IFF reorganizes with new business strategy for efficient financials and productivity
09 Dec 2022 --- International Flavors & Fragrances (IFF) is updating its strategic plan and launching an operating model as part of the next stage of its transformation. The company aims to change its current divisional structure by integrating operations with its three primary end markets – food and beverage, home and personal care and health – to better support their customers.
“Our refreshed strategic framework and new operating model will increase customer centricity and better align with end-market needs. This next phase is designed to ensure we are innovative, efficient and disciplined as we strengthen our competitive position and achieve long-term financial success,” says Frank Clyburn, CEO and director at IFF.
The company aims for these tactical moves to offer IFF a chance to sharpen its customer-focused strategy and better align with the market, setting it up to maximize its development potential.
A further US$100 million in run-rate savings have been disclosed as part of the enhanced cost and productivity initiatives, which will support investments and increase earnings. The company anticipates achieving net yearly savings of US$350 to US$400 million between 2023 and 2025.
Internal affairs
At IFF’s Investor Day held recently, the organization’s management outlined the various changes that will be made to the strategic scope.
The company shared a new strategic framework as part of the implementation of a growth-focused strategy, positioning the company’s “Do What Matters Most” initiative at the forefront, fostering sustained profitable growth, strengthening its commitment to customers and integrating environmental, social and governance (ESG) priorities across the entire enterprise.
IFF aims to integrate ESG priorities across the entire enterprise.Additionally, IFF plans to develop a streamlined operating structure that is better matched to end markets and client demand.
Facing finances
IFF defined its long-term financial goals and provided an overview of its preliminary financial outlook for 2023, which projects mid-single-digit adjusted operating EBITDA growth on a currency-neutral basis.
The business anticipates revenues to increase from 4% to 6% and adjusted operating EBITDA to increase from 8% to 10% over the three-year period of 2024 to 2026.
Additionally, through operational enhancements and the sale of non-core assets, the business anticipates reaching three times net debt/credit adjusted EBITDA in 2024, at which point it plans to resume its share repurchase program.
In order to drive further cost reductions in administrative expenses, IFF has accelerated and expanded enterprise-wide productivity measures and implemented a reorganization program to increase efficiency throughout the business.
The corporation hopes to save over US$100 million annually by cutting headcount. With these extra reductions, it now anticipates achieving US$350 to US$400 million in net annualized savings between 2023 and 2025.
New operating model
IFF gave a sneak peek at its new operational model and how it plans to turn the business into “one” IFF. Its food and beverage, home and personal care and health divisional structures will be combined.
This change will make IFF’s operating model more customer-centric and market-supported, in line with IFF’s ambition to become its client’s go-to partner for all solutions related to their particular business sectors.
These changes were made after an evaluation with the company’s top leadership, clients, investors and key partners.
The company hopes that the new working structure will improve performance and speed up client delivery. By the end of 2023, IFF anticipates that its new operating model will be completely operational.
Edited by Mieke Meintjes
