Firmenich talks savoury, sugar reduction and smart protein innovation: ‘We have an edge in technology’
Firmenich closed out fiscal 2020 demonstrating ‘resilience in a year of significant uncertainty’.
The company, the world’s largest privately-owned fragrance and flavour house, reported sales growth of 2.8% on a constant currency basis when it revealed annual revenue reached CHF3.9bn in its earnings statement released last month.
This was achieved despite the downward pressure caused by the worldwide lockdowns and travel bans imposed due to the coronavirus crisis. These restrictions had a knock-on impact on the group’s perfumery business – but this was more than offset by what the company described as a ‘strong’ performance in segments such as savoury, sugar reduction and plant-based proteins.
Firmenich chalked this ‘resilience’ up to its ‘passion to innovate’ with its customers, supported by its ‘research-driven, innovation-led’ focus.
“Innovation is our top priority. Last year we invested close to 10% of our revenue on R&D, which is in line with the average of the past five years. We believe that our level of investment in R&D has been consistently ahead of competition,” IR head Diego Chantrain told this publication.
During 2020 Firmenich’s R&D spend totalled 9.5% of group sales, or around CHF368.4m, a figure as a percentage of sales that it claimed was higher than ‘any of our competitors’.
This innovation investment has enabled Firmenich to identify ‘critical consumer trends’ across its fragrance and flavour markets and leverage its R&D resources to develop innovative solutions that keep its customers ‘ahead of the curve’, the company claimed.
Looking to 2021, Chantrain revealed this innovation focus – and level of investment – will remain core to the company’s strategy. “We believe that our current level of investment in R&D is appropriate to leverage and scale up the technical capabilities in our portfolio,” he explained.
Firmenich plans to develop its expertise in areas where the company believes it has a technological edge over the competition, the executive continued.
Differentiation through innovation
During the 12 months ended 30 June, Firmenich introduced some important innovation platforms.
This included 'smart protein' solutions, which were designed to support the rise of vegan and vegetarian diets. “Our unique integrated solutions improve everything from taste to texture and match the succulence of meat proteins in vegetarian and seafood alternatives.”
Sugar reduction and other areas of reformulation were also core themes: Firmenich revealed it continued to leverage proprietary natural sweeteners and salt reduction technologies discovered in its labs to combat excess sugar and salt consumption, while preserving taste.
The result of these efforts were seen on the top line, Chantrain noted.
He told FoodNavigator: “Our savory business grew by double-digits driven by increasing consumer demand for savory items at grocery stores around the world. It is worth noting that our fast-growing plant-based foods business is included in the savory segment.
“Firmenich established itself as the clear leader in sugar reduction in FY20, with the strongest organic growth in the industry. Our pioneering taste modulation technologies can naturally reduce up to 100% of added sugar, and this has enabled us to remove over one trillion calories from consumers’ food and beverage products this year. As customers look to accelerate launches of healthy and tasty products, they have selected Firmenich as a long-term partner of choice.
“In FY20 our smart protein business more than doubled. Our unique smart protein solutions improve everything from taste to texture, while matching the succulence of meat proteins in vegetarian and seafood alternatives.”
These areas will remain strategically significant for the ingredient business in the coming year. "These are some of the key growth areas that we are pursuing and where we believe we have an edge in technology versus our key competitors," Chantrain revealed.
Other investment cases will include the group’s sustainable development journey and digitalisation.
Digital transformation and sustainability goals
During 2020, Firmenich continued to embrace digital developments. The company doubled its e-commerce sales compared to FY2019, reaching CHF111m in online revenue. It was also able to use digital tools to increase productivity by 25% in its new Fragrance Center in Geneva.
Firmenich is also looking to artificial intelligence and machine learning to advance its innovation capabilities. The company enhanced ‘ingredient discovery and creation capabilities’ using AI research developments from its Digital Lab partnership with the EPFL in Switzerland.
The digitalisation of the business is a work-in-progress with continued development planned for the coming fiscal, Chantrain revealed.
“We have a significant digital transformation program ongoing, and that has undoubtedly contributed to the success of our e-commerce platform,” he noted.
While COVID-19 has ushered in an accelerated shift towards digital channels at a consumer level, Chantrain said that the growth of Firmenich’s online sales were not necessarily a consequence of the global pandemic. “We saw strong sales growth across Perfumery & Ingredients and Flavors, not particularly linked to COVID. We do expect to see continued growth in this channel.”
Elsewhere, Firmenich is working to make its business model more sustainable.
The Swiss ingredient company became ‘the first in the industry’ to complete the UN Sustainable Development Goals Action Manager assessment, examining the contribution of its entire operations to the SDGs. This, Firmenich said, is a key milestone for B Corp Certification. According to the company, the assessment confirmed its ‘strength’ in areas such as health, human rights and climate action.
“We also became one of a handful of companies in the world, and the first in our industry, to power all our operations globally with 100% renewable electricity. We are one of only two companies worldwide to have received a CDP triple “A” rating for climate change, water security and forests, two years in a row, recognizing our global environmental leadership. Our commitment to the most ethical, traceable and sustainable supply chain was further recognised by the highest Platinum rating of 83/100 from EcoVadis for environmental and social performance, placing Firmenich in the top 1% of the 65,000 suppliers assessed.”
Looking to the future, Firmenich committed to continuing to ‘improve and expand our best-in-class ingredients palette’ by introducing new natural, sustainable, biodegradable and renewable ingredients.
