Episode 450: Ingredion CEO Jim Zallie Shapes Ingredients and Innovates Food's Perfect Feel

It's a pleasure to be here.

Well, let me start by saying what it means to me. I started my career here 41 years ago, and so it's like coming home for me. My office was one of the labs upstairs. But this serves as our world technical headquarters, and it's one of 30 what we call Idea Labs where we work to develop new food ingredients, but we also work with customers to co-create products that help drive consumer-preferred innovation. So we look at our ingredients as being differentiated aspects to a label, to a front-of-pack claim that can make a food product more desirable for a consumer, and thus we're helping our customer, a food company, to formulate winning products in the marketplace. So for me, it's where all the magic happens, really, from the standpoint of the technology and the understanding of food at its most basic level.

Yeah, so our purpose is to bring together the potential of people, nature, and technology to make life better. We have five cornerstone values. One is around the people element of things, which is everyone belongs, and that's a value that's served us extremely well. We are a company that has a people-centric growth culture. We have a value around care first. We also have a value around innovate boldly, and so that's where a technical headquarters like this matters a great deal. We lean into and live our values, and we have, we think, a very noble purpose. That guides us along with a winning aspiration, which is to be the go-to provider for texture and healthful solutions that make healthy taste better. So all of that guides us as far as our mission as an organization.

Yeah, so what we conveyed today at our Texture Innovation Day here in Bridgewater was that we feel that texture is undervalued or underappreciated and not well understood from a standpoint of its impact on overall taste and something called overall liking. Flavor has very standardized definitions and descriptors, whereas texture does not. Yet in Japan, for example, there are over 140 descriptors; in China, it's greater than 400. So for us as a company, there's so much opportunity to correlate consumer preference, consumer insights with sensory understanding and then texture data, measurement science, and the correlation of the structure function of a food product to how it is perceived by consumers. We use an expression that eating is simple but food is complex. So texture, we believe, is a frontier that can impact food preference and overall liking similar to how flavor is thought of in its impact. We're very excited about what the future holds for us as we leverage our toolbox of texturizing ingredients to really understand at a scientific level how texture can drive consumer preference and work with our customers.

Well, first of all, you're highlighting the multifaceted nature of texture. Texture first of all starts with the appearance, to your point. So what your eye visualizes, you're processing how that product is then going to taste when you begin to consume it. So it starts with the appearance, and the overall surface structure will impact how that product feels in the mouth. So there's that aspect of it. It is then the mouthfeel of the product, it is the flavor release and how the texture of the food impacts the flavor release. It's also the sound or the auditory experience. Just a funny little anecdote: one of the major snack manufacturers, as I understand it, is working with a software company to specifically have noise-cancelling software for gamers that are typically consuming their snacks that are crunchy while they're gaming, but need the noise-cancelling effect because they want to be able to do both. So that underscores how texture is impacting society.

So I think all innovation starts with the customer and us listening to the customer, and then the customer obviously listening to the consumer and the consumer trends and what the consumer prefers. But I think when you think about the opportunities to innovate within the area of texture, there is, we believe, a whole psychology of the consumer that our customers will know better than us on opportunities to develop an offering for perhaps a specific eating occasion or a particular mood that a consumer might be in. An example that I would give you is that for some consumers that are part of a busy day, they may want something that fits their mood at the time, which might be higher energy and crunchy and crispy, something that they want to chew on like that, whereas in the evening when they're getting closer to bedtime, they may want something that's calming or something that is smooth and creamy. Us listening to our customers on what they want and what they need to develop, one of the examples we showed on the tour today is crispy fries for food delivery. That would be another example. So we work very closely listening to our customers and would work to clarify upfront what we call a project brief, understanding exactly what they want to try to achieve, and then translate that into a formulation or a recipe that our food scientists and what we call culinologists will work to develop. Often times we're trying to develop a restaurant-quality product that would be of that high caliber that would feature what our ingredients do uniquely to impart the attributes to meet the specifications in the brief. We've earned a reputation working with customers around the world, 18,000 customers, more than 120 countries around the world. We're a global company. With that value also anchoring us of innovate boldly, our scientists are not afraid to take some risks. We're also a company that leverages plant-based raw materials, so we're a plant-based company leveraging raw materials such as corn, tapioca, rice, potato, pea. We would process those products in such a way to impart functionalities and know how to correlate all of that to texture and how it impacts texture. So literally, when it comes to innovation, our innovation starts at the plant level as well as the downstream level of the processing that goes into those ingredients to impart structures that would impact texture. So it's a complex set of science starting at the plant level through food engineering and then through sensory science to pull it all together on behalf of our customers.

Yeah, I was just very, very fortunate because I did not know about food science as a major or food technology as a major. I was just fortunate when I was in high school to be pushed by someone to look at career options that merged my interest in science, chemistry, and nutrition at the time, and I came upon food science. That led me to go to Penn State, which had a major in food science. Then I was just very fortunate to graduate and be hired by a company called National Starch and Chemical Company. The starch division of that company was then purchased by a company called Corn Products International back in 2010. We were merged and rebranded in 2012 to be called Ingredion, which means ingredients in action. So that's what the name Ingredion means. I've just been fortunate to have worked for this company combined now for 41 years and have challenges that have been put before me where I've been able to grow my career personally, that's helped shape the way I lead because of the opportunities afforded to me. But I have a love of the food industry and I have a love of science and technology, and have seen the value that we can impact around the world. I think we have a very noble purpose and are a very innovative company, and all of that makes it kind of easy to come to work every day.

Well, so when I first took over, the industry was changing, and we were a company that was a spin-off in 1998 at the time, Corn Products from CPC International. So we were literally 20 years old, and we had almost been taken over by another publicly traded company, and that deal had fallen through as we went through the Great Recession. Our values were 20 years old at the time, and they were very good values, respectable values such as excellence, such as quality, such as safety, but they were not contemporary and they were not inspirational and motivational. So one of the first things I did was work with the leadership team to make sure we put in place those cornerstone foundational values that we still have in place today that I think we live, put in place our purpose, because I knew we were going to go through a little bit of a tough patch because some of our portfolio was a little bit dated and was going to come under some pressure. I knew I needed to have our employees rally around a purpose and values, and I wanted to build a people-centric growth culture. It's one of the things I'm very passionate about. I think in society today, if you don't have a strong culture, your business will suffer, and if you don't focus on people, you will also. People will see through whether you're really living your values and whether you have a care for people in general. Now obviously you're running a business, it's not easy at all times, but I think if you take your eye off of either the customer or the employee and you get very internally focused, it's a recipe for failure. So that's what we try to nurture at Ingredion. I think we've done a pretty good job with that because our listen survey, we do a listen survey each and every year and we do a mid-year survey. Our participation rates are well above industry benchmarks, and our engagement scores are above industry benchmarks, and we're very proud of that. That's a signal to me that we have employees that are very vested, but also we in positions of leadership and management have a responsibility and accountability to them to continuously try to figure out on their behalf how they can have fulfilled careers, be motivated. I look at my job as CEO as Chief Clarity Officer. It's one of the most important roles that I have is to continuously try to synthesize what we're doing, why we're doing it. While we start each and every year with only five crystal clear priorities, you have to continuously update and modify the emphasis around those priorities at any time of the year because some things take precedent at different times. That's all necessary to have a highly engaged workforce and employees that feel they're connected to the purpose, the values, and the strategy. I just think that's really the recipe for success in today's business.

Yeah, so one of the reasons for the rebrand at the time was obviously there were two different companies coming together, so it was an opportunity to rebrand. But we did not want to be perceived as an agribusiness company that was creating its value more based on just efficiencies associated with commodities or commoditization products, but more of a specialty ingredients provider. So that rebranding gave us the license to move more towards what we're doing today, which is to evolve to be not just a specialty ingredients provider but a specialty solutions provider. So we've worked consciously over the last 12 years to make strategic acquisitions and organic growth investments. One example would be we're the largest producer today of high-intensity natural sweeteners, which is stevia, for the trend towards reduced sugar, no sugar type products as well as avoiding high-intensity artificial sweeteners. That ingredient category or capability is something we did not have five to seven years ago. We were thought of more as a starch and sweetener company, not necessarily a specialty solutions provider. The example I would give you is we've added also protein fortification ingredients as well. If a company came to us five to seven years ago and asked us to produce the following kind of product, we could not do it, but today we can. The product I would give you the example of is one of the largest food categories that everybody likes, which is ice cream. If someone came to us five, six, seven years ago and said, 'Can you produce a sugar-free or reduced sugar, low-fat or no-fat, plant-based, dairy-free, indulgent ice cream?' we could not have done that. Today we have the high-intensity natural sweetener to produce it with low to no sugar, we have the protein-based ingredients that are non-dairy that can replace the milk or the dairy, and we have the ingredients to help impart a very rich, creamy mouthfeel to make the product indulgent and also prevent ice crystal formation during freeze-thawing. So it's a capability that we've built that has made us much more relevant to more opportunities than we ever have had. I think that's the direction we're going to continue to head in, and that's where we see the opportunity to be a very complete texture solutions provider as well as a company that supplies sugar-free alternatives and protein and fiber-fortified ingredients as well.

Yeah, what I talked about on the earnings call, because obviously we got questions about what's driving the performance. Over the last two years we've delivered greater than 50% total shareholder return, so we're very proud of that. But those accomplishments, those achievements in our particular case, isn't because of some trend that we're riding where the trend is our friend. It is really about the accumulation of doing a lot of little things I think very well that have kind of culminated to make us a company that's operating well. What I would say is that about four years ago we imposed a global operating model that was meant to leverage best practice against benchmarked examples for operational efficiency when it came to finance, IT, and then ultimately operations, and then HR, and even some marketing, say back office or areas of expertise. That helped drive and is driving the efficiencies along with global procurement, I should say, which is also doing a great job for us right now. That was not an easy transition because the individuals that were running the businesses wanted to feel like full-fledged general managers, and what we had to say is growth is tough. In order for us to grow, we really need to trust that we can build those capabilities in from a functional excellence standpoint, and there will be efficiency gains there. We want the go-to-market teams to be much more intimate with customers, sell service as a differentiator, and find those pockets of growth and those opportunities. That alone is a full-time job where we can be excellent with the customer at the customer interface level, and then trust your colleagues to drive the functional excellence and all the efficiencies that they will make sure that our service is where it needs to be to customers, and it'll all have a customer focus to it. So one of our other values, picking up on that, is be preferred. So we want to be preferred by our customer. I think it's an accumulation of all of those factors over now the last say four or five years that's come together that is delivering the results we see today. I'm hopeful, which is why we held the session today, that innovation and being able to drive consumer-preferred innovation on behalf of our customers will continue to propel us forward as a company to deliver shareholder return and to have these great achievements.

Yeah, well first of all, thank you for raising this and thank you for bringing this topic of safety up. It is at the heart of our care first value. Ingredion, I'm pleased to say, operates at world-class levels of safety, which enabled us to be a finalist, one of three, for the Green Cross Award on a national scale this past year. But we operate at levels of safety that are in the top decile of manufacturing companies. We believe that employee safety and employee well-being, I think we extend it even now to employee well-being, is something that's at the heart of again our people-centric growth culture. The kind of things that we're talking about is making sure that we have the same muscles developed culturally for caring for employees' personal safety as we do for food safety. Because being an ingredient supplier to the food industry, we all can relate to our ingredients finding their way into consumer products that we all consume as employees of Ingredion. You would not want to have anything do harm to anyone. So we have a very strong culture of quality along with food safety, which builds off of our strong culture for one's personal safety. We're very, very proud of that, and honestly that is another foundational value from which I think all companies need to have to be a good company.

Well, I think it is beginning to impact the ingredients industry. Certainly it's impacting all businesses as it relates to tasks that can be done much more sophisticatedly, like forecast accuracy, supply chain efficiency, and just leveraging data that you generate in our operations. We're leveraging AI right now in our operations to reduce tolerance levels for certain specifications where we can just operate in tighter windows of operation for more efficiency, which can eliminate less waste. But the exciting frontier that we're looking at, which we talked about today, is in predictive formulation that then can correlate to the structure function understanding and leverage all that big data to be able to accelerate innovation on behalf of our customers and deliver exactly what we want to deliver texturally for a customer. We are piloting also, which is very exciting, a tech service assistant. So think about it as if you were doing a chat, a 24/7 chatbot booking a hotel reservation that you wanted to have questions answered about an experience that you wanted to have on a vacation. Obviously that exists today and will probably be the norm in the next couple years. In our industry, equally, customers will call a tech service representative and ask for a particular ingredient that would best be suited for what they're trying to formulate. We're developing an AI-generated agent that will be able to do that, allowing those specialists to do higher order tasks. That's just an example of some of the things that we're piloting right now. I just think that's the exciting part of the future, because we're just in the very early stages of this, and the impacts from an innovation standpoint have not been felt yet. We think that AI will absolutely play a differentiating role when it comes to how do we take this complex subject of texture solutions and operationalize it and simplify it. We think it's going to be key, and so we are piloting it because you do have to learn, you do have to train some of these models, these large language models, so that they are credible and they don't have errors in them that would set you back.

Yeah, so first of all, I think everybody understands that consuming too much sugar is not good for you, and it has a strong correlation obviously to type 2 diabetes and obesity. So much so that the FDA now requires companies to label the amount of added sugars on a food product's label, which is in addition to the natural sugars that find their way in the product itself. Stevia is 300 times sweeter than table sugar, so it can be used at a very low level to replace sugar but yet still impart sweetness. The original stevia leaf extract products that came out, I'll call them the early generations, did have a bitter or a licorice off-taste associated with it. Since then, we've been able to develop, using natural stevia leaf extract, enzymatic conversions to isolate the best-tasting stevia components. Honestly, they're really great-tasting, clean-tasting products that are still 300 times sweeter and give you that healthy opportunity to either reduce or completely eliminate sugar in a food product. Then we work from a texturizing standpoint to build back the mouthfeel that's lost when sugar is replaced, and we call that build-back texture, functional build-back. That's really just a great opportunity where we're doing good for society and doing good for one's health. In addition, we've developed a technology where we ferment sugar to turn it into a stevia product, and that is a much more sustainable process by which we can very efficiently produce a great-tasting alternative to table sugar, 300 times sweeter, but doing it in a very sustainable, reduced environmental footprint way. That's just another exciting example of our technology toolbox. We call the three products stevia leaf extract, bioconverted which is the enzymatic conversion, and then the fermented as the perfectly sweet trifecta that we have for stevia.

No, great question. I think it starts with the fact that we are a plant-based company. As it relates to the drivers for gluten-free, you talked about celiac disease, irritable bowel syndrome. When you are replacing wheat gluten, which is the allergen in that particular case, the way you need to do that is to replace it with something that's going to impart the functionality but does not have any inherent gluten. Rice does not have any inherent gluten, potato does not, tapioca does not. Well, we're basic in all three of those, and then there's other ingredients that you can add as well that will help with dough conditioning for a baked good as well as ingredients that are going to help with the overall cell structure for a very great texture but still be a gluten-free product. So the offerings that we have in rice, potato, tapioca, and our knowledge of formulating really make us a great partner for gluten-free. On dairy-free, the concerns are either mindful consumption when it comes to avoiding dairy and the animal nature associated with it to be dairy-free, or there's concerns about inflammation with some dairy-based products as well. We have products that can replace non-fat skim milk, that can replace the casein in cheese or coffee creamers, for example. So basically, through our understanding of food science and technology and the plant-based offerings, we know how to reverse engineer the functionality that's inherent in an animal-based or dairy-based product. So that's how we're targeting the opportunities to develop offerings for both dairy-free as well as gluten-free.

Well, I think alternative meats that you raised was a category that grew quite quickly but then hit the realities of the run-up in food costs associated with food inflation that we've all experienced over the last three to four years. So that's one of the things that has created a challenge for the continued penetration of the alternative meat category, along with the labeling. Those products also, the first generation type products, were impacted negatively by the labels that were either high in saturated fats or didn't necessarily have a clean label as perceived by consumers. So we're working with those customers to clean up the labels and provide the functionality that's needed to give the moistness, the succulence, the chew, the bite of those products through our alternative plant-based proteins. In our particular case, it's a pea protein isolate or it's a lentil-based product or some of our starch-based products again to bind moisture and provide the bite or the chew or the elasticity that you are familiar with when you bite into a regular meat type product. The beauty of our product lines is they're very, very diverse, they're multifunctional, and they provide unique attributes that help support vegetarian products, vegan type offerings, and what we call the whole category of free-from. So free-from, you mentioned gluten-free, dairy-free, fat-free, sugar-free. Our ingredients play a role in all of those, and that's what makes us so relevant and, I think, appreciated by our customers or seen differently certainly than we were seen five to seven years ago.

So we're very, very mindful and plugged into all of the trends, and we're also very clear on what our strategy is. We went through an enterprise-wide strategy refresh last year. We have our winning aspiration, which again is to be the go-to provider for texture and healthful solutions that make healthy taste better. We're basically focused on executing that strategy and are looking at other ingredients that would fit within our portfolio that would expand our toolbox, our capabilities to deliver on the value propositions inherent in that winning aspiration. So we're a company that again has innovation at its core and a company that strives to be preferred, as I mentioned, and with an eye on the customer. I have an expression that I'm known for in the company: all growth starts with a customer. So we have to make sure that we are a customer-focused organization but are also very aware of where the consumer is going. As you talked about, the consumer is a very fickle consumer, and you need to be wired into these trends and be able to pivot to these what we call pockets of growth that are always emerging in our industry. It's one of the beauties of the food industry: people do always have to eat, and it's one of the basic pleasures in life. We get to play an important role in that, and we relish that opportunity.

It's been my pleasure.