Former Chairman & Chief Executive Officer, International Flavors & Fragrances
International Flavors & Fragrances CEO: From Scents To Cents | Mad Money | CNBC
Jim Cramer got a tour of IFF’s secret lab in Manhattan to determine the real smell of success.
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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 (20 segments)
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Jim Cramer0:01
For over a century, one company has had a sense for pioneering science, pushing the boundaries of imagination that you can taste, smell, and touch. While we're in the thick of earnings season, I don't want to lose sight of companies that are riding powerful long-term themes. Take International Flavors & Fragrances, if the stealth technology play that develops proprietary flavors and scents for the food, beverage, personal care, and household products industries. This may sound like a totally unnecessary business to you, but you've got to understand that these consumer packaged goods companies are constantly fighting tooth and nail against each other for market share, so they'll happily pay to license a new taste or smell from IFF if it means getting even a small edge on the competition. In fact, the last time International Flavors & Fragrances reported was back in May. The company blew away the numbers. Stock surged from 1119 to a new all-time high of 126 bucks, and it really hasn't looked back since, climbing 13% as of today. Yep, this little-known company has had a remarkable run from the February lows. So I want to give you a better sense of the story here, especially since it's reporting again on August 8th. That's why we went straight to the source, speaking with Andreas Fibig. He's the Chairman and CEO of International Flavors & Fragrances at his company's headquarters in New York City earlier today. And let me tell you, it was smelling just fine. Oh, and uh, this is just my own bespoke fragrance, no big deal. Take a look.
Andreas, you run one of the great growth companies of all time. Your growth is still strong, and the company's been around forever. Is it because you offer a value proposition to your customers?
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Andreas Fibig1:41
Absolutely. And you were saying that the company's 127 years old, so we've been around for quite a while. The value proposition is that basically if you look at repurchasing of things you eat, then the taste plays an important role. The same is actually for the smell. So if people want to taste and see something which is really great, then they want to have it again, and that's where we come in. And if you look at our cost of goods for our customers, it's a relatively low part, it's probably between two and five percent of their cost of goods, but the value we're creating is enormous.
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Jim Cramer2:21
Well, how do you know what tastes good and smells good?
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Andreas Fibig2:23
And first of all, Jim, it's different from country to country. We see enormous differences between Asia, Europe, or the US. What we do is every single year about 500,000 consumer interviews to find out what they like, what are the latest trends, and what we have to develop to delight them for the next day and the next months.
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Jim Cramer2:45
Well, who determines exactly what tastes good or bad? Because I've got to tell you, in some places what tastes good is what's disliked in other places.
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Andreas Fibig2:56
Absolutely, and that's what we see in the geographic differences. So what we do is actually together with our customers, we test it with the consumers and we go and figure out what they really want. And that might be different. And as we discussed before, there is an acquired taste and there's probably something which they have in their genes already, that bitter is not good for you and you should be careful with that. And that might be a good mixture between acquired taste and taste which is already in your DNA.
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Jim Cramer3:26
Well, I know that there's some businesses that are really on fire for you. I mean high single digit, the Fabric business. What smells clean? But I can't figure out the world other than what my mom told me was clean. What smells clean? How do you know?
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Andreas Fibig3:38
And that's probably a good indicator because I think we all acquire these kinds of senses during the time of our upbringing, and then we go and fall back to that. And if we think we had a good experience during our childhood, then this is something which makes clean for us. And again, that might be different from country to country and from geography to geography.
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Jim Cramer4:00
How about taste? How much is a company coming to you, a major consumer products company, saying listen, we want something that tastes good? And how much of it is them saying to you, this is the taste we want, the taste of salt, we want the taste of sugar, but we don't want fat, we don't want empty calories?
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Andreas Fibig4:16
Yeah, that's usually the process. We get a lot of briefings from our customers, and they tell us what they really want. Then we look into our results we had from our consumer research and come up with a product which fits exactly to that brief. Then we do the testing again, and then hopefully our product is selected. And in many cases it is.
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Jim Cramer4:36
Now, there are people I'm sure at your company that are masterful at this, that have done it for a long time. Would they say this is what I think you're going to like soon because I see taste change, but I can't predict where they are?
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Andreas Fibig4:53
There are many people in the different parts of the businesses. You have the perfumers, for example, and you will meet one in a couple of minutes. They have their own experience. On the other hand, you have the flavorists. They do the same thing for the flavor. There's a person whose job is a flavorist. I want that job. Absolutely, yeah. You can try it out. If your taste and smell senses are good, I think you could do it. But you can try it certainly. So we have people, flavorists, who are doing exactly that, and they're figuring out what they need. And they are even experts in savory or expert in dairy or beverages. So it goes actually very much down even to the category.
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Jim Cramer5:31
Now, one of the things that we've all come to realize is a great secular trend is natural and organic. Where does IFF play in a world where we might think that artificial flavors, we can't have it, artificial taste. What really matters is it's got to be right off the vine, it's got to be farm to the table?
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Andreas Fibig5:48
Yeah, we play certainly in both areas. But I have to say, if you look at chemicals, you have chemicals everywhere. We have chemicals in our body. So I think you can't get rid of chemicals, and it would be a very short story. So what is important is that we talk about the safety of ingredients. And that's where we do a lot of things and research to make sure every single ingredient which goes into one of our products is absolutely safe to use. And it might be a natural ingredient or it might be a synthetic ingredient. So that's important because we just presume natural organic means good and synthetic means bad, which is probably not true. Because you can have a natural ingredient which is not good for your body. Just think about mushrooms which are poisonous, or think about other natural ingredients which are not good for your body, and others which are synthetic and they are 100% good for your body as well. So that's perceptual reality, and that's something where we surely have to do some more work to educate people what is really good for you. But I agree with you, naturals and organic is a trend, and we as IFF cater towards that trend.
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Jim Cramer6:56
Okay, how does IFF compete? There's one other competitor, but there's a lot of companies that want to be in. I mean, do you tell a consumer products company, listen, we can make something taste better than the other guy?
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Andreas Fibig7:08
Usually it's a different way. You get a brief. If you are on a core list of a big customer, then basically all competitors come up with their solutions. Then the solution goes to the consumer testing, and what comes back and is the best one, that's the selected one. That's the usual process.
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Jim Cramer7:27
All right, I see famous people have fragrances, but I have to believe that they don't have labs like this. A famous person comes to you, they say look, I want to smell like this but not that. How do you make a famous person smell?
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Andreas Fibig7:40
Sometimes they have very clear ideas what kind of smell or fragrance they want to create, and then they sit together with our perfumers. And perfumery is actually, I would say, a mixture between science and art. And here the artistic piece comes in. And actually many of our perfumers they click very well with these celebrities because they are usually very artistic as well. And then they come up with something with a couple of solutions. They smell it and then they decide. Are there things that taste really great that don't have any that aren't filling in real life? I actually don't know. I don't know. But you can ask this question actually our perfumer Carlos. Talking to him later.
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Jim Cramer8:19
We definitely want to do that. This Andreas Fibig, he's the Chairman and CEO of IFF. Thank you, sir. Thank you, Jim. Jim Cramer here from Mad Money. Thanks for watching CNBC on YouTube. Click here to subscribe and get the jump on my exclusives with CEOs, plus market news, investing advice, and a whole lot more.