Gilles Andrier, CEO is interviewed by Givaudan employee Alice. They discuss how the business navigated the external challenges to find opportunities to continue growing with customers and deliver sustainable value creation for all stakeholders.
Alice: Overall, how would you sum up 2022?
Gilles Andrier: We managed to deliver a good set of results in an external environment which turned out to remain difficult with new challenges and opportunities emerging. In the second year of our 2025 strategy, we continued to deliver solid sales growth at 5.3% like-for-like¹, which is testament to the strong relationships we have with our clients and our ability to deliver superior products that are loved by consumers. Overall, the business remained resilient and we made good progress on our 2025 strategic ambitions. I’d like to take the opportunity to express my thanks to all of my colleagues who contribute daily to the success of Givaudan.
Alice: What were the main challenges we encountered and how did we approach them?
Gilles Andrier: The main challenges we experienced were large increases to the cost of raw materials, supply chain constraints which led to increasing costs of transport, freight and logistics, and the war in Ukraine resulting in much higher energy costs, particularly in Europe. These conditions placed significant pressure on our operating environment, however, we maintained our strong focus on supporting our customers’ growth with high service levels. In collaboration with our customers we implemented price increases to fully compensate for the increases in input costs. We also ensured good cost discipline across the business, with our colleagues keeping focused on business-critical activities.
Alice: The landscape of our industry underwent a number of changes in 2022, what’s your perspective on the latest mergers?
Gilles Andrier: Yes, we saw a number of mergers taking place in 2022 showing that our industry continues to evolve. At Givaudan, we continue to be committed to our purpose and execution of our strategy with a business model where we focus on customised, high value-added solutions for our customers which help them differentiate their brands with consumers. Having made a number of acquisitions over the recent years, we have an expanded portfolio and enhanced value proposition, so we are well positioned to continue providing differentiating solutions for our customers. We continuously evaluate our portfolio and assess potential opportunities for partnerships, collaborations or targeted acquisitions within our high-added value business model.
Alice: What progress did we make in the second year of the 2025 strategy?
Gilles Andrier: Our 2025 strategy, ‘Committed to Growth, with Purpose’, is our intention to deliver growth in partnership with our customers, through creating inspiring products for happier, healthier lives and having a positive impact on nature, people and communities. Ambitious financial and non-financial targets remain central to our strategy roadmap.
In 2022 we delivered 5.3% sales growth, against a target of average organic sales growth of 4-5% on a like-for-like basis over the five-year strategy cycle period. The good growth was achieved across most product segments and geographies. We demonstrated our strong focus on execution, in supporting the growth of our customers, whilst also leveraging our innovation capabilities to introduce new solutions which further strengthened our market leadership position in our chosen markets.
Our free cash flow was 6.7% of sales, versus an average free cash flow of at least 12% over the five-year period. This was driven by higher working capital requirements and investments. We remain confident to achieve the five-year term target.
We also aim to deliver on key non-financial targets around sustainability, diversity and safety, linked to Givaudan’s purpose. In our nature goal, where we aim to be climate positive by 2050, we have reduced our scope 1+2 emissions by 35% compared with a 2015 baseline. One of our people goals is to reduce our total recordable case rate by 50% by 2025 and at the end of 2022 we were at 36%. Full details of the progress we have made on our purpose targets can be found on this site.
Alice: What were some of the highlights across our strategic growth drivers?
Gilles Andrier: We made good progress across the three growth drivers in our 2025 strategy of expand the portfolio, extend customer reach and focussed market strategies. The key themes we identified continue to be the right ones, with the areas of health and wellbeing, Naturals, plant-based proteins, Active Beauty among many others all contributing to growing with our customers.
In expanding the portfolio, we continued to expand beyond our core portfolio of flavours and fragrances, naturals and delivery systems into nutrition, food ingredients and beauty. Taste & Wellbeing expanded its plant-based texturising ingredients through an agreement with Fiberstar in the US for a new citrus fibre ingredient.
Our encapsulation capabilities for active cosmetic ingredients was strengthened with the acquisition of 48% of Nanovetores Group. We announced a strategic collaboration with LanzaTech to enable the development of sustainable fragrance ingredients from renewable carbon.
We inaugurated our first integrated fragrance encapsulation centre in Singapore, completing a five-year investment programme of CHF 30 million. The centre brings together all of Givaudan’s competencies related to encapsulation, to further support the development of encapsulation delivery technology to meet consumers’ demand for long-lasting fragrance experiences, across a variety of product categories. In Taste & Wellbeing, we opened a new Consumer & Sensory Insights (CSI) centre in Johannesburg, South Africa to unlock evolving consumer needs, local differences and sensory expectations to accelerate regional innovations in this growing market.
Alice: What progress did we make with 2025 strategic growth enablers?
Gilles Andrier: Our growth enablers are centred around the four pillars of our purpose – creations, nature, people and communities – and I’d like to share a few highlights from 2022.
In creations, we are creating more plant-based food experiences that meet consumer needs and also contribute to lower emission consumer diets through our Plant Attitude platform. Our enhanced MoodScentz™ creation programme is making use of new neurobiology measurement capability to be able to design compositions that positively enhance emotions, in support of developing solutions for happier, healthier lives.
For nature, our focus areas include making impactful actions on climate and water and we were recently recognised by CDP for the fourth consecutive year with a double A rating for leadership in climate action and water stewardship. In our people enabler, we refreshed our Employee Value Proposition in line with our new branding, and to restate what makes us the employer of choice in order to attract new talent, especially in a competitive market.
In communities, our flagship Sourcing4Good programme, launched in 2021, continues to underpin our approach to sourcing responsibly as we aim to source all materials and services in a way that protects people and the environment by 2030.
Alice: What role did innovation play in 2022?
Gilles Andrier: Innovation is a critical factor in creating inspiring solutions for our customers. Through co-creation and collaboration with customers and partners, we are bringing new products and solutions to the market. These are two examples of exciting new innovations in 2022 that also demonstrate how we show our love for nature in everything we do.
Firstly, in Fragrance & Beauty, an exciting new captive molecule, AmbreXolide™, a sustainable alternative to the widely-used musk Ambrettolide™. This biodegradable and naturally-derived molecule exclusively available for Givaudan perfumers is obtained by an innovative process using Nobel Prize-winning technology.
In Taste & Wellbeing, biotechnology is being used with great success to produce sustainable, natural ingredients. BioNootkatone was launched, a breakthrough ingredient that responds to the demand for sustainable, natural, clean-label citrus flavour without the cost and supply volatility of traditional citrus extracts. Made from a non-GMO sugar source as the starting material, the ingredient does not require the
use of any citrus ingredients. Additionally, we have developed a natural vanillin to help address supply and sustainability concerns.
Alice: And how did we advance on our digital innovation journey?
Gilles Andrier: Overall, digital innovation is a key enabler of our 2025 strategy, and an important trend that is accelerating changes in the way we do business, and how we keep our customers at the centre of everything we do.
For 2022, I’d highlight the launch of Taste & Wellbeing’s Customer Foresight futurescaping platform. This is about leveraging big data, artificial intelligence (AI) technology and Givaudan’s deep expertise to help anticipate and address tomorrow’s challenges and consumer expectations. In Fragrance & Beauty, we launched ‘Creatogether’ the first artificial intelligence powered human-machine co-creation service in collaboration with the Tmall Innovation Centre (TMIC), the Alibaba group’s open business-to-consumer (B2C) platform.
Alice: Having acquired many companies over the last few years, how are we progressing with the integration into Givaudan?
Gilles Andrier: Through the strategic acquisitions we have made over the last few years our product portfolio has grown and expanded, allowing us to provide an even more compelling proposition for our customers.
We have a well-established process for how we integrate these companies into all of Givaudan’s business systems, processes and new ways of working. We reached a number of milestones internally with many sites going live and being brought fully into the Givaudan operating platform including Givaudan Business Solutions, which is a great achievement, and will further strengthen our ability to deliver a superior customer experience for our customers.
Alice: The world of work has changed greatly over the last few years, how do you see this at Givaudan?
Gilles Andrier: We all welcomed the opportunity in 2022 to more of a return to the office, where we benefitted from in-person meetings and opportunities to collaborate in different ways. Our people purpose ambition is to be a place where we all love to be and grow, and in support of this and taking the learnings of the last few years, we introduced a Flexible Working Framework to be implemented locally. This was built on a number of principles including that our arrangements always ensure that we continue to be the creative and innovative partner of choice. We continue to evaluate our approach to flexible working to meet the needs of the business and our people.
The pandemic also really shone a light on the importance of having a healthy and well workforce. This is also reflected in our people purpose goal to improve how we care for all our people, through providing access to mental and physical health initiatives, tools and training. Throughout 2022, we continued to raise awareness on these important topics, and provide resources, such as our Employee Assistance Programme which is available to all of our colleagues around the world.
Alice: We launched our new brand identity in 2022, Human by nature, can you explain more?
Gilles Andrier: Yes, it was the right time evolve our brand identity to reflect the expansion of Givaudan’s activities into adjacent spaces with many acquisitions, going beyond flavours and fragrances into nutrition, health and wellbeing, and beauty. It was also in recognition of changing societal expectations, with the movement towards more responsible means of consumption and increasing consumer demand for products that make them both feel, and do good. ‘Human by nature’ celebrates the beauty of the human experience and our connection to nature. We are proud of being a very human company, committed to creating for happier and healthier lives, and deeply invested in showing our love for nature in everything we do.
Alice: As we look to 2023, what are the key priorities?
Gilles Andrier: The challenges experienced in 2022 will likely remain, at least over the near-term. We will have to continue to implement pricing actions in partnership with our customers, manage our inventory levels as supply chain constraints ease, and ensure that we continue to have good cost discipline throughout the business. We remain confident in our strategic plan and have the right foundations in place to continue growing with our customers as we head into the third year of our 2025 strategic cycle.
Like-for-like excludes the impact of currency, acquisitions and disposals.