Dear Shareholders, As I reflect on a year that was once again shaped by global uncertainty, I am constantly reminded of the many instances in which IFFers around the world have risen above these challenges to drive positive change, deliver results for our customers and create exceptional experiences for the end-consumer.
IFF continues to play an essential role in the daily lives of so many people around the world. For instance, when a consumer grabs a yogurt from the refrigerator, there’s a one-in-three chance it was made with an IFF probiotic. If someone is doing laundry at home, there’s a 50% likelihood their cold-water laundry detergent was developed with an IFF cleaning enzyme. Each day, I watch our purpose unfold through the solutions, products and experiences we create. In 2022, our 24,000-strong global team continued to push industry boundaries and drive innovative breakthroughs that deepen our customer relationships and Do More Good for our people and planet.
I feel extremely fortunate to be part of such a purpose-driven organization that not only touches, but enriches the lives of consumers across the globe. At the same time, we also evaluated who we are and who we want to become as we continue to deepen our role as an indispensable partner in the consumer value chain. As many of you know, I have spent much of the last year engaging with customers, partners and leaders across our business to better understand what we’re doing well and where we can improve. From these important conversations, I learned that—first and foremost—IFF has an incredible foundation to build on our industry leadership. But, to remain successful and achieve our long-term vision, it’s important that we continuously evaluate both our strengths and weaknesses, while considering opportunities to improve our performance and culture.
As I outlined at our December 2022 Investor Day, we introduced “Do What Matters Most,” our refreshed strategic plan and operating model that will position our company for long-term success. We are doubling down on customer excellence, accelerating productivity initiatives and undertaking a portfolio optimization strategy, while centering our business around the highest-value opportunities. These efforts will ensure IFF’s continued ability to drive sustained, profitable growth, meet and exceed customer demand and continue fulfilling our purpose of applying science and creativity for a better world.
Our updated operating framework will be guided by three key objectives designed to support greater innovation, efficiency and discipline in this next chapter:
- Be The Premier Partner.
- Build Our Future.
- Become One IFF.
To become a more unified organization and be “One IFF,” we are also simplifying our operations. We introduced our plan to transition from our current divisional structure to focus our business around three core end markets: Food and Beverage, Home and Personal Care and Health. As a leaner organization, IFF will be better positioned to innovate, streamline delivery and serve the highest-value and highest-demand markets. This is consistent with IFF’s goal to Become the Premier Partner: meeting customers where they are, with innovative solutions that enhance the consumer experience.
In line with this customer-first approach, we also established a Center of Commercial Excellence, backed by a team intensely focused on enhancing our sales capabilities and providing a more holistic customer experience. This group is focused on leveraging IFF’s full product portfolio while enhancing our sales execution to unleash greater opportunities for our customers.
Our robust R&D capabilities continued to prove a strong advantage in 2022, with significant new technologies introduced across the portfolio. Our cutting-edge probiotics research is driving improvements in gut health, while we harness the power of scent modulation for applications that increase cognition, memory and sleep. R&D has long been central to our progress and operations, and our renewed focus in this area will only make our offerings stronger. Alongside these key strategic initiatives, we are evolving our Board of Directors in line with best-in-class corporate governance standards to ensure that IFF has the optimal support and oversight to advance our growth and transformation, while upholding our commitment to being a force for good. As part of our Board refresh, we will continue to add additional outside senior executives with specific management, strategy and operations expertise relevant to IFF’s current profile.
We are on a mission to not only be the premier partner for our customers, but also the most responsible partner for our communities and the planet. That is why we have taken steps to embed ESG+ priorities across our entire enterprise to reaffirm and strengthen our commitment to managing our environmental footprint and making a positive impact on the communities in which we operate. Since we launched our Do More Good Plan in December of 2021, we have made incredible progress. Over the last year, we continued to execute on our climate and planetary health, equity and well-being, transparency and accountability, and sustainable solutions objectives to ensure we remain positioned to win in the sustainability market. In December of this year, IFF received P&G’s inaugural Supplier Sustainability Award, which honors business partners who champion environmental sustainability and commit to protecting the planet.
Our people are our power at IFF, and we work hard to create an environment where every IFFer can thrive. In 2022, IFF also received Move-level certification from Economic Dividend for Gender Equality (EDGE), the leading global assessment and business certification for gender and intersectional equality. The assessment encompassed 27 countries, giving IFF the added distinction of having the largest number of EDGE-certified countries at one time. In addition, our achievement marks the first – and currently only time – a company has earned this level of recognition twice.
Finally, IFF continued to deliver strong financial results, including top and bottom-line growth in 2022, despite the volatile market environment. For the full year, IFF delivered $12.4 billion in sales and adjusted operating EBITDA* of $2.5 billion. Looking ahead, as was previewed at our Investor Day, we expect annual sales to grow 4% to 6% on average and adjusted operating EBITDA* growth of 8% to 10% on a comparable currency neutral basis** in 2024—2026.***
As the global supply chain remains challenged, we introduced enhanced productivity initiatives in the second half of the year to strengthen our business and improve our profitability. With these initiatives, IFF is targeting approximately $350-400 million in net annualized savings from 2023-2025. These necessary actions will allow us to maintain our financial strength and reinvest in our highest-value opportunities to accelerate long-term profitable growth.
Looking ahead to the next phase of our transformation, I am energized by the unique opportunity in front of us. IFF has built an incredible foundation as a trusted partner with world-class talent, a robust R&D pipeline and broad portfolio. I am confident that our refreshed strategic framework and new operating model will allow IFF to increase our customer centricity, more closely align with today’s marketplace and deliver most efficiently for our customers around the world.
All of us at IFF are more committed than ever to challenging expectations and redefining the possibilities of our industry. I am confident that together, we have everything we need to achieve this as we commit to Do What Matters Most.
Thank you.
Frank Clyburn
Chief Executive Officer
Read the original letter here.
