We want to be the partner of choice for our customers, and the measure of this 2020 ambition is the value we create with them through sustainable, responsible growth.
Being the partner of choice is also about shared success with our employees, suppliers, and our partners in science and technology, all of whom are critical in delivering on this ambition.
Our 2020 ambition is to create further value through profitable, responsible growth by building on the three strategic pillars of growing with our customers, delivering with excellence, and partnering for shared success. This growth ambition translates into financial targets of an average 4-5% growth and an average 12-17% free cash flow until 2020.
1 average over five years
Read below about our strategic achievements for each pillar.
Growing with our customers Delivering with excellence Partnering for shared success
Growing with our customers
Leveraging capabilities to drive success With customers at the heart of our business, we leverage our knowledge of markets and consumer preferences to help customers grow their brands.
We set an ambitious financial target of 5% average organic sales growth over the five-year period, and we are well on track with sales of CHF 4,663 million, an increase of 4.2% on a like-for-like basis.
We made significant investments for future growth with new acquisitions and expanding our commercial footprint with the opening of new offices and innovation centres, mostly in high growth markets.
Below are the key achievements per driver.
High growth markets
Progress in meeting our 2020 ambition rests largely on our success in high growth markets, a key opportunity and the first of four key drivers in our strategic pillar of growing with customers. We achieved a number of milestones in these markets during the year.
We recently opened new offices in Guatemala, Ivory Coast and Algeria, and became the first global flavours company to open laboratory and office facilities in Pakistan. For the first time, customers in Pakistan will be able to access our industry-leading capabilities locally. The new 800 square metre facility in Karachi strengthens Givaudan’s capabilities in beverages, snacks and sweet goods in the region, offering flavour application services for all sectors with a strong focus on sweet goods and beverages. Customers will benefit from a faster response to their requirements and gain access to fully halal-compliant international flavour profiles as well as to Givaudan’s capabilities and training for local technologists and manufacturers.
The Flavour Innovation Centre (FIC) in Singapore is home to the Asia Pacific campus of our Givaudan Flavourist School, which is training the next generation of flavourists in the region. In 2016, the FIC facility was renovated and extended, and includes a new fully integrated culinary space for concept development as well as new or expanded savoury, bakery, confectionery, beverage and dairy facilities to serve all market sectors. The investment enhances Givaudan’s innovation capabilities in Asia Pacific, enabling a regional focus on applied innovation, collaboration and knowledge sharing to complement its global network.
Enhancing innovation capabilities in Asia Pacific to facilitate a regional focus on applied innovation, collaboration and knowledge sharing.
We continue to focus on our manufacturing strategy for fragrance ingredients to reinforce our position in the high growth markets of Asia Pacific. In China, for example, we have a joint venture with Zhejiang Xinhua Chemical for the production of fragrance ingredients that enables us to meet demand in the region and improve our competitive position globally.
Health and well-being
We work with our customers to develop and maximise the growth of their brands by providing solutions that help them meet the increasing demand of consumers for health and well-being products that contribute to a healthy, active and balanced life. This is our second key driver for success, one which offers many opportunities in both flavours and fragrances.
Following the acquisition of French bio-sourced active cosmetic ingredients company Soliance in 2014 and science-based cosmetic ingredients firm Induchem in 2015, our newly formed Active Beauty business now offers customers and consumers around the world a range of innovative products and technology under one roof. The mission of Givaudan Active Beauty is simple: to bring beauty to the world.
Additionally, we expanded our existing collaboration with Amyris in the USA in the research, development and production of active cosmetic ingredients.
In Flavours, we focus on ‘less is better’ as well as on ‘more is better’. In advocating ‘less is better’, we develop flavours, ingredients and solutions that enable the reduction of sugar, fat and salt. In 2016, we introduced several innovations to support consumer trends in health and well-being, ranging from a new ingredient that helps to enhance sweetness while reducing calories to a ‘non-dairy dairy’ solution for customers seeking rich, creamy or authentic dairy flavours for their products while addressing issues related to allergens and vegetarian preferences.
The additional focus area of ‘more is better’ involves the use of more protein and more functional food ingredients to provide health benefits. Flavour challenges in terms of bitterness or other off-notes represent opportunities for us to surprise our customers with delightful solutions.
We are also investing in the development of next generation tools for protein palatability and bitter receptor modulation. These new TasteSolutions® ingredients will ultimately enable the replacement of animal proteins with plant based proteins to continue to address an ever-growing world population with great tasting and nutritious products.
Finally, we will use innovative development technologies to strengthen our Naturals platform in two areas and further build a robust natural flavour ingredient palette. Specifically these are areas where the cost reduction advantage is considerable and where security of supply is critical, for example plant cell culture, agricultural intensification, extraction and concentration.
Consumer preferred products
In putting customers at the heart of what we do, we make them feel valued, confident and understood. By doing this we are a true partner at each step of the creation and value chain. We are flexible and agile in offering customised solutions to meet the needs of our global, international, regional or local customers.
Customers are at the heart of what we do. We make them feel valued, confident and understood. We are a true partner at each step.
Our tailored solutions for consumer preferred products continued to be successful in helping our customers grow their brands and delight customers around the world. This success was also seen in our collaboration with external partners and is set to drive new business value for our Company.
In Fragrances, following Mahonial™ and Rosyfolia®, we launched Nympheal™ in 2016, our new floral captive molecule that completes the floral trilogy of new synthetic ingredients. The three ingredients were designed, developed and quickly launched to perfumers, providing them with answers to existing and future regulatory restrictions on certain white floral molecules. These captives bring new olfactory perspectives for our customers in growing their brands.
We have also provided customers with leading edge technology for their brands through the development of a new generation of encapsulates that enhance the perception of long-lasting freshness in the fabric care category as well as in personal care. Innovation in natural ingredients was also achieved through crafting new qualities in the citrus family, where we explored its various facets during the year.
New ingredients are important in building the best palette of ingredients for our perfumers, who strive to create the fragrances that offer customers innovative and safe scents for their consumers around the world.
The acquisition of Spicetec Flavors & Seasonings in the USA in 2016 supports our growth in integrated solutions. We now have the opportunity to expand our integrated savoury solutions by moving beyond flavours, combining exceptional, complementary resources to provide our customers with unrivalled creative and innovative capabilities. We will use the expertise of Spicetec globally to grow in the expanding processed meat and spice and seasoning market.
Delivering with excellence
Superior customer experience With customer needs in mind, we drive excellence across the value chain in delivering our products, services and business processes.
We have set an ambitious financial target of 12-17% average free cash flow as a percentage of sales. With 12.8% of sales in 2016, we are on track to achieve our 2020 target.
We continued to make significant investments in our infrastructure, site footprint and supply chain to support our growth, particularly in high growth markets.
Delivering with excellence
We strive for excellence at every touch point with our customers by creating a memorable experience and a desire for them to work with us again. In a market that is more competitive, dynamic and fast moving, we must find ways of bringing all of our talent and experience to the fore. This needs to be done with agility to operate efficiently while offering customised solutions that meet our customers’ needs.
We seek to bring all of our talent and experience to bear for customers. We want every customer interaction to be excellent at every touch point.
Both divisions are driving a number of initiatives to address this need, from innovation to sourcing to commercial, to ensure that we deliver with excellence and offer a superior customer experience. At Group level, Givaudan Business Solutions (GBS) will become the foundation of our commitment to deliver with excellence. Fully operational by 2020, the implementation of GBS will support the Company in delivering on this commitment by reducing internal complexity, offering best-in-class business processes to our customers and solutions to both divisions and our corporate functions, and driving excellence across the organisation.
GBS is represented on the Executive Committee by Anne Tayac, appointed to the new role of Head of Givaudan Business Solutions with responsibility for its design, gradual implementation and management.
As part of our global strategy to engage with customers and partners in key markets, in 2016 we expanded our digital presence and shared tailored content in local languages by launching our websites in China and Japan.
Partnering for shared success
Building to be the partner of choice True partnerships with our key stakeholder groups are nurtured and valued in driving responsible and sustainable growth and for shared success.
Being the partner of choice is a critical success factor in driving our business growth and involves building strong partnerships with innovators, suppliers, employees and communities in which we operate.
Givaudan is known for its innovation, and this is something we are very proud of and which we don’t take for granted in today’s fast-changing world. We have excellent in-house teams and a record of innovation excellence, but we know that seeking inspiration from the external world can open new possibilities in innovative solutions for our customers.
Good progress was made in 2016 with this more open approach to innovation and in establishing collaborative innovation partnerships with external partners who can speed our access to new technology and disruptive innovations. For example, we became a Founding Partner of MassChallenge Switzerland, which will widen access and exposure to an international network of emerging start-ups. As an example, we worked with a young French entrepreneur on commercialising his olfactory alarm clock Sensorwake.
All members of our Executive Committee together with a number of senior business leaders visited the USA to personally experience the potential of this collaborative approach to innovation and hear from a number of start-up companies, incubators and venturing enterprises. We already have a contractual agreement with one of these incubators, IndieBio, which focuses on funding and building start-ups that address a range of humanity’s most pressing problems and biotechnology topics. Terra Rocketspace is an example of a programme in which we are a collaborator that brings together the industry’s most disruptive start-ups and progressive corporations. This will accelerate cross-industry innovation and set a new standard for food and agriculture.
In the context of the European Institute of Innovation and Technology (EIT) Innovation Hub, Givaudan has worked for over a year with food partners to build a European consortium to define the future of food. In 2016, this EIT Knowledge and Innovation Community FoodConnects (KIC) was chosen as the pan-European winning KIC to drive sustainable transformation towards a more consumer-centric, resource-efficient and innovative food sector. The EIT KIC FoodConnects is a unique partnership of 50 leading companies, universities and scientific partners covering the entire food value chain.
We seek to create closer long-term partnerships with our suppliers, knowing that solid and open partnerships within our supplier base have significant potential to boost our mutual innovation power. Suppliers can genuinely be our partners and become an extension of our business through Supplier Enabled Innovation, which is about motivating our suppliers to use their R&D resources to help us achieve a level of innovation that is beyond what we can do on our own. This different way of working with our suppliers will increase our intellectual resources and innovation momentum.
Through our Responsible Sourcing programme we maintain compliance to high ethical standards with our suppliers, working with them to create traceability and adherence to social, health and safety, environment and business integrity standards. In 2016, we launched our Responsible Sourcing Policy, an industry first which informs and requests our suppliers and service providers to adhere to our responsible sourcing principles and requirements in all core areas of responsible sourcing.
We are committed to establishing direct sourcing models in countries of origin that offer the best ingredients to our customers and create value in our partner communities. In recent years we have established direct partnerships with a number of specified villages in Madagascar to support local people and ensure a reliable vanilla supply chain within the Givaudan ethical sourcing project. In 2016, we inaugurated the NATEMA plant, one of the largest clove leaf oil processing plants in the world. NATEMA (Natural Extracts Madagascar) is a joint venture with Henri Fraise Fils and will enable Givaudan to establish and grow its capacity to develop and process natural ingredients sourced in Madagascar. A further agreement with Henri Fraise Fils will allow us to leverage the local expertise and infrastructure of HFF to secure vanilla bean supply directly from Malagasy smallholder producers.
Strong partnerships with our people are important for our success. There are two areas on which we focus:
Firstly, employee engagement. Creating a stimulating and engaging workplace is vital for our success, driving the achievement of our 2020 ambitions and enabling our people to achieve their goals. We measure our progress in this area through our employee engagement surveys. In 2016, we completed our second Employee Engagement Survey, which offers all employees the opportunity to have their say. The impressive 80% response rate – an increase of 10% on 2013, when our first survey was conducted – showed that our employees feel empowered to speak and create change. One result was that 87% of employees feel proud to work for Givaudan. Another was that 78% would recommend Givaudan as a great place to work. The results overall were clear in showing that our strengths of 2013 continued as strengths in 2016.
Creating a stimulating and engaging workplace for our employees is vital for our success.
The second area of focus is the development of our people. This is achieved through bespoke leadership and technical development programmes and job rotations with the following outcomes: firstly to make sure that our people have the skills and expertise necessary to do their jobs; secondly to prepare them for the future so they can fulfil their career aspirations; and finally this enables us to build a strong pipeline of successors to key leadership positions and technical positions.
We are committed to strengthening and improving the social, economic and environmental fabric of the communities where we operate and where we source our raw materials. We have a broad network of Green Teams, which are cross-functional site teams dedicated to driving local sustainability activities.
We are committed to strengthening and improving the social, economic and environmental fabric of the communities where we operate and where we source our raw materials.
Case studies of these activities can be found in our annual Sustainability Report, but one example in India during 2016 highlights the sort of project that may be undertaken by our Green Teams: In local schools in Daman, western India, there is a lack of awareness about food safety and hygiene among food handlers who prepare midday meals for students, so a food safety and hygiene programme was developed by our local Green Team in partnership with the government education department. The programme was conducted over two days, reaching more than 200 food handlers who work at about 40 schools that serve meals to approximately 10,000 children each day.