Strong roots, new paths

The groundwork has been laid. Symrise can now recombine its resources and skill sets time and again to ensure its market activities are both successful and sustainable. After a good 2019 fiscal year, in which Symrise grew for the 14th time in a row, Dr. Heinz-Jürgen Bertram can look to the future with high expectations. The CEO of Symrise is confident that the future holds exciting and innovative projects that will continue to drive the company forward.

Dr. Bertram, “Strong roots, new paths” is the motto of this Corporate Report. What does that mean for Symrise?

It’s in our DNA to be innovative, explore other worlds and conquer new territory – as that’s what our predecessors were doing nearly 150 years ago. We continue to carry the torch to this day, grow with understanding and build on our skill sets, all the while tapping into new fields of business and exploiting innovative technologies. In other words, we’re always on the lookout for steps that we can take on the basis of our foundation and our traditional strengths and that will bring us forward. There’s good reason why we’re considered to be one of the founders of our industry – and we want to continue dynamically shaping this long history.

3408

€ million sales record

Let’s take a brief look at the numbers: Did the approach work?

Once again, we have reached our goals by setting a new sales record of € 3,408 million. But much more importantly, with EBITDA(N) of € 707 million and a profit margin of 20.8 %, we’ve demonstrated that we’re a very healthy company. At the same time, the average annual growth rate of our sales since the IPO in 2006, which is at over 8 %, reveals that we’re growing faster than the competition and have made the right decisions. The market average is just 3 to 4 % – and these percentage points represent a significant difference.

What do you do differently from other companies?

We began diversifying our portfolio years ago – alongside growth and efficiency, one of the three pillars of our long-term strategy. We have expanded our classic flavor and fragrance business, which is in our DNA, to include related fields that provide us with access to whole new markets and expand our portfolio of offers. This ranges from the identification and sourcing of new raw materials and the increasingly interconnected research and development of our divisions to the full utilization of the production facilities, mar­keting and sales. We now generate a third of our sales outside of our traditional business units. One thing is certain: You can no longer be successful in our industry over the long term with flavors and fragrances alone.

“Sustainability has been an integral part of our strategy for years because we wouldn’t be able to maintain success over the long term without it and because, of course, we want to be involved in the positive developments in the world.”
“Sustainability has been an integral part of our strategy for years because we wouldn’t be able to maintain success over the long term without it and because, of course, we want to be involved in the positive developments in the world.”

The growth that promotes this development is another pillar of your strategy. What have you done to ensure that it’s both healthy and sustainable?

Over the past eleven years, we’ve increased our sales from € 1.3 billion (2008) to € 3.4 billion (2019) using three levers. First of all, we have grown on average between 5 and 6 % organically, 1 to 2 % as a result of the aforementioned changes to our business model or expanded capacities, and 1 to 3 % through select acquisitions.

“We now generate a third of our sales outside of our traditional business units. One thing is certain: You can no longer be successful in our industry over the long term with flavors and fragrances alone.”
“We now generate a third of our sales outside of our traditional business units. One thing is certain: You can no longer be successful in our industry over the long term with flavors and fragrances alone.”

But isn’t there a risk of forgetting your roots in the process?

Yes, there is. But we do everything in our power to ensure it doesn’t happen. We have a vision with which we’ve created a new role model for our industry. With many projects dedicated to backward integration of raw materials – this Corporate Report describes our activities in South Africa and Indonesia as an example – we go to where it all begins: the farmers with whom we work closely together in more and more areas to find sustainable solutions for the supply of raw materials. This benefits the people just as it does the environment and our company, as we have access to traceable, high-quality natural materials. This was especially important last year in particular due to shortfalls in many areas. Our operations in the US provide one example of this: There, the Pinova company, which we acquired in 2017, uses renewable raw materials sourced from nature for the production of fragrances.

707 € million

­­EBITDA(N) in 2019

But the focus on the locations of origin isn’t everything, is it?

No, it isn’t. For example, we also create huge advantages for our customers in our research and development – often working together on projects that are developed with extraordinary accuracy. Our goal is to supply key ingredients for products for the whole family that people use day and night, which is why we’ve significantly expanded our portfolio and thus exploited new growth channels. Now we’d like to reap the fruit of our labor and, to use the same metaphor, cultivate the land for the future.

When it comes to changes in the Group, how do you decide which new path to take?

All of our divisions should create added value, which combined allows us to achieve our desired profit margin corridor. There are some areas that tend to remain below and thus form a good foundation, while others exceed the threshold at the top, but may have lower sales for the time being. If you take a look at the most recent large-scale acquisition, it’s easy to see what appealed to us: The American company ADF/IDF, which we acquired in 2019, manufactures egg and chicken products. We see enormous synergy effects in a variety of areas, including market access and technology transfer. ADF/IDF will also have a positive effect on sales and profit from the start, which is why we’ll continue to actively scan the market for further sensible additions. In particular, this includes acquisitions that complement our portfolio – for instance, in the Nutrition segment or with fragrances.

How important is the topic of sustainability for Symrise?

It has been an integral part of our strategy for years because we wouldn’t be able to maintain success over the long term without it and because, of course, we want to be involved in the positive developments in the world. The backward integration mentioned above and the associated social and environmental effects in the countries rich in raw materials are just one key component. We also address all of the sustainability objectives defined by the United Nations. We want to assume a pioneering role regarding climate protection, too, and are aiming for climate-­positive operations as of the year 2030. Our success is also reflected, for example, in the fact that we were the first large company to win two German Sustainability Awards – in 2012 and 2018.

What trends have you identified that you would like to pursue in the years to come?

It goes without saying that we examine and respond to megatrends such as urbanization, digitalization and the desire for natural, healthy food and sustainable body care products. A few examples that we also examine more closely here in this Corporate Report: We were the first ones to use artificial intelligence to develop perfumes up to market-readiness in collaboration with a customer. We wholeheartedly embrace the circular economy in an effort to avoid wasting raw materials and use green chemistry to develop innovations particularly on the process side of things. We produce our chemically manufactured menthol without any residues, using raw materials efficiently until there’s nothing left. At the same time, we’re gradually transitioning to the use of renewable raw mate­rials found in nature. We’ve firmly established the naturalness trend in our code of nature in the Flavor division: With this platform, we offer our customers the best-possible solutions for incorporating the authen­­tic flavor of nature into the products. We also respond to major health challenges, including how to manu­facture great-tasting products with less salt, sugar and fat.

Let’s take a look at sales: Your personal goal was to generate half of your sales in the established markets and the other half in growing markets.

We’re not quite there yet. The mature markets are slightly ahead, which is also due to the fact that most of our acquisitions occur there – and it follows that sales in these countries are increasing at a higher rate. However, we’re working at full speed in the emerging markets, where our procedures are always similar: We open sales offices, generate business, provide these offices with products from neighboring countries, build our own production facilities and expand capacities as required. And just to give you an idea of the scope: In Asia we developed an organization in Vietnam. We’re also investing further in India and Indonesia, where we’ve opened our new research center in Jakarta, and will be opening a new plant in China in the second quarter for € 50 million. We have an­­other exciting example in South America: For Diana Pet Food, we’re developing a green factory in Col­ombia with all the required forms of energy such as electricity, steam and water supplied in accordance with sustainability guidelines.

How is the customer structure coming along?

As it should: We have a healthy mix of locally, regionally and globally operating customers. We’re listed as a supplier in just about all of the brand spaces that are important to us and are working toward our aim of being able to supply these customers in as many segments as possible. Of course, our extensive portfolio and wide variety of applications for the source materials go a long way.

“We’re looking to double our 2018 sales figures to € 5.5 to 6 billion by 2025.”

What will the high growth and effective measures ultimately lead to?

Symrise will remain dynamic with a continued high growth rate, which we want to increase organically to 5 to 7 %. Our profitability is also expected to grow. By improving the portfolio mix, we hope to increase the operating margin to 20 to 23 % over the long term. We want to reduce our investments, which are higher than the industry average, to 4 to 5 %. But our goals are still ambitious: We’re looking to double our 2018 sales figures to € 5.5 to 6 billion by 2025.

The
perfect
FIT
The
perfect
FIT

The purchase of the company ADF/IDF has ­allowed Symrise to expand its business in the Nutrition segment. The US-based company makes a stable contribution to sales and profits – and they offer natural based products made from poultry and eggs that pair well with the product ranges of Symrise Nutrition.

The strategy is crystal-clear: Symrise only acquires other companies if they a) complement or expand the Group portfolio and b) are so healthy that they immediately or very quickly contribute to achieving the ambitious sales and profit goals of the Group. The purchase of ADF/IDF, which Symrise completed at the end of 2019, fully complied with these stipulations. The company bolsters the product range in the Nutrition segment while also achieving annual sales of USD 220 million and thus an EBITDA margin of approximately 23 % in a rapidly growing market. Symrise bought the new partner, whose full name stands for American Dehydrated Foods/International Dehydrated Foods, for USD 900 million. The transaction was financed through equity and debt capital.

ADF/IDF, which is headquartered in Springfield, Missouri, develops and produces protein specialties based on meat and egg products. The approximately 470 employees serve numerous markets, for which they use the synergies that arise when processing the raw materials. The focus is on chickens and eggs. The experts in the USA use these to produce pet food components and food ingredients. The range of products fits perfectly with the products of Diana Food,Diana Pet Food,Diana Aqua and with the Symrise positioning, since ADF/IDF only uses natural raw materials that are utilized sustainably.

AADF/IDF creates tasty and nutritional-physiological solutions, made from traceable and sustainable sources, in order to offer manufacturers of human food, pet food and aquafood industries ingredients serving health and well-being of consumers.

The customers, who can count on stable supply chains, were also an important factor in the acquisition; one argument for the company, which was founded in 1978, was its strong position in the US market. This allows Symrise to expand its global presence. ADF/IDF, on the other hand, benefits from the vast resources of Symrise around the world.