International Flavors & Fragrances, Inc. · NYSE:IFF
International Flavors & Fragrances — Investor Day (June 2013)
69 slides from International Flavors & Fragrances's investor day presentation, Jun 5, 2013
Slide 1: Investor Day 2013: Innovation, The Foundation of Our Success
Exhibit 99.1 Investor Day 2013 Innovation The Foundation of Our Success Doug Tough Chairman of the Board & Chief Executive Officer June 5, 2013
Slide 2: Senior Leadership Team
Senior Leadership Team Doug Tough Dr. Ahmet Baydar Chairman of the Board & Chief Executive Officer Senior Vice President, Research & Development Kevin Berryman Francisco Fortanet Executive Vice President & Chief Financial Officer Senior Vice President, Operations Nicolas Mirzayantz Anne Chwat Group
Slide 3: Meeting Agenda
Meeting Agenda Wednesday, June 5th Meeting Time Doug Tough 8:00 am 8:20 am Hernan Vaisman 8:20 am 8:40 am Nicolas Mirzayantz 8:40 am 9:00 am Dr. Ahmet Baydar 9:00 am 9:20 am Break 9:20 am 9:30 am Technology Demonstrations 9:30 am 11:00am Francisco Fortanet 11:00am 11:20am Kevin Berryman 11:20am 11:4
Slide 4: Technology Demonstrations
Technology Demonstrations Flavors (Upstairs) FlavorFit™—satisfying consumers’ need for healthier choices, without compromising on taste Citrus Toolbox unique and authentic citrus flavors for the most refreshing beverages Fragrances (Downstairs) Encapsulation encapsulated fragrances smell fresher lon
Slide 5: We create unique scent and taste experiences people love
“We create unique scent and taste experiences people love” Member of S&P 500 Listed on NYSE Market cap of ~$6.5 billion $2.8 billion in sales and $488 million in adjusted operating profit (FY 2012) Leading innovator Create flavors & fragrances for the food, beverage and beauty industries
Slide 6: Company Overview
Company Overview Geographic Global Reach 5,700 Employees Serving Consumers in 100 Countries Operating in 32 Countries 47% sales to Emerging Markets Product Diversified Portfolio 49% Flavors 51% Fragrances Multiple End-Use Categories Naturals Customer Outstanding Base Strong Multinationals Leading Re
Slide 7: IFF's Business Model A Holistic Chain
IFF’s Business Model A Holistic Chain Consumer Creative Operational Customer R&D Insight Centers Excellence Intimacy Based on rigorous Discovery of Commercializing Efficiency in all Increase consumer new materials innovative we do participation on research Development of solutions Internal margin co
Slide 8: 2010 Strategic Initiatives
2010 Strategic Initiatives Introduced Economic Profit to prioritize investments Developed a process for prioritizing R&D programs/investment Ingrained philosophy of investing resources behind advantaged categories Created a roadmap for achieving strong financial results Allows us to track and measur
Slide 9: Results of 2011 Strategic Assessment
Results of 2011 Strategic Assessment Flavors & Fragrances are both attractive Bulk of portfolio is EP positive Some categories and customers needed remediation We have substantial organic growth opportunities M&A could be used to accelerate organic growth
Slide 10: Three Strategic Pillars
Three Strategic Pillars Leverage Geographic Reach Strengthen Innovation Platform Maximize Portfolio
Slide 11: Leverage Geographic Reach
Leverage Geographic Reach Sales Profile 43% 49% 57% 51% Q1-2010 Q1-2013 Developed Emerging Markets Markets Revenues by Region (1) Latin Europe, America Africa and 16% Middle East 32% 25% North America 27% Greater Asia 75% of our Sales are Outside North America 1.Chart above based on 2012 total reven
Slide 12: Strengthen Innovation Platform
Strengthen Innovation Platform Our Innovations, such as Health & Wellness, or Encapsulated Fragrances, or other modulators such as malodor, deliver: Customer Benefit drives market share Consumer Benefit meets an unmet need IFF Benefit innovation drives gross margin Innovation is our life-blood
Slide 13: Maximize Portfolio: Consolidated Portfolio Impact
Maximize Portfolio: Consolidated Portfolio Impact Leveraging Geographical Reach, Our Innovation Platforms and the Profitability Initiatives Have Led to Substantial Improvement in Our Portfolio Performance Since 2010 2010 Portfolio Value Breakdown % Capital Employed 15% EP Positive 20% EP Break-even
Slide 14: Investment in Our People
Investment in Our People We have Focused on Attraction, Development and Retention of Our Talent Regional Recruiter Model 3 Pronged Development Approach Management tools/employee transparency Retention of Critical Talent
Slide 15: Creating a Competitive Advantage
Creating a Competitive Advantage Increase R&D Investments to Improve Innovation Develop superior products and delivery systems that address consumer needs Deepen understanding of customers’ brands Use innovation to drive continuous margin improvement Invest in facilities, creative centers, and peopl
Slide 16: Investor Day 2013
Investor Day 2013 Innovation The Foundation of Our Success
Slide 17: Hernan Vaisman, Group President, Flavors
Investor Day 2013 Innovation The Foundation of Our Success Hernan Vaisman Group President, Flavors June 5, 2013
Slide 18: Global Flavors Market Potential
Global Flavors Market Potential IFF Flavors Estimated Market Share Increased 2 ppts to14% Since 2007 Global Flavors Market Breakdown by Category Other Dairy 3% 8% Beverage Sweet 35% 21% Savory 33% Global Flavors Market Breakdown by Region Latin America 11% EAME 33% North America 27% Greater Asia 29%
Slide 19: Progress Since 2010
Progress Since 2010 Average local currency sales LFL growth of 9% with a quarterly range of 6% to 12% Emerging markets account for 50% of Q1-2013 sales, up from 47% in Q1-2010 Health & Wellness and Naturals platforms are significant contributors to current portfolio strength Segment profit increased
Slide 20: Local Currency Sales Growth
Local Currency Sales Growth LFL Sales Growth has Accelerated Over Past 3 Years 9% 6% 2007—2009 2010—2012 Enlarged footprint in emerging markets of Asia and Middle East Invested in profitable categories and customers to drive continued growth Increased R&D investment to improve innovation and deliver
Slide 21: Emerging Market Presence
Emerging Market Presence 2010—Q1 2013 Expanding Emerging Market Sales 55% 53% 52% 51% 50% 50% FY FY FY Q1 ’13 47% 48% 49% 50% 45% Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Developed Emerging
Slide 22: Flavors Segment Profit Drivers
Flavors Segment Profit Drivers Segment Margin (2010-2012—Percent) 2.0 21.6 20.2 0.6 FY 2010 Net Price and Strategic FY 2012 Input Costs Initiatives Segment profit increased $55 million since 2010, despite pressure from increased raw material input costs Profit expansion due to exit of low-margin sal
Slide 23: Consistent Growth & Profitability
Consistent Growth & Profitability Double-digit adjusted segment profit growth accelerated Improved adjusted segment profit due to consistent sales growth, ongoing innovations and targeted focus on higher-margin business opportunities Ongoing innovations and market coverage initiatives should drive f
Slide 24: Execution on Strategic Growth Pillars
Execution on Strategic Growth Pillars Strengthen Innovation Platform Leverage Geographic Reach Maximize Portfolio
Slide 25: Leverage Geographic Reach
Leverage Geographic Reach Aligning Our Investments in Manufacturing Capacity and Labs with Fast-Growing Markets Greater China ~7% Expected Market Growth India ~9% Expected Market Growth Indonesia ~5% Expected Market Growth Turkey ~5% Expected Market Growth Source: IAL Consultants & Internal Estimate
Slide 26: Strengthen Innovation Platform
Strengthen Innovation Platform Consumer Drivers Naturalness Health & Wellness Taste Affordability vity Acti Naturals Flavor Encapsulation & High-Impact of Modulators Delivery Molecules s Freshness Mitigate effects of Flavor release Cost reduction / Pillar Authenticity reduction Sodium, sugar, fat Lo
Slide 27: Maximize Portfolio
Maximize Portfolio In 2012 All Categories are EP Positive Negative ~20% Positive Positive 100% ~80% 2010 2012 Almost all categories and regions showed significant improvement vs. 2009; all are EP positive Q2 ’13 will be the last quarter with impact from the exit of low-margin sales activities Expect
Slide 28: Strategic Priorities Going Forward
Strategic Priorities Going Forward Leverage Geographic Reach Additional investment in targeted developing markets in Africa, Middle East, Central and Southeast Asia Exploring additional opportunities in largest developing countries where different ethnic/religious groups demand specific tastes Impro
Slide 29: Strategic Priorities Going Forward
Strategic Priorities Going Forward Strengthen Innovation Platform Natural Flavors ingredients New game-changing Flavor modulators and existing tool box High-impact molecules through analytical and organic chemistry Delivery Systems
Slide 30: Strategic Priorities Going Forward
Strategic Priorities Going Forward Maximize Portfolio Focus on profitable sub-categories where IFF has currently significant opportunities for growth Target technology-driven taste solutions instead of commodities Cost-savings and margin expansion through manufacturing efficiencies
Slide 31: Summary
Summary Strategic Priorities Enlarge Footprint Continue alignment of innovation activities to consumer needs Pursue opportunities to better position IFF in more profitable categories Financial Long Expectations -Term Sales growth of 2 to 3 percentage points above industry Improve gross margin Segmen
Slide 32: Investor Day 2013
Investor Day 2013 Innovation The Foundation of Our Success
Slide 33: Nicolas Mirzayantz, Group President, Fragrances
Investor Day 2013 Innovation The Foundation of our Success Nicolas Mirzayantz Group President, Fragrances June 5, 2013
Slide 34: Global Fragrance Compound Market
Global Fragrance Compound Market IFF Fragrance Compound Market Share Increased 2 ppts to19% Since 2009 Global Fragrance Compound Market by Category Personal Wash Fine 15% Fragrance 27% Home Care 16% Beauty Fabric Care Care 17% 25% Global Fragrance Compound Market by Region Latin America 17% Europe,
Slide 35: Performance Update
Performance Update 8% average (2010-2012) local currency sales growth for Fragrance Compounds due to strong win rates, increased core list participation, innovation and emerging markets growth Innovation (e.g., encapsulation) driving sales & profitability Emerging markets growing importance Ingredie
Slide 36: Local Currency Sales Growth
Local Currency Sales Growth Acceleration in Fragrance Compounds Competitive Pressure in Ingredients Ingredients 8% Compounds 1% 0% 0% 2007-2009 2010-2012 More than 80% of IFF Fragrance sales are Fragrance Compounds Strengthening resources in emerging markets Investment in higher profit categories an
Slide 37: Leverage Geographic Reach
Leverage Geographic Reach Emerging Market Sales: 48% of Total Fragrance Sales and 54% of Compound Sales 60% 58% 56% 54% 52% 50% FY FY FY Q1 42% 44% 46% 48% 40% Q1 2010Q2 2010Q3 2010Q4 2010Q1 2011Q2 2011Q3 2011Q4 2011Q1 2012Q2 2012Q3 2012Q4 2012Q1 2013 Developed Emerging
Slide 38: Adjusted Segment Profit Drivers
Adjusted Segment Profit Drivers Adjusted Segment Margin (2010-2012—Percent) 17.3% 2.8% 2.0% 16.5% FY 2010 Net Price and Strategic FY 2012 Input Costs Initiatives 280 bps reduction due to unprecedented input cost increases 200 bps improvement from strategy execution Resources focused on higher profit
Slide 39: Adjusted Segment Profit Growth
Adjusted Segment Profit Growth 2007-2009 2010-2012 3-Year CAGR 8% -5% 8% CAGR adjusted segment profit under new strategy execution, reversing downward trend; despite substantial input cost increases Investing in and successfully growing higher profit businesses Innovation / encapsulation technology
Slide 40: Execution on Strategic Growth Pillars
Execution on Strategic Growth Pillars Leverage Strengthen Maximize Geographic Reach Innovation Platform Portfolio
Slide 41: Leverage Geographic Reach
Leverage Geographic Reach Of Our Top 10 Markets, 5 are in Emerging Markets; $54 Million in Capital Spending Since 2010 Greater Asia $1.2 Billion Market Potential > 5% Growth New technology center in Mumbai Expanded C&A Resources in Singapore New Singapore plant Latin America $1 Billion Market Potent
Slide 42: Strengthen Innovation Platform
Strengthen Innovation Platform Consumer Drivers Multi-Sensorial Experience Health & Wellness Sustainability Affordability s Platform “I enjoy “I take care “I take care every moment” of myself” of our Planet” “I can afford it” R&D New Molecules New Molecules New Molecules New Molecules IFF Naturals N
Slide 43: Maximize Portfolio
Maximize Portfolio Economic Profit Analysis of Portfolio 10% 11% Negative 11% Neutral 40% Positive 78% 50% 2010 2012 Good progress in improving economic profit performance Executed strategic alignment program in 2012 Profitability restored through pricing & margin initiatives Fact-based analysis ind
Slide 44: Materials Supplied by IFF Ingredients
Materials Supplied by IFF Ingredients IFF Ingredients 3rd Party Suppliers < 20% of Total Fragrance Sales are External Ingredients External Ingredients Fragrance Compounds
Slide 45: Strategic Initiatives/Realignment—Ingredients
Strategic Initiatives/Realignment—Ingredients Increased use of IFF ingredients in Fragrance Compounds ? Increased pipeline of new molecules for internal use Rationalizing portfolio of ingredients and manufacturing assets Augusta plant closure planned for mid 2014 Long-term Amyris Biotechnology colla
Slide 46: Strategic Priorities Going Forward
Strategic Priorities Going Forward Leverage Geographic Reach Continuing our investments in fast growing emerging markets ? India ? China & South East Asia ? Brazil & Mexico ? Middle East Strengthening our consumer insight leadership in emerging markets Gain market share in developed markets
Slide 47: Strategic Priorities Going Forward
Strategic Priorities Going Forward Strengthen Innovation Platform New Molecules – Create unique and differentiated fragrance experiences – Provide low cost, high impact solutions for emerging markets Naturals – differentiated & unique fragrance experiences Delivery Systems – strengthening encapsulat
Slide 48: Strategic Priorities Going Forward
Strategic Priorities Going Forward Maximize Portfolio Leverage innovation to support margin enhancement Accelerate growth in higher margin businesses Continue to improve profitability of negative economic profit businesses Execute Fragrance Ingredients strategy Continue to drive proven productivity
Slide 49: Summary
Summary Strategic Pillars Leverage Geographic Reach Strengthen Innovation Platform Maximize Portfolio Financial Long Expectations -Term Compounds sales growth of 2% to 3% above industry Stabilize external Fragrance Ingredients sales Improve Gross Margin Segment Profit growth of high single-digits
Slide 50: Investor Day 2013
Investor Day 2013 Innovation The Foundation of Our Success
Slide 51: Research & Development, Ahmet Baydar
Investor Day 2013 Research & Development Ahmet Baydar SVP, Research & Development June 5, 2013
Slide 52: IFF Strategic Pillars
IFF Strategic Pillars R&D Drives Progress Across Our 3 Strategic Pillars Strategy Leverage Strengthen Geographic Innovation Maximize Reach Platform Portfolio R&D
Slide 53: R&D Strategy
R&D Strategy Introduced Our Refreshed Research Strategy at 2011 Investor Day Create Ingredients and Technologies to drive product superiority and differentiation Focus Research Platforms on customer and consumer needs Improve consumer preference, cost-efficiency, and drive growth Broaden internal re
Slide 54: Customer and Consumer Needs
Customer and Consumer Needs Strengthened Consumer Insights and Customer Intimacy… 1Health Wellness & 3Taste Preferred or Scent 5Performance & Diffusion 7Compliance Regulatory 2Sustainability 4Naturals 6Malodor 8CostInnovation
Slide 55: Research Platforms
Research Platforms … to Direct Our 10 Research Platforms Flavor Fragrance 1Flavor Modulation 3Delivery 5Fragrance Molecules 7Delivery 9Malodor Systems Systems 2FlavorNaturals 4High Impact 6Naturals Fragrance 8ProcessResearch 10Modeling
Slide 56: Portfolio Management Approach
Portfolio Management Approach Utilize an Economic Profit-Based Process to Prioritize Investment 2of Likelihood Success 4Prioritization Resource & 1Opportunity Market 3Value to IFF 5Execution
Slide 57: Progress on Innovation Strategy
Progress on Innovation Strategy Our Strategic Approach Is Accelerating the Rate and Impact of Innovation Flavor Molecule Pipeline Fragrance New Molecule Pipeline Delivery Systems Portfolio Cost Innovation Total Innovation Pipeline
Slide 58: Flavor Modulation
Flavor Modulation Developing Next Generation of Flavor Modulation Technologies Launched portfolio of exclusive healthy flavor technologies Creating novel flavor modulators via isolates from biodiversity and receptor research
Slide 59: Flavor Naturals
Flavor Naturals Providing Healthier, Cost-Effective, Authentic Taste Solutions Created robust pipeline of novel natural flavors, targeting: Natural versions of existing molecules Extracts with unique performance Leveraging biotechnology to create sustainable, cost-effective naturals
Slide 60: Flavor Delivery Systems
Flavor Delivery Systems Extending Our Flavor Encapsulation Solutions Launched superior encapsulation technologies to deliver specific flavor attributes; e.g.: Physical form Protection Time release Creating pipeline of novel delivery technologies for challenging applications
Slide 61: Fragrance Molecules
Fragrance Molecules Strengthening Portfolio and Providing Creative Teams with a Winning Edge Launching strong portfolio of new molecules Over short-, mid-, and long-term Competitive edge for Compounds Long-term value for Ingredients
Slide 62: Fragrance Naturals
Fragrance Naturals Introducing Novel Naturals to Differentiate Our Fine Fragrance Creation Leveraging sustainable cultivation, extraction, and cultivation techniques Higher-impact unique naturals Superior olfactive profiles Expanding global sourcing and synergies between Flavors & Fragrances
Slide 63: Fragrance Delivery Systems
Fragrance Delivery Systems Creating the Next Generation of Encapsulation for New Category Applications Built market leadership in Fabric Care; adapting for Personal Wash and Hair Care Creating proprietary delivery systems to: Expand into additional categories Drive breakthrough performance Strengthe
Slide 64: Sustainability: Green Chemistry
Sustainability: Green Chemistry Ensuring Our Products and Processes Set Industry-Standard in Sustainability Reducing energy use and waste via microreactors and proprietary catalysts New ingredients and processes are eco-efficient and “green by design” Renewable raw materials Energy-efficient pathway
Slide 65: Open Innovation: Value Drivers
Open Innovation: Value Drivers External Collaborations Drive Value in 3 Key Ways 2 3 Provide Augment & Expand Accelerate Innovation Guidance Internal Innovation Horizons
Slide 66: Open Innovation: Scientific Advisory Board
Open Innovation: Scientific Advisory Board Expert Guidance and Insight on Technical Approach Steven V. Ley, Leslie B. Vosshall, Cheryl Perkins, Brian J. Willis, Thomas D. Sharkey, Ph.D. Ph.D. M.S. Ph.D. Ph.D. Professor of Professor of President, Former SVP of Professor and Organic Chemistry, Molecul
Slide 67: Open Innovation: Biotechnology
Open Innovation: Biotechnology Building Biotechnology Expertise with Industry Leaders Natural vanillin through biotechnology Broad collaboration to pursue other targets Focused on sustainable, cost-stable route to key IFF Fragrance ingredients
Slide 68: Key Takeaways
Key Takeaways Accelerating rate and impact of innovation R&D well-aligned to address key customer and consumer needs Open Innovation becoming critical driver of progress Strong innovation pipeline building IFF’s long-term competitive advantage
Slide 69: Investor Day 2013: Research & Development
Investor Day 2013 Research & Development
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