just kind of unpack them if that’s Yes. But by business, I think when you look at the scent side, it’s probably a market growth of 2.5% to 3% depending on which category you’re talking about. On the taste side or flavor side, you’re probably in that 3% to 4% market growth range. On the H and B side, market growth somewhere between 45%, again, depending on the category.

On the food ingredients side, again, it can vary at the sub businesses, but it’s probably constant year over year to some growth, to be candid, zero to one, as I think about the market aspect. As we think about our portfolio, you have that as a foundational piece of market. We obviously want to do better than market. We aspire to be the best we can be. And so when I think about the peer set where they’re targeting on some of those businesses, mid single digits on some of those areas are viable options, viable targets for us.

Now we still need to do the portfolio work, which is why we have not given more formal long term targets to it. Once we’re done with the food ingredient assessment and decisions have been made, then obviously, we’ll have the conversation on more longer term targets. But if you break the businesses independently, you’re probably taste, scent, you’re probably in that mid single digit range. And then we can at H and B as well, maybe a little bit higher than that as you go forward. So that’s the way I would think about the business kind of independently of the consolidation piece.

Unidentified speaker: Okay. Perfect. And then any thoughts kind of conceptually on EBITDA margins? We’ve looked at EBITDA margins at your closest comps, as Eric suggests, is the best path. That would imply something like a 23% margin.

But is there anything you’d point out why things we should be aware of when we run this benchmark analysis, maybe like should IFF, H and D margins be comparable in NovoNiesis or not, things to just build in more nuance to the benchmarking.

Michael DeVoe, CFO, International Flavors and Fragrances: Yes, it’s great question. Fundamentally, Eric is absolutely right. We should be in that low-twenty ish range, kind of absent when you start looking head to head competition piece and kind of remove the food ingredients piece to it. Probably nothing on the taste side. I think it is pretty comparable versus the bellwether there, who is a very good bellwether, that’s where we aspire to be.

The scent side, there’s a little bit of difference in portfolio. We obviously exited our Lucas Meyer’s cosmetic business. So active beauty or Beauty Care cosmetic actives business is no longer part of the IFF portfolio and is on some of our competitors. And so if you look at the best in class within that business, they probably have 100 basis to 200 basis points of incremental margin associated with that. So you kind of normalize for that because it’s not a one for one compare.

And then on the H and B side, you mentioned one of the competitors in Europe as well, who’s a fantastic competitor. I think part of it is this year, that business, if you remember last year, was a 30% EBITDA margin business. We reallocated our corporate allocations and brought it down to a 26% business. So a little bit self inflicted and created a bigger gap. The reality is, based on where we sit today, there are some differences in terms of some scale benefits that NovoNesis, frankly, has, which is driving that premium and EBITDA margin.

But that’s not to say we can’t get several 100 basis points improvements in that business. And that’s our focus. Our focus is not to be at the 39%. They’re long term targets. Our focus is to be better than we are today.

But we see a pathway going forward that over a couple of years, can move that progression to much higher than where we are today. But there is a little bit of a structural difference between that business and our H and B business, specifically in gross margin.

Unidentified speaker: Okay, great. One final question. Just given your tenure at the company, given how much change there has been, even just in the I’ve lost track of time, one years point since Eric’s been Yes. CEO, right, about one point enormous changes in the executive team, So I guess, you may not know if I’m sure

Michael DeVoe, CFO, International Flavors and Fragrances: you have, but

Unidentified speaker: like what percentage of the leadership roles you say are people who are new to the company in the last two to three years? And how do you feel about the level of talent today versus other points in your career at the company?

Michael DeVoe, CFO, International Flavors and Fragrances: Yes. There’s been a bit of a change at the top aspect of it from an ELT, executive leadership team. So there’s various people. There’s a good mix of external and internal. So myself, I’ve been tenured.

Anna was there for almost I’m not going say thirty years. She’s going get mad at me for that almost thirty years at IFF. So she brings a lot of institutional knowledge. Our Head of IT has been there for almost ten years. So there’s a lot of continuity from that aspect.

And then there are some new business leaders that are bringing different points. So Andy Mueller stepped in as the food ingredients person, has great experience across the industry overall, really a wealth of knowledge and is doing a fantastic job. Leticia came, again, from a not a direct competitor on the H and B side, but a lot of experience in the biotech space, so bringing new value add. Uvranche came from Kellogg, so got the consumer facing background. So I actually think it’s a very good mix.

We’re all building off of each other. The team dynamic is fantastic. So it’s something that excites us on a day to day basis. When you look at the next level down, there actually hasn’t been too much churn. So there’s still long tenured executives in the various businesses they’ve worked.

So when I think about the talent aspect, I’m not concerned. I actually think we have a very, very strong team. We have all the right players in place. There will always be chances to move and do different things. But I actually think relative to my tenure at IFF, we have the team that is the most committed to driving the success for IFF going forward.

So it feels really a good spot.

Unidentified speaker: Okay, great. We’re going to wrap there. We can go to breakout. But please join me in thanking Mike and IFF for being here.

Michael DeVoe, CFO, International Flavors and Fragrances: Thank you.

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