Hi everyone. I'm Nicolai Tangen, the CEO of the Norwegian Sovereign Wealth Fund. And today I'm in Switzerland and in really, really good company because I am at Givaudan, the world leader in flavors and tastes and smells and all these fantastic things which surround us. And I'm here with Gilles who has been the CEO for 20 years.
Thank you and warm welcome to Switzerland and to Givaudan and here in Vernier.
Wonderful. And it's kind of incredible to be here at your R&D center, the center of the world's smell and taste. So, let's kick off. What is Givaudan in brief? What do they do? What do you do?
I can see it in different ways. You know, we make the world taste and smell very good. But we actually really thought about our purpose a little while ago and we wanted to expand beyond just the world of fragrances and flavors. So the way we express what we do and what we are meant to do is to make consumers happier and healthier, which gives us a broader perspective on what we could do for them beyond the taste and smell.
Why is smell and taste so important in connecting people? Because we are animals in the first place.
Totally. Yeah. You know, just something which is interesting which is for me always, you know, even after 21 years as CEO, 32 years at Givaudan, I'm still amazed by how this business is magic. So in the first place, for example, in your body, in our bodies, we have 2,000 receptors and you actually have 500, so a quarter of them which are only dedicated to taste and smell. So it's basically the surviving kit in the first place. Yes, it's to have a pleasant life, to smell beautiful things and so forth, but in the first place it has basically where it's a survival kit. It's about bitterness is poison, foul is not good for you, but at the same time sweet is calories, is better for you. It's about energy. So it's all those things that obviously is at the core of consumers and obviously we are dealing with memories because the body is designed in such a way that actually it has such a connection with the emotions, with the memories and it's actually the fastest way to go from the senses to the memory and that's why those things are being so linked. So that's the beauty of our business and that's the cornerstone of what we do.
Well, you do many things and there are many ways to kind of get into this but I just love to kick off with the creative process when you develop and use smell. Who, well first of all, who do you create it for?
So we are in a B2B business obviously. Givaudan is not a brand in itself where you will find Givaudan on the shelf because taste and smell is actually the key differentiating attribute when a consumer wants to repurchase a product. Any product, it comes at the top of the list before packaging, advertising, pricing, whatever, the functionality of a product. It's not us saying that, it's our own clients.
So let's say now I'm Tom Ford, I come to you, I want to create a new perfume. How do we attack this?
So basically that's what's called a brief. So you're going to issue a brief. You are the product manager, the marketing director of Tom Ford at the Saldo and you're going to issue a brief and you're going to brief us but alongside other fragrance houses because it's a competitive brief and you want to get the best out of the creativity of a broad range of perfumers. So that's how you go about it. We might actually define the brief together because we might help you in defining the brief, what type of consumers, how does it position itself with the other perfumes that you have under the Tom Ford area, you might have some ideas. So it's really we enter a co-development process together through the brief. And then we have 200 perfumers around the world. We're not going to have 200 perfumers working on the Tom Ford brief. But we are going to have the finest perfumers out of New York, out of Paris, out of maybe some other places and we're going to create some ideas and it's going to be like a funnel with the team of Tom Ford to actually select, eliminate. And they're going to do that with the other fragrance houses and at some point we're going to find a few leads on which we're going to work together, make some consumer tests and so forth. And then that can take three weeks with a very small client, two, three years, it can take a long time and the best wins.
But when you say lead, what is that? I mean so now I have my existing fragrances and then what type of leads would they be?
So you might have a range already in the top four, which are very sort of woody or some of the fruity or some of the... and it might be interesting and that's going to be us coming to you with some ideas to fit maybe a gap or something that essentially is going to fit the range of perfumes that you already have but which also needs to echo to what Tom Ford is as a brand. You know, because the beauty of this business is that any brand has almost like an olfactive signature, it smells like Tom, it smells like Gucci. So it needs to fit basically the strategic, some form of strategy in the portfolio but also to fit the signature of the brand and that's what we do together. So you might have, and that's really based on the creativity of our perfumers finding ideas out of the blue as much as being a bit more rational in terms of how does this fit in the range of the... So that's there is actually very often we are fit by investors and so forth into the chemical industry. We are as far as the chemical industry as you can imagine, we are actually closer to, especially when we talk about fine fragrance, also the advertising industry where it's all about defining the brand, defining the attributes of the brand and then translating that into a message and how you're going to communicate about it. So it's a bit the same process.
How does smell fit into fashion? How do the fashion waves and smell, how does it work?
So you have trends obviously. For example today, over the last 10 years there's been an enormous trend around gourmand, you know, it's about the gourmand sort of signatures and so forth. You might want obviously to jump onto the trend of some trends or for example today what's extremely interesting and our fine fragrance business has been booming for the last five years, double digit. It's been very much fueled by the Gen Z, the Gen Alpha and suddenly it's a whole cohort of consumers who found it so exciting to actually express themselves with multi-layering fragrances and it's really a matter of expressing yourself. And through that, it came out very clearly that because it's a matter of expression, fine fragrances needed to bloom and to really diffuse very much so as compared maybe to 20, 25 years ago where it was really about having fragrances for yourself and so forth. So those are trends which evolve with consumers and we also create some trends with newness, with new ingredients that we develop.
So tell me about something on the new stuff. What's new stuff? So what should I wear to be modern in a fragrance world?
There's not something, it's really about, well it's like in fashion, you know, there are as many brands as fashion can propose. So it's really about how you feel about the fragrance, you know, there are so many families, there's an infinite possibility of fragrances and therefore it's really about exploring, it's really about, and that's what new consumers do. It's very interesting to see them. They spend their Saturday afternoons in brick and mortar shops exploring together and what fits you. So, it's a matter of expression. What music do you like? I can't tell you, just experiment. So, it's a bit like this in fragrances.
Okay. So, say now we have had the brief. We decide that we want to go down the citrusy route. Right.
Exactly. So the freshness with a citrus top note on top of a woody ambery note.
Like Sauvage type thing. So what do we do? So we go into the lab together, you and I. And what do you have in the lab? What does a lab look like?
So you have at the core, so again you go back to the perfumers. So the noses. You know, they're going to write a formula. They're going to express like you will write a piece of music on the computer, they write the formula, they know how the formula smells, this is also a piece of magic, you know, it's just a matter of expression obviously then... exactly and then but obviously they need to still smell the reality like a musician you need to play the music. So you have for every perfume you have a technician sitting 20 meters away with an organ of different ingredients. The palette of ingredients which can be 500 to 1,500 different ingredients. And those ingredients are part of the formula. The technician makes the formula, weighs every single ingredient, very tiny drops, a bit more volume, some other ingredients, makes the sample, mix in the alcohol, go back to the perfumer. The perfumer smells, put a plate, smells, and then the perfumer is not by himself or herself. She is surrounded with people who are going to help in the process. People at Givaudan, you know, so it's called evaluators. So the evaluators are there to actually bridge the work of the perfumers with what the clients want, what the brand want on the outside because also you might not be the only perfumer working on this brief. So that we maximize the chances of winning the brief.
How many evaluators do you have?
So on a project you have one or two evaluators but you might have two or three perfumers working on big briefs.
They compete but that's... it's a very friendly competition because it's a teamwork where every at the end of the day you have an interest into your perfume part to win because it's a... we have incentive plans. So basically the way it's designed is that there is interest that we all win together. Obviously the perfumer who wins might be a bit prouder than the one who has just participated in the race but...
So here we have, so we now have a bottle, the stuff in there, we love it, the evaluators like it, what do you do then?
So then obviously we go back to the client. So in France there's a lot of interaction, so the client comes to the office. We smell together, we smell this idea but we might smell other ideas. And then in front of us, you know, at the client side, you have people who are very capable of evaluating the fine fragrance. How does it fit? How do they feel about it? And then you might be selected to go into tests because some clients test the fragrances, some others just go by their conviction and gut feeling. But essentially you might go into a consumer test and therefore it's 100 for example consumers on which we're going to present the fragrances in different countries and you're going to test those ideas against benchmarks which are testing very well. So that's a comforting way of saying maybe that's going to be potentially a success. There is some limitations to that because the more you test, the more you're going to maybe lock yourself into something that consumers already know. Most of the big successes maybe were never tested because actually the only way to actually create something very different is not to have consumers smell things that they are used to. So actually there is always a debate about should you test, should you not test but it can be a comfort factor. You can have things which actually don't test very well but are going to be huge successes. So you have a lot of paradoxes but that's...
Do we tend to like more the stuff we already know?
How predictable is it? So now we have something, how often are you really able to predict the success of a product?
Well, that's the, especially in fine fragrances, you have a certain, you know, more or less, if you have really poor test results you know it's going to be a flop so you better not launch it but it's not because you're testing very well that's going to be a huge success. So because there are other elements, you know, you need to have the right packaging, the right mix, the right advertising. So there is a certain form of predictability but you have no assurance like in anything but music.
You know one of the worst test results ever for a product was Red Bull. People just totally hated it. I mean it was so awful that normally you would have put it into huge bottles and sold it for nothing. Instead they put it into very small bottles and sold it for a huge price and supposedly is the second bestselling beverage in the world.
Right. So you have examples in the industry.
So what's the biggest surprise? What's been the biggest surprise for you? That's something you didn't think was going to sell.
A business school one which we did many years back. It's called Angel by Mugler. And that was really, really, really disruptive. That was a very gourmand, in your face, overwhelming.
So what does gourmand mean? What does that mean?
Gourmand means it's a very sweet, chocolate, very edible. Usually again back to the animal story, we like what is linked to food. You know, so in this case Angel was quite polarizing but the woman at the time, Violette, had a huge conviction and they launched it and it's called what is called a slow builder. So actually it was not necessarily an initial success but over time it built up and it attracted consumers and today Angel we say in perfumery is the mother of many, many, many other fragrances which went into this gourmand route. So you need sometimes to take risks in fine fragrances to have a very strong conviction to create what we call trend setters.
What are some of the other mothers?
Actually what's very interesting is that because of new ingredients, new molecules which have been created in the meanwhile to enrich the palette that we just talked about and some of those new molecules are being created here in this building where Akigalawood for example is something that has been created a few years back which now has made, is behind so many successes in fine fragrance that it actually created a trend by itself. So you can create new trends and new mothers and fathers through new ingredients and new molecules. And that's why it's extremely important to have the best talent, the best perfumers formulating but also helped by very novel ingredients which will help create new fragrances down the road.
So when you look at the whole fragrance market, how much consists of the old classics, you know, the Chanel Number 5, the Opium, these kind of things and how much is the new, more funky stuff?
So just for the interest of our people listening to us, it's called the churn. So basically in fine fragrances, nowadays the market has grown so much that the erosion of fine fragrances used to, when you are at a market growth of let's say 5%, you have 25% newness, 20% erosion. So you can imagine that the churn, the replacement is quite fast. Today because Givaudan we are growing more like 15% on average in fine fragrances, we are more at the pace of let's say 10% erosion but 25% newness. Yes. So basically yes, we still have a lot of old classics which are a bit the foundation but essentially the newness has come. So yeah, every brand tries to hook, it's called, to place basically a perfume in the top 10, top 15 somewhere, you know, but you need time to do this.
I usually don't advertise for brands but I will answer very happily your question. By Prada which is my fragrance for many, many years. You know, we have done a lot of fragrances for Prada and I'm wearing one of them.
Very good. How important are the perfumers because you are married to one.
What kind of skills do you need to have?
Obviously as you know, at the core of Givaudan we have a perfumery school. So the perfumery school...
And I'm sorry, do you have, you have educated very many of the world's perfumers.
Yeah, and the perfumery school of Givaudan is very well known because it has been established more than almost 80 years ago. It actually trained, created 40% of the, let's say 40% of all perfumes which are sold in the world were created by perfumers coming from the school of Givaudan. So it's a well-renowned. So to characterize what needs to be a perfumer, it starts there. So we select them on the basis of, yeah, can they smell obviously, but you know, this magic about the nose, everybody has more or less a good nose. I mean, but the difference between...
Well, you say that you have super tasters, right? You have people with...
Yeah. Yeah. Well, it's the accuracy is like the, it's like the perfect ear maybe and so forth. But even if you have the perfect ear, does it make you a Mozart? I don't know. So it's really about having a lot of passion for it because you need, you're going to do that for the next 40 years. You really need to love it because it's tough. You know, it looks very nice on paper. It's magic. But we discussed about the briefing process. You are in competition. You as an individual perfumer, you're going to lose a brief nine times out of 10 or eight times out of 10. So you have a lot of deceptions. You have a lot of setbacks and you need to grab all your confidence to go on the next brief and to be continuously creative. So resilience, persistence is extremely important. Then obviously having this creativity, this generation of new ideas and so forth is obviously extremely, extremely important. So that's how we select them. It's in the first place in the resilience, the persistence, that's the most important attribute.
Okay let's move on to flavors.
Flavors. So it's more or less the same business but the application is different. So what we described about fine fragrances but then obviously fragrances going into home care, into personal care, into hair care, it's the same process, the same briefing, the same skill set and then you have the same for flavors where the application would be beverage, would be food, would be sweets. Because most of the time yes, the food provides a lot of taste but because of the fact that you have packaged food and so forth, a lot of what we call the volatile, the top notes disappear in the process, you need to put back some of those top notes, those flavors which are going to create the really fresh strawberry that you expect from a yogurt.
And when you say top notes,
The top notes, it's really the profile when you smell. So you have top notes, middle notes, dry downs, that's in perfumery. Well, in flavors when you eat something most of what you experience in the taste are actually the top notes, the volatiles. You don't chew your whatever you have to eat for hours. So actually the impact of flavors is a few seconds, a few minutes. So it's really about the first impact when you peel an orange, when you smell an orange, it's the top notes, all those volatiles which come to you, then you experience sweetness and so forth over time. But the big difference between flavor and fragrance is that in fragrance you have the top notes but then when you have a perfume you're going to wear it maybe for a few hours. So you expect the dry downs, the smells continuing to diffuse over time. In flavors, the impact is very short at the beginning. So that's why...
What are some of the famous flavors that you have made that we eat and experience every day.
We don't quote them. We don't name them. We are perfect...
