Former Chairman & Chief Executive Officer, International Flavors & Fragrances
CNBC Squawk on the Street: Andreas Fibig, CEO
Our CEO Andreas Fibig joins "Squawk on the Street" to discuss the company's first-quarter earnings results as well as the coronavirus pandemic's impact on the company. (Recorded on May 12, 2020)
About Andreas Fibig
Andreas Fibig, former Chairman and CEO of International Flavors & Fragrances (IFF), discussed the company's performance and strategic direction in several media appearances during 2020. In May 2020, Fibig appeared on CNBC's "Squawk on the Street" to discuss IFF's first-quarter earnings, noting that demand was thriving in flavors and ingredients for packaged foods, hand sanitizers, and detergents during the pandemic, while fragrances and cosmetics sales declined. He stated that all 110 of IFF's manufacturing facilities remained open, with safety measures including split shifts, face masks, and temperature checks. Fibig also mentioned that IFF had produced over 70 metric tons of hand sanitizer, branded "Hope 2020," distributed free to frontline healthcare workers and police departments. Fibig also discussed IFF's merger with DuPont's Nutrition & Biosciences (N&B) unit, announced in July 2020, describing it as a combination that would create a global leader in ingredients with a broad portfolio and double the R&D of competitors. He highlighted the company's ability to provide integrated solutions, such as combining flavors, texturizers, and plant-based proteins for products like plant-based burgers. Fibig had previously overseen IFF's acquisition of Frutarom in 2018, which he described as a complementary combination focused on growth. He stated that IFF's mid- to long-term growth guidance was 5 to 7 percent, expressing confidence in achieving that target.
Transcript (11 segments)
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Interviewer0:00
Guys want to mix it up a little bit here, bring on a guest that Jim you've had on many times as well, accompany you. We follow closely International Flavors & Fragrances. The company having reported numbers will begin its conference call as soon as well, but we've got Andreas Fibig, the company's chairman and CEO, first on CNBC with us this morning. Andreas, it's nice to have you with us. And I want to get right to the quarter itself and what you saw because you saw positives of course as a result of significant demand for ingredients and solutions, for example in certain consumer products, packaged food and the like. And then you also saw fragrances and cosmetics, I would assume, sales of which decline given nobody could go into a department store, for example. So what are you doing at IFF to adjust to this new reality?
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Andreas Fibig0:49
First of all, thank you, good morning. Thank you for having me here. We had a good quarter, and that was driven by certain categories and certainly by the ability of IFF to basically work with the supply chain. All of our 110 manufacturing factories are open, and there was a bit of a challenge, but I come to that later. What is really thriving right now is on the flavor side and ingredient side, the center of the aisle in the supermarket. Every single packaged food which goes in there, we see it also on hand sanitizers and detergents, which are really, really going extremely well. And that's driven by the demand we see in the marketplace, but also by some of the big wins we had at the end of last year. As you were saying, what is not going very well is some particular fine fragrances or cosmetics or some of the foodservice product as well. But in general, I would say strong quarter and a good start into the year.
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Interviewer1:50
Yeah, given that, Andreas, why not share 2020 full-year guidance?
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Andreas Fibig1:55
Look, we believe that we see that the market is super volatile at the moment, right now. And we see spikes in some categories, it goes up by 200, 300 percent, and others are going down. We said it, it's just too volatile right now, and we don't know how the recovery will happen when all the different countries are opening up again. To keep the guidance, but we will give over the course of the second quarter more guidance on the second quarter when we can do so. And I think it's the right thing to do for that situation. The good thing is it's a global business. We are selling our products in more than 200 different markets. And the whole COVID-19 crisis, as you well know, started in China. So we took a lot of learnings from our Chinese operations, then we went to Europe, then finally to the US and Latin America, and that helped us to adjust. What is a big question for us right now in our consumer insight studies: what will be sustainable of these trends? So we'll be, let's say, all the health of vitamins in food, be a sustainable trend? Are we seeing that the people using more hand sanitizers going forward and wash as much as they do right now? That's underway. We do every year about 500,000 consumer interviews. We really want to figure out what is important for our customers to be successful in the future.
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Interviewer3:28
Yeah, and we talked a great deal about what the new normal is going to look like. Andreas, what about your own workers? I know most of them are reporting to your facilities and have been throughout this. What changes have you made, what changes do you anticipate making as well in terms of how the work is getting done?
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Andreas Fibig3:47
First of all, I'm extremely proud that all of our essential workers are showing up every single day and in all factories and working. We have done a lot to help them to stay safe. We have split the shifts; the shifts don't touch or see each other. Even with the face masks in there, we do before they leave their homes, they do their own temperature measure. They have SOPs they are following. And that's the reason why all of our 110 factories are open, and more, even most of our labs are working with different shifts as well. The only ones are the office workers which in many countries are still home and not readily. We are starting the office as well, but as we find being now on Zoom, it works very fine with people working from home as well. What we have done also is to help the frontline healthcare workers, police departments with some hand sanitizers. We have now up to now produced more than 70 metric tonnes of hand sanitizers and have developed a special set we call it Foap 2020, which we distribute for free to all of these workers, and right now 8 countries and more to come.
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Interviewer5:01
Andreas, Jim, it's great to see you. And congratulations on an amazing quarter. Thank you, Jim. To the... I don't know if people understand how much of your business is the business that's really sideline. We don't care how we smell on Zoom, so obviously you pivoted. I've always felt that that was so great about your model, right? I mean, you could pivot. We have to figure this out. And then certainly the merger was the point and the business is on track as well. You know, we announced at last December, we are very proud that we have announced yesterday the top leadership team, the purpose and vision of the new company, and even despite the COVID-19 situation, we are not missing a beat and combining these two companies together. Yeah, but I love the nutrition part. I mean, I love the way you broke things down again. It's a great mosaic because it's a couple billion dollar product lines that are all in growth mode, and I know it brings excitement. It's something you taught me early on was that we liked the taste of the first thing we tasted when we were born. We are in a very insecure time and people are at home, we want to be comfortable in any way we can. Are you seeing a resurgence of the basic tastes that we got when we were born?
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Andreas Fibig6:17
Yes, maybe not when you were born, but what you experienced in your childhood. Macaroni and cheese in this country, for example. In other tastes, all over the place. I think the reason why people are now going back to some of the big brands they knew for years and for decades.
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Interviewer6:37
Andreas, finally, you mentioned the DuPont deal, of course on track as you've said to close in the early part of 2021. Your stock got whacked after you announced that deal; it has come back since, in part on the strength of the results themselves. But what did the market not appreciate, understand, or not like about that deal that it seems to have come around to appreciating now?
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Andreas Fibig6:56
I think a couple of things. First, we had to understand what is the strategic logic behind the deal. And secondly, we had to discuss the financing, how we really want to make it happen. And we acquired two years ago another company called Frutarom, and we had to explain that we basically will finish the integration of Frutarom until the third and fourth quarter this year, and then basically go first for the next year into the next big integration exercise. I have to say, looking at the first part of most companies, whether it's before an A and B or four hours, it shows that these are two essential businesses which will be combined here, and we are well positioned to grow going forward even in that environment. On top of it, we are now in the position to really do integrative solutions where we can bring a lot of these ingredients together. Let me give you an example. We see right now a lot of plant-based burgers, plant-based meat. Even with the meat crisis in the U.S., there's a lot of demand now. As a company, we are not just flavoring that; we can do with a plant-based protein which we get; we can bring the texturizers into it. We basically can do almost the whole product here for our customers. And I think this is a very strategic advantage we are having against all of our competitors.
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Interviewer8:26
Well, Andreas, we always appreciate your updating us on those various efforts. Thank you for joining us this morning. Thank you. Take care, stay healthy.