DSM-Firmenich AG (DSFIR) Earnings Call Transcript & Summary

Hello, everyone, and welcome to DSM's Virtual Investor Day. And for those of you who were with us on the earnings call yesterday, welcome back. Now today is going to be something a little bit different. We will take you through the journey of DSM and how we progress with our strategy. And we will, of course, talk about the nutrition growth platforms and the related innovations as promised, in line with the theme of today's investor event. We would, of course, prefer to welcome you in person. But with COVID, it's just not possible. However, we do want to keep it lively with interaction with a lot of colleagues. So as you are not with us, and in fact, we are not together, this is going to involve a lot of studio hopping. Now here is the program. Dimitri and I will kick off, followed by Trish with the innovation programs. Then Chris will take us through the journey of Nutrition, setting us up nicely to then talk about Human Nutrition with Philip and Maha, Food Specialties with Patrick and Animal Nutrition with Ivo and Christie. And then we will wrap it all up with a Q&A where all of the speakers will be available to answer your questions. And with this, that gives me just enough time to make it to the studio where Dimitri will welcome you just now.

Thank you, Geraldine, and be careful and travel safe back here up in the studio. And also a very warm welcome on my behalf to this virtual investor event. I want to go back to mid of February, when Geraldine and myself took over as co-CEO of DSM. And during that time, we started to travel to talk to you as investors, as analysts, to talk about the strategy of DSM, talk about who we are, what we intend to plan going forward with DSM. And that was in the time where COVID-19 hardly existed. It was talked about, but nobody would believe that it will end up in a global pandemic as we see today. During these talks, during these meetings, you also raised a couple of times, Dimitri, Geraldine, this co-CEO-ship, how is that going to work? How are you going to make speedy decisions? And I'm pretty sure that we told you at that time of the story that we are 5, 6 years together in the Managing Board. We are fully aligned on where we want to bring the company, aligned on the strategy forward. But still, you were a bit staring at us and saying, and at max, I think we got your benefit of the doubt. And let's go back to that time when we started our co-CEO-ship, what a way to start our tenure with unprecedented and challenging times. And first of all, we started with creating an environment where our people, our employees could stay safe and healthy by implementing strict measures, which we've copied and learned from Asia where it started. And by doing so early on, we could keep all our facilities up and running, and therefore, could also secure the supply to our customers, to supply secured products and services to our customers who could then supply their critical businesses to their customers and consumers. And amidst these unprecedented times, we continued to make good progress on our strategic journey. We did 3 acquisitions. We announced an intended divestment of Resins & Functional Materials, and we implemented 2 change programs. Let me start with CSK, which we acquired end of last year, and we started immediately the integration project in quarter 1 this year. We acquired Glycom on the first of April, and we are currently starting that integration. And then Biomin and Romer Labs, being part of the Erber Group, just recently acquired on the second of October. And also there, we're starting the integration project. We announced the intended divestment of Resins & Functional Materials, a business where I grew up in, 30th of September, with the intention to close in the first half next year. And during all these 9 months with COVID impacting the whole business, we also implemented 2 change programs. One in Nutrition to continue the growth trajectory for Nutrition. We call it Fit for Growth and one in Materials. We call it Agility to Grow, where we had to restructure part of our businesses because COVID had just such an impact on that business. And in that journey, under these 9 months, we continue to make extremely good progress. Geraldine, you made it safely up here. Great to see.

Yes. Thanks, Dimitri. And I have to say that all of the things that you have listed, we would not have been able to do them on our own. And I therefore, also want to thank all of our colleagues, the whole company for what we've managed to achieve and what is a rather complicated year 2020. Now it's also fair to say that we would not have been able to navigate these rather choppy waters, if we didn't have a really well-established long-term strategy, one that we are very confident in and that's well understood by the whole organization. Now we've also found out that actually, strategies grow over time in strength. And our growth and value strategy started in 2015. Then we sharpened it in 2018. And therefore, this slide should not be new to most of you, and it still holds perfectly true. Now at the time, we asked ourselves 2 big questions. One is, how do our competencies and our purpose, creating brighter lives for all, align with the megatrends and with the SDGs? Now having established that, we then asked the second question. What does that mean in terms of the areas where we should focus in order to grow? And the answer is health, nutrition, and sustainable living. Now this is actually really important and helped us a lot in the last 9 months because in a year where everything changes pretty much every other week, it helped us focus in the right areas to drive growth. It has also actually made our capital allocation a lot easier, and a good example are the 3 acquisitions that we just mentioned. And thirdly, of course, it has helped us assess when is the right time to make the right portfolio changes. And actually, to that point of portfolio changes, it's probably good if we start with our Materials businesses and put them back into context, following the divestment announcement that we made in September of the divestment of our Resins and Performance Materials (sic) [ Resins & Functional Materials ] businesses.

Let's lead you through the continuous journey of that Material business where we have continuously upgraded our portfolio. Let's go to 2010, 2013, where we have evaluated the portfolio at that time, and we decided to restructure part of that portfolio by exiting the Bulk Chemicals part. Caprolactam, acrylonitrile, composite resins did no longer fit in the portfolio we wanted to build for Materials. Taking from there into the next step, we continued our value upgrade of that portfolio. And in the last pit, step #3 in the 2016 to 2020 timeframe, we differentiated our growth approach. We subsegmented the Materials business into maximize returns, growth and accelerate growth, and also differentiate where we put our resources in, where do we put the money. And we put the majority of the money in the accelerated growth areas, and therefore, built a very strong materials business. A Materials business where we have deliberately chosen to grow in certain areas and not in other areas, and therefore, continued to upgrade the quality of the portfolio. EBITDA percentage-wise, we beefed it up from 13% in 2015 to over 20% in 2019, while at the same time, improving the EBITDA growth. The EBITDA growth on an annual compounded average basis was 12 percent points for the Materials business, quite an achievement and showing the strength of the Materials business. That Materials business today, after the divestment of Resins & Functional Materials, is still a EUR 1.7 billion business with strong growth potential. It fully fits into the sustainable living part of our strategy. It adds 4 growth drivers to the Materials business. One, to select the right segments to play in. We call them winning segments. And within these winning segments, we choose the areas where substitution is ongoing. Substitution for new technology, who basically substitute all technology. Products which are more sustainable to products which are less sustainable. That substitution, fueled by innovation and the sustainability trend, made the Materials business the business where we are today. And having said that, we should be able to grow the top line with mid-single digit and the bottom line with a high single-digit percentage. That is Materials, a very strong quality business. And now let's move from one strong quality business to another strong quality business, our Nutrition & Health business. The Nutrition & Health space is a fantastic space to play in. It is an attractive market, helped by global macro trends, and it's fully aligned with the critical SDGs, Sustainable Development Goals. And it has proven to be a growth area for a long period already. And why is that? It's because consumers want to improve their health. They're seeking help to improve their health and looking for sustainable nutrition. Society demands solutions for health challenges. An environment is more and more impactful in the choices we make, and sustainable food production is the key. And therefore, it is absolutely key that there is health for the people and health for the planet. And in this fantastic, attractive space, we, as DSM, in our Nutrition & Health business, we have a fantastic business model. We have a unique business model. And why is this so unique? Because it started with Global Products a long time ago, Global Products, which we were selling to a multitude of end markets. And we have built that Global Products. It's not only vitamins, its cultures, it's enzymes, it's minerals, it's new products who filled our toolbox. And with that toolbox, we could offer expertise application know-how to make the difference to our customers and apply solution thinking. And then you see on the second bit, it's called Local Solutions. And this is for Animal Nutrition in the different species in Animal Nutrition, ruminants, poultry, aqua, and it's the end-use segment in Human Nutrition & Health, Early Life Nutrition, food and beverage, Medical and Pharma, dietary supplements. And adding the expertise of the broad toolbox of global ingredients and combining them in a solution to our customers makes us successful and makes our customers successful. That is the uniqueness of this mold. There are not many players who have these 2 boxes reinforcing themselves. And how does acquisition and innovation play in all of this, acquisitions and innovations strengthen that value proposition, strengthen that business model. And let me lead you through a few of these acquisitions. One, CSK, Glycom, Biomin and Romer Lab. They add to this business model. Let me give you an example on Glycom. Glycom has the largest facility of HMOs in the world. And by doing so, we add the HMO category to our Global Products toolbox with all the expertise around these molecules. And we translate them to solutions in our Early Life Nutrition space. Because in the Local Solutions part, we do have that expertise where HMOs fill in fully with ARA, DHA, and we can make a difference for our customers to continue to grow. Biomin, another example. Biomin in the world and in the industry is seen as the undisputed leader for mycotoxin absorbers. And that adds another fantastic category to the Global Products toolbox. It's in granting in lodging and lodging and it adds specialty character to it. And that coupled with a fantastic global exposure and infrastructure in the Animal Nutrition & Health space, is a fantastic bolt-on acquisition, which again strengthen this unique business model. Then on the Innovation side. We have lots of innovations ongoing, and they also strengthen that unique business model. Veramaris, Avansya, Bovaer, formerly known as Clean Cow, Balancius, CanolaPRO, just to mention a few. Let me take you through an example on Bovaer. Bovaer is an additive for feed, which reduces the methane at cows. It adds again to the Global Products toolbox we have. But it has been coupled with the end-use expertise we have in Animal Nutrition & Health. And by doing so, we can create a formula to help our customers or farmers at the end to reduce their methane emissions and other emissions in their cow farming. So it truly strengthened the global unique business model we are building. And then you could say, is there more? Absolutely, there is more. Isn't it Geraldine?

Well, indeed. While we are very proud of our existing business model, we have spent some time thinking about what's coming next. And in order to do that, we started by looking back at the story of Food and Nutrition. Unlike all good stories, it starts with once upon a time. Once upon a time, pretty much everyone lived off the land. We produced the food that we eat ourselves. Now fast forward a little bit, new agricultural practices were able to increase the amount of food that was produced, and that enabled towns to grow, but they were still supplied by the local farms. The real shift actually came a bit later when the tractor and other machines started to replace the horses, the cows, the humans. And this was a very exciting time because it was -- when we were asking ourselves the question, can we bring a lot more people out of hunger. Now not only by applying mechanization to the food space, but also some of the solutions of the industrial revolution. And here, we should think about productivity, scale, specialization, lower unit costs, globalization. Well, the answer turned out to be yes. Again, fast forward a couple of decades, and we have seen that the proportion of people who are in hunger has gone down dramatically. And that is a huge achievement that we can be proud of and will continue to be proud of. But having said that, it hasn't solved all of the problems, and it has come at a price. Now we like to think about the price in 2 ways. First, we have seen that food and nutrition have become separated. Why? Well, because actually, the main focus was on calories. Now let's think about this. Sure, we have less people suffering from hunger, but 2 billion are still suffering from malnutrition, and that is actually increasing. And at exactly the same time, we have an even bigger number of people who, while eating too much fat, sugar and salt, also actually suffering from a deficiency in the central micronutrients. It's even fair to ask ourselves the question in these corona times, would the pandemic have as drastic an impact if we were all better nourished, and we know already that the answer to that is no. Now that's one area of concern. The other area of concern is actually our planet. If you look at the current food system, it's having significant environmental implications. Here, we have to think about top soil destruction. 1/3 of top soils are already destroyed. We have to think about the desertification, which is accelerating at pace and loss of biodiversity. Not only biodiversity in plants, but also in animals due to monoculture, and this is before we've even looked at the impacts of climate change. It's in fact known that the food system of today will be unable to continue to produce the amount of food going forward, yet alone actually meet the needs of a growing population. Now does that mean there are no solutions? That's not the way we look at it. And we believe that we can help contribute to finding solutions to, on the one hand, bring nutrition and food that together for everybody, but also reduce the environmental impact of food production. Now how does that relate to our story as a company? As you know, as DSM, we have been part of that journey, too, because we have a 150-year history, a history of nutritional ingredients. And we have the broadest and deepest knowledge of what actually makes food nutritious. It's what our customers praise about us and it is the core of our science and of our global products. Now in addition, in the last 15, 20 years, we have extended our reach. We have made sure that we become even more relevant to our customers, to the end markets, and in that way, grow and develop a local network that enables those local solutions. But we believe that what comes next is even more exciting. Now we've already mentioned that the trends around consumer society and the environment that we've seen today are already fully-aligned with our competencies as a company. But they all point towards one thing that they have in common, health through nutrition. Here, we need to think about the health of people, including the aging population. The health of society, reducing the cost of health care, but also hopefully, reducing inequalities, and thirdly, the health of the planet. Now that is what we think about when we think about health and nutrition. But there are a whole other sets of megatrends that we need to think about, and those have to do with technology. With the scaling of digital technologies with the breakthroughs in Biosciences, we believe there is the emergence of unprecedented precision. Now why is precision so important? Because it enables personalized nutrition and it enables personalized feed for the animal space. So this is where we're seeing the biggest developments coming. Now it's not only about technologies, by the way. The digital era is also about behaviors. And most of us are becoming quite comfortable with tracking what's going on with us, both inside and out, amongst others, through personal devices like this one. Imagine what would happen if we can use this information to actually help better health through nutrition. Add on this a little bit of DNA sequencing and then there is a true potential to reduce, to avoid some of the medical conditions that are known and yet are still developing because of the wrong nutrition. So this is what we see about this unprecedented precision, is that all put together, this becomes very exciting. Now what does that mean for DSM? Well, we are determined to start developing solutions, both in Animal and in Human Nutrition to provide us, we see precision as the big next phase in the story of food and nutrition. Now let's have a look at our business model. What does that actually mean to this already pretty unique business model? Well, we see precision as a brand new area, a new market that is emerging, and we believe we are the best place to actually provide value to our customers with this precision. It is a market in its own right and it is a market of scale. To give you an idea of size, it is estimated that the precision nutrition in the human space will reach $60 billion by 2040, and we believe that this will go faster in the animal space. So you may ask, pie in the sky? Certainly not. In fact, we've already started the journey and we are progressing step by step. You will be hearing quite a lot about this with our colleagues today. So if you are interested, please stay tuned. But there's one aspect that will, of course, be critical, and that is the quality of our innovations.

And you perhaps asking yourself, where does innovation play a role in all of this? And the answer is, it plays a role in all of this. Innovation is, today in our company, project-based. And we're going to tune and refocus that according to platforms. Platform oriented, close to the business and platforms who shape the DSM of the future. And these 4 platforms are around precision, prevention, proteins and pathways. And our Chief Innovation Officer, Trish Malarkey, who will tell all about that after our speech here, so stay tuned for more innovation-reminded information. And where does that bring us from a nutrition and health perspective? We deliver a very strong performance in an attractive market and we've alluded to that. It's an attractive space to be in. And within that space, we have a unique business model of Global Products, Local Solutions, now added with the precision, which Geraldine just explained. And by doing so, we feel we can continue our pathway on a top line growth of mid-single digit and in high single-digit EBITDA growth. And how was this playing out for the whole company of DSM? Well, despite these challenging conditions, we will keep delivering on our targets. And that is from a profit perspective. But DSM, being a truly people, planet, profit perspective, we also commit to our people and planet ambitions. And having said that, Geraldine, with all of this, how are we going to execute this? And what are our priorities going forward?

Yes. Let me tell you what we actually intend to spend our time on in the coming quarters. And rest assured, the top priority is to deliver on our performance and our deliverables to all of the stakeholders. Now to do this, of course, we have to be the partner of choice for our customers. That's where growth will come from, and there's a whole array of activities in order for us to make sure that our existing businesses are performing really well. Now on top of this, we need to make sure that our innovation programs and projects come to market on time and that we integrate these acquisitions that we've just been talking about in a very effective and efficient way, so we can get the benefit of the growth as fast as possible. So all of this will keep us busy. It's keeping us busy, actually right now. But we also want to be building for the future. And to build for the future, we need to start thinking about those new business models that come with precision. Not only the business models, but also, of course, the capabilities in digital and in bioscience, and we may use a bit of M&A to do that. In addition, you've heard us now talk about healthy nutrition. And we really want to make sure that we are increasingly positioning our Nutrition business in line with this development. And last but not least, of course, we want to make sure that we have highly motivated colleagues with the right skills, the right profiles and the right mindsets to get us onto this next journey for the company. Now organizational changes are something that happen all the time. We will do that as we need and when we need it going forward, and of course, starting with an efficient carve-out of our divested businesses in the months to come. As for the financial policy, well, to be honest, I can be pretty quick here because our capital allocation remains unchanged. It is very well-aligned with the fact that our strategy is an organic growth strategy at heart. And therefore, that's what we want to prioritize, and deploy our capital predominantly there with potentially also some M&A, as we've said in the past. And as for capital intensity, we are definitely committed to staying a high investment-grade credit rating. And with this...

Let me try to close this part. We are a purpose-led; performance-driven company. And that's not a tech line. It's not a PowerPoint slide. It's not a storyline. It is who we are. And during COVID-19, I've seen people pushing their boundaries. I've seen people running the extra mile to secure supply to our customers, being courageous, caring and collaborative. During COVID-19, I've seen people stepping up the plate to create a safe and healthier environment for them, for their team, for their colleagues. I've seen integration started of the acquisition we've done, and I've seen change programs being implemented in very difficult conditions. And therefore, a big shout out to all 23,000 employees who made that happen, a big shout out. And that, with an extremely high spirit, we just recently got feedback from our yearly employee engagement survey, where the engagement amongst our employees went up with 2%. In these difficult circumstances, in these unprecedented times, that is a fantastic achievement. And that is what made the company tick 30 years ago when I joined DSM as a youngster. And it makes me tick today as co-CEO, as one of the co-CEOs of this company because it's a great company to work for. And I know I'm perhaps a little biased, but it is a great company and it's a company to be proud of. And with that, I'm happy to introduce you to Trish Malarkey, our Chief Innovation Officer, our Executive Committee colleague, who will tell you all about Innovation.

Thank you, Geraldine and Dimitri. Hello, everyone. I'm Trish Malarkey, DSM's Chief Innovation Officer. As someone who joined relatively recently, I can confirm that DSM deserves its reputation as an innovation powerhouse. Let me share with you what I see as some of the hallmarks of this intrinsically innovative organization. DSM had the ambition and vision to make early bold investment decisions more than a decade ago, and we continue to do so as a purpose-led frontrunner in sustainability. Our big tickets are breakthrough solutions to some of the key challenges facing the world, and you'll hear more about our progress in several of these later. A critical factor for their success, as with all innovation, is the full support and sponsorship we enjoy from top management. Our openness to partnering with academia, public, private partnerships and others in the value chain ensure we have access not only to the best technology, but also routes to market. We've experimented in a structured, unbiased and holistic way learning with all possible innovation vehicles such as internal R&D, corporate venturing, internal venture building, M&A, licensing and much more. So underpinning this, we have uniquely powerful set of scientific competencies that serve the health and nutrition of both people and animals, so we gained compelling business synergies from much of our research. Our intrinsic innovativeness is reflected also in our performance as DSM is in a strong position to deliver on our growth targets. Even without the Materials projects that will join Covestro, we will achieve our target of EUR 350 million in net sales from innovations next year. This will include contributions from big tickets, such as Eubiotics, Gut Health, Balancius, Veramaris and Avansya. From our B2C business, i-Health and many more. Materials, of course, will be an important contributor. But today, we're focusing on our Nutrition business, which represents around 80% of our total sales. With our origins as a producer of nutritional ingredients, we continually develop state-of-the-art chemistry and biotechnology. And to provide these ingredients to customers as solutions in food, animal feed and in personal care, we have built formulation and application capabilities. Our recent acquisitions have strengthened this and helped to pave the way to today's opportunity to realize health benefits through nutrition. This really will be unlocked by translating and combining our understanding of animal and human nutrition, physiology and the mode of action of our ingredients, combining it with emerging digital and data technology. We can increasingly develop solutions that matter to an individual's personal health and their lifestyle. And in animals, we could precisely optimize food conversion based on an animal's genetics, its microbiome and the environment it lives in. Ultimately, science and technology has been and will be the foundation for us to deliver business growth. To help us capture these new opportunities and to give focus to our innovation efforts, I want to walk you through our 4 Ps framework in a bit more detail. The 4 Ps are overarching growth themes capturing global societal, technological and environmental trends that inform our innovation platforms. And let me start with pathways. With 150 years' experience of applying science to create the best nutritional ingredients, this truly is our base strength. And with the advances in biotechnology and our core competencies, we can look to microorganisms to produce ingredients and intermediates more cost-effectively and with a better environmental footprint. One example in our bio-based vitamin and carotenoid platform is the potential to enzymatically process vitamin A. Vitamin A plays a vital role in many important bodily functions, but the standard chemical production is energy intensive, is complex, and it certainly creates wasteful byproducts. Innovation will allow us to deliver the health benefits of vitamin A in a much more environmentally sustainable way. However, we're also -- we're more than an ingredient company, we provide solutions. And our protein theme addresses how to meet the protein demands of a growing global population. Reducing the environmental footprint of farming is the goal of our animal emission reduction platform. Our Clean Cow project dramatically cuts methane emissions, one of the largest contributors to climate change. But behind Clean Cow, we'll have a pipeline of novel approaches and supporting services. We're also working on alternative sustainable food proteins, which includes scaling up CanolaPRO, a plant-based meat and dairy alternative. That means understanding how the protein functions and how it can be applied in different ways for various food matrices. In our prevention pillar, we have a rich portfolio of natural active ingredients that help to maintain and improve the health of people and animals. As we learn more about microbiome modulation by nutrition, for example, we can see how it affects people and animals and the resilience to stresses and diseases. This creates opportunities within our animal gut health and our human healthy gut platforms. In animals, building on our successful work at Balancius, the development of novel products and solutions, together with new technologies and services, creates opportunity to reduce antibiotic use in the food chain. For people, we are investigating the potential to help with diseases such as irritable bowel syndrome. Our culture's powerhouse platform, meanwhile, includes bio-based preservatives as alternatives to chemicals in the food industry. We have biopreservation cultures that are natural, label-friendly solutions for applications where right now there are either no or limited preservatives. In combination with other Dfn ingredients such as starter cultures, probiotics and enzymes, this offers natural preservation solutions that will dramatically prevent wastage. And I would be remissed not to mention immunity. Given how topical it is right now, there's a wealth of global scientific literature on the immunity boosting properties of Vitamin D, for example, and increasingly, how it can help prevent the infection of COVID-19 and alleviate the symptoms of those who have it. But it can take months to reach optimal vitamin D status through improved diet or traditional supplements. In our immunity platform, we have an innovation called [indiscernible] D that helps people reach ideal vitamin D levels 3x faster. It's not a wonder drug. It won't cure COVID-19, but it can provide our immunity at crucial boost. And then finally, precision. As you heard earlier, we regard this as the next frontier in Nutrition. With digitally-enabled scientific approaches, we can also precisely optimize an animal's feed and we can develop individual nutrition solutions to match anyone's personal health and lifestyle. With AVA we have a personalized nutrition platform that provides nutrition and coaching recommendations across a wide range of health and wellness segments. You'll hear more about this and many other innovations later today. Naturally, we tend to talk to you more about our mature Innovation projects. But as you can see, within each growth theme, there are several Innovation platforms. And for each of these, we are defining a clear pipeline of multiple projects at various stages of development. I hope that as we walk through the 4 Ps, you saw how this framework provides focus and how it links our existing portfolio with our future pipeline. Because when we look ahead to 2025, our success is not dependent on 2 or 3 programs. For sure, the impacts of our big tickets should make a meaningful contribution. But by 2025, the likes of Clean Cow and Avansya will still be growing towards their peak. And while we will say goodbye to some of our Materials projects next year, we're also gaining other opportunities through acquisition, such as with the Erber Group. This should continue to contribute to our original '25 targets and beyond. So I hope I leave you with a better sense of how our approach and our 4 Ps framework create a seamless complete 2-way link from our nutrition strategy through to our scientific competencies. We're building a business anchor pipeline of innovation in Nutrition that's aligned with future strategic needs that supports our growth ambitions that helps us determine which scientific competence we build and maintain, and most importantly, motivates our people, our customers and our stakeholders around science and innovation. I'm now going to pass over to my colleague, James, who will introduce you to our Nutrition colleagues and how we will build on our current strength and use innovation to capture the attractive growth opportunities.

Thank you, Trish. Welcome, everyone. My name is James Bauly, Global Lead for Personalized Nutrition, and exceptionally for the next hour or so, your host as we move to the second part of today's program. Now having heard from DimitrI, Geraldine and Trish about how DSM aims to capture the opportunities arising from those global megatrends and changes in customer needs and consumer behaviors, we'll be exploring some of the key themes around these topics in more detail with the leadership of the respective businesses. I would firstly like to welcome Chris Goppelsroeder, CEO of DSM Nutrition, to talk with us about the Nutrition strategy over the last few years and its results as well as perspectives going forward. Chris, a very warm welcome. It's a pleasure to be here. I'd like to start by reflecting on performance. How do you feel, Chris, looking back over the last 5 years, are you happy with the achievements of the Nutrition business?

James, I'm very happy about what we achieved. I mean we have a unique business, one with purpose, and then we have strong performance on top. I mean, what do we want more?

Very nice. Can you elaborate a little bit more, please?

Yes. Yes, 2015, we set ourselves very ambitious targets. And these ambitious targets were such that we had to do something different. And when you look today, we delivered. I'm particularly proud about the year-over-year improvement we did. And when you look at this slide and you start with the left, organic sales growth at 6%, that's definitely beating the market every year, on average, 6% growth. And then on the EBITDA side, double of that, nearly double of that rate, with 11%. That's also a good way of showing that we have leverage. And last but not least, if you combine the 2, moving from 17% to 21% EBITDA margin, yes, we created a real growth business with DSM Nutrition with very attractive margins.

Those are indeed impressive numbers, Chris, very impressive. What do you believe were the key strategic moves enabling such success?

There are always many, as you can imagine. If I bring it to one, then I would say, further building out our business model was probably the most important element that we did.

Okay. What does that mean exactly, Chris? Can you compare the new business model with the old one and perhaps explain the main differences?

Yes. Let me try that by showing you what actually we showed in 2050 to our -- '15 to our investors. You see here the global products and local solutions picture, as we had it at that time. In 2015, we had a very big Nutrition business, but the vitamins piece in it was pretty big. And that vitamins piece that we had at that time was also quite volatile, probably also because we managed it quite operationally. The other point is when you look on the right-hand side on this picture, the in-market organization was region-oriented, region only, which more or less led to undifferentiated product selling. And yes, probably little to no innovation pool that was created from that. When you take that all together, certainly not optimal when we look at it from now.

Right. Indeed. So there needed to be some kind of evolution. How does it work now, Chris?

So when you look today, then the picture looks a bit different. You have 3 major levers that probably changed it for the better. Let me start with number one, a dark blue. We put a strategic category managed in place. As category management that leveraged the unique business model with the purpose to reduce the volatility of the profitability of the vitamins portfolio. And I think we were quite successful. Number two, we put end market focus in place. End market focus, together with market insights, leading to more solution selling, so real solution selling and obviously, much more market pull in terms of innovation. So that then, in turn, leads to number three, which is a beefed up portfolio. Beefed up by 2 things: one, the innovation we just talked about; the other one, clearly, M&A. So altogether, 3 levers that changed the picture, I think, materially for the better.

Very good. And this makes perfect sense, Chris. And on paper, obviously, it sounds relatively simple. I assume in reality, it took a bit of time to make all of this work. And you touched on volatility earlier. Could you describe the elements that lead to a more limited volatility of the vitamin portfolio's profitability?

Let me try that, James. On this picture, you see our vitamins set up in a portfolio of market position and supply position. And as you can see, in all vitamins, we have a strong market position, which is probably not so surprising given that we have a big market share in all of them. It changes a little bit the picture when you look at the supply position. There, you see that in fact soluble vitamins, so we're talking about, A, E and D, there we have a leading supply position. That is both in capacity and cost. Whilst for the water-soluble vitamins, such as the B vitamins and vitamin C, we're more on the average side of things. So now when you think about our investment strategy, capital expenditure, right, we very much focused on the fat soluble side, where we already are leading. Now on the water-soluble side, we were a little bit more modest. Instead of increasing capacity a lot there, we rather opted to buy externally, sourcing. Now we didn't do it across the board. We did it mainly for Animal Nutrition & Health. And the reason is very simple. The first is the regulatory stringency of the animal nutrition side is less than the human nutrition. But most importantly, the volatility of pricing on the animal side is quite a bit larger than on the human side. So all in all, when you take this together, it makes it quite clear that we did a bit of a different strategy. If you now complement that with the vast premix position we have on the animal nutrition side, it generates for us for that external sourcing, a hugely leading purchaser situation, which is quite powerful. So as you can see, this make and buy strategy has certainly had an influence, but there is another element that probably is important. And that is, I would say, the portfolio effect. What is the portfolio effect? It's essentially that individual vitamins do not move all in sync with each other in one or the other direction. That's actually positive. So the portfolio effect is that, if you have all of the vitamins, some go back up and some go down. In total, the fluctuation of the profitability has been reduced dramatically, as you can see here. It's not 0. I don't want to say that. It's not 0, but it's much less than it was.

Yes, indeed, that looks like a lot less volatility also than I realized. I'd like to come back to the end market orientation. You touched on it. So if I understand it correctly, you're actually selling, to a large extent, the same products into different end markets. So how can you then also create differentiated solutions per segment and still drive growth?

That is indeed a good question, James. So let me try to answer this with our human end markets. So here, you see the 5 different segments that contribute to our EUR 3 billion sales in the human business. So it's early life nutrition, food and beverage, dietary supplements, pharma and medical nutrition and personal care and aroma. And each end market, we can clearly see, has a very different key success factor when you think about what customers value, especially. And the innovation space is also very different. So whilst the products that we sometimes sell are the same, the kind of where they go to is very different. Now instead of going through all of them, I think that's a bit too long and -- let me choose just Early Life Nutrition and dietary supplements. So in Early Life Nutrition, what customers want is top-notch quality. Now is that surprising when your end consumer are babies and toddlers and children? Not really, right? So what these customers want is peace of mind. And we give them that peace of mind with a top-notch quality system in both in procedures and systems. So that is important to them. But it's not good enough. They want even more from us. They are also in a race, in a race that is innovation based and a raise to come as close as possible with their products to mother's milk. Mother's milk, which is essentially the gold standard in this industry. Now in that instance, I think you probably are aware we have done quite a bit over time. So in the last 10 years, the first thing we did was certainly the acquisition of Martek. So we added Omega-6 and Omega-3 to the portfolio, which is a huge innovation wave in the industry. And just recently, with Glycom, human milk oligosaccharides, HMOs, we added another step in the same direction. So I think we have put ourselves clearly on the map for Early Life Nutrition. If I then move maybe to dietary supplements, altogether a different game. In dietary supplements, the name of the game is understanding science of the health benefits of our products and then comes the important part. And translating those into claims that customers understand, but even more so, consumers understand to create a pool. Now that is certainly key in that area. And maybe not all remember, but maybe about 10 years ago, we have put in place a group that is called Nutritional Science and Advocacy. And what they do is just that. They just do that. And now very recently, right, COVID-19, unfortunately came along, and you can imagine that now all changed, the whole focus is on immunity. We threw all our resources on that subject, on that health benefit. And because we did that and could do that so quickly, we could help our customers from day 1. Yes, in this new normal that COVID-19 created. And I think we all know we have a fantastic portfolio for immunity. Think about vitamin D, vitamin C, the omegas, et cetera, probiotics. But I'm particularly hopeful about something new. We have something new in the pipeline. I'm totally excited about it. That is particularly helpful in immunity with COVID. So even more on the horizon. So I hope this shows a little bit how the same products can do different things in different end market segments.

Very good, Chris. Looking forward to hearing more about that later as well. And absolutely, with this unique set of end markets, I totally see why you've opted for this segment orientation to fuel the organic growth. And at the same time, the market insights coming from those segments have obviously been very helpful in targeting new innovation projects and products from M&A.

True.

So all in all, how successful do you then rate your overall portfolio expansion over these past years?

James, it's a fair question. So if I try to show that here. On the bottom, you see the existing portfolio on top what we added in the last 5 years. And yes, it looks pretty nice on this picture, but we have to be a bit fair. The new products that are depicted here, only about half of them already today have a significant addition to our sales and to our profits, and the rest, not yet. But when you think about the power of this new portfolio, this can create a new wave of profitable growth. But if I turn a little bit to the 2 main markets, animal and human, we also have a bit of another thing to look at. What is, if you say, trend or what is the North Star, where do we think everything is going in those 2 markets? And if I start with animal, the North Star for a while and will stay in the north -- stay sustainability. Now if I put it a bit more precise, it's sustainable animal farming. And when you think about that in the background of your head, Veramaris, our joint venture for omega-3 in fish, together with Evonik, OLVEA, Clean Cow or Precision Nutrition, they fit exactly that bill. It's even true for our latest acquisition, the Erber Group with mycotoxin mitigation, but also what they bring along to our already growing heavily Eubiotics franchise. It fits again very much to bill. And if you go a step even further, many of our existing products already fit very nicely, just think about more with less with enzymes and so forth. It all fits very nicely together. Now the human side is different. But also there, we have a clear North Star. And given COVID coming along, it's even more pronounced. I would say health is and will remain our North Star. Maybe the question is personalized health or just health. Also here, our existing portfolio has already done nothing else, but health through nutrition. But if you look at the new portfolio, let's start with EverSweet, our stevia joint venture with Cargill or CanolaPRO, our plant-based protein joint venture with Avril or as I just mentioned, ampli-D, that's the product for immunity, COVID-related immunity, it's all fitting to the health aspects of our population. HMOs, we just discussed, fits the bill also. So also our acquisition fit into that. And last but not least, our big, big future also in personalized nutrition is, again -- as you know, better than me, is again in that direction. So I think also there, we have a clear North Star. If I can say, this makes me feel we have an exciting new portfolio, but it's also fitting with the future.

Very nice. And I'd love to spend more time talking with you about this. This is sort of a very exciting glimpse. We are, however, going to be learning more about some of these with the respective business leaders. So Chris, perhaps this is a good time to also talk about the team for a few minutes and touch on who does what in the Nutrition organization?

Glad to do so. As you know, without a team, nothing works. So I'm particularly proud of this team here, the Nutrition leadership team, but also the whole organization of DSM Nutrition, as we have done this all the last 5 years together. Why I put this organization like you see it in front of you bang into the business model is because I think that's the secret behind our success. Our organization is a live example of the business model. So let me be clear, operations, innovation and category management are clearly the global products piece. They are working on the products definitions, whilst our market piece is very much coming together with Animal Nutrition & Health, Human Nutrition and Health, Food Specialties and Personal Care & Aroma on the right-hand side. And then you have the classical people and organization, finance control, strategy and myself, being the ones that kind of encompass everything. So when you think about that, it actually is the secret sauce, if I can say so why this worked. Now some of them you will talk to, I think, James, just in a few minutes. So Animal Nutrition, Human Nutrition and Food Specialties. Ivo Lansbergen, Philip Eykerman and Patrick Niels. So I think you will hear much more from them.

That's exactly right, Chris. So thank you. Let me thank you for this interview, what a journey it's been. And perhaps before I let you go, one last question. There's this poster entitled, Human Nutrition, Human -- sorry, Health and Nutrition Campus. What is all that about? Chris, what are you planning? And where are you planning it?

Yes. Thank you for leading me to finally, a very important question. As you know, innovation is a leading pillar of our strategy. I think everybody has made this clear, also the co-CEOs just before me and Trish. Now it's also a personal topic for me. I'm very -- is very close to my heart. Now we also know that from past mistakes that if you want to make out of innovation a successful commercial business, there are a few things that are really important that the, let's say, the one that we most feel is important for us looking at our past mistakes is putting together market-driven business thinking with technology-driven R&D thinking. If they are close together on every step on the way, it will be good. So with this state-of-the-art Health & Nutrition Campus, we want to essentially do just that. We will build it here in Kaiseraugst, in the headquarters of DSM Nutritional Products. And we're very proud to be soon in a space where we can do innovation much faster. Now there's a small but important detail that I want to show you. But I need to bypass you here behind you because we have here a fantastic model of what we want to do. So if I can explain briefly, this is the Rhine River. This is our main building. And what we are building is this innovation building here. And given that we want them to work closely together, you see that here, we made a physical connection between the 2. So we went out of our way to connect those 2 buildings and not have them separate as silos. Now on top of it, we put here in the main building, but also here, in the innovation building, quite a lot of interactive spaces for project teams, cross-functional project teams to work together and interact in an agile way. So all of this is, unfortunately, not yet there, unfortunate, but it will be there at the end of 2023. And I think it will also kind of manifest or bring testimony to the point that we want to stay in Switzerland. Our commitment to Switzerland. But it definitely means here is innovation as a key pillar to who we want to be as DSM.

Thank you, Chris. Tremendously inspiring. I, for one, can't wait to see this become a reality. Bright science, brighter living really shines through. Thank you, again, Chris, for your time. Really enjoyed the interview. And I'd like to now hand over to a break. We're going to take a 10-minute break, and then we'll be back to talk, as Chris mentioned, to the leaders of the respective businesses, starting with Human Nutrition & Health. See you back here in 10 minutes. Thanks again. Thanks, Chris.

Thank you, James. [Break]

Welcome back. Next up, I would like to welcome Philip Eykerman, President of Human Nutrition & Health; and Maha Elkharbotly, Global Vice President, Specialty Solutions for Human Nutrition & Health. Welcome both of you. Philip, congratulations on your new assignment. It's quite a time to be taking on that role, and we can hardly talk about Human Nutrition & Health without touching on COVID and the current pandemic. We hear that COVID is boosting demand for immunity. Is this a temporary situation? Or a more structural increase in demand for immunity-related products?

Thank you, James. COVID has a big impact on our business. The impact it has on the globe and on our day-to-day life, I think, is unprecedented. And I think it's also woken up the world through the importance of preventive health and especially immunity. Every other year, we do a big survey with 12,000 consumers. And what we see is that people are buying more dietary supplements, but also taking them more. And we see also that people are introducing immunity-boosting ingredients into their day-to-day lifestyle. This is an example of breadth with lipids, and I can tell you, it tastes very well. So -- and of course, that creates a big demand for some of our products, especially vitamin C, vitamin D, the lipids, the probiotics, but also vitamin E and A. If we take all those products together, that's roughly 50% of the EUR 2 billion of sales that we have and of the products that we bring to our customers and our consumers through the dietary supplements, through pharmaceuticals, through medical nutrition, but also through infant formula and normal food and beverage products. Of course, the biggest effect we see in dietary supplements that is globally in terms of retail value, a EUR 40 billion market, that has been growing at 3% to 4% per year. And typically, what we saw is that the herbals and the probiotics were growing above average and the minerals and vitamins a bit below average. And that trend has currently reversed. We see the vitamins and the minerals grow above the average at the moment, and the total has gone up from a 3% to 4% where it was in recent years to now 4% to 5% growth per year. And in some regions, like the U.S., we even see an 8% growth this year for dietary supplements. So yes, big impact. Is that impact going to last? Yes, I think so. As long as COVID will be on top of people's mind, the impact will last. And the more that people integrated into their day-to-day habits, the more it will stay, James.

Thanks, Philip. Indeed, immunity going to be critically important for the foreseeable future. But Maha, what is the real impact of micronutrients on the immune system?

So micronutrients stay a very critical role in our immunity support. So we have 2 types of immunity, which is our first one is in our innate immunity, which is our first line of defense, which micronutrient supports as well as our adaptive immunity, which is our second line of defense. In the EU, micronutrients have already been granted several health claims. And in the U.S., the U.S. FDA allows immunity claims as well in front of pack. And here is a great example for our customers, where we were able to support them with our regulatory teams and our scientific teams to be able to support them, to be able to put such claims in front of pack, which is obviously quite important for our customers.

Very good. And I think, Philip, you also have another example that you wanted to share today.

Absolutely, James. I think there is mounting scientific evidence that vitamin D could play a very important role in fighting COVID-19, both in prevention as well as in treatment. Basically, if you look at the total global population, almost 40% of people are deficient on vitamin D and almost up to 90% don't have the optimum level of vitamin D in their blood. We have a new product in our pipeline that we call ampli-D which is a much more highly bioavailable form of vitamin D. In fact, it's the form of vitamin D that flows in our blood. And this can basically boost the vitamin D level in the blood to the optimum levels in a matter of days and weeks, whereas with normal vitamin D dietary supplements, this can take up to months. So this is the example that you see here is the product as we make it and deliver it to our customers who then can basically put it on the shelves with their labels on it. So this has the ingredients in the pill or the gummy in the bottle, the bottom in the box with all the regulatory documentation with it all from DSM. This is what we call a market-ready solution. We've currently got regulatory approvals for this product in Australia but are working on getting swift approvals also in the other regions. And I think this could be really a game changer in the fight against COVID-19.

Very nice example, and we'll definitely be talking about solutions more later on. And it's a great example of a quickly meeting a critical need for people. Now we've talked about immunity ingredients, product solutions. I also want to touch on i-Health today. How does the i-Health business play into this?

Yes. i-Health has been a great business for DSM. Since we've acquired it almost now 10 years ago, it's been growing double digit with very attractive margins. I think we've got a fantastic team there that also is delivering a very good year this year and is launching a number of new innovations. These are some examples that you see here, one for adults, one for kids of immunity-boosting products under the Culturelle probiotic line.

Very good. Thank you. It's a lot to talk about on the immunity side and be sure to check the virtual rooms. Also, there's a lot more information around immunity. I'd like to change tack a little bit now and talk about your recent acquisition, Maha, of Glycom. So firstly, do Glycom also play in immunity?

Yes, they do with HMOs. So HMOs, it's Human Milk Oligosaccharides, which is basically a group of carbohydrates that behave -- and together, they are considered a prebiotic, a very advanced prebiotic. And we find those mostly in breast milk. But I just want to be very clear, the breast milk is the golden standard. And what we try and do is to help get formula as close as possible to this golden standard to support mothers that are not able to breastfeed. HMOs are critical in supporting the infants in developing an immune -- a digestive system. And while when you have a healthy digestive system, you're able to create a strong immune system to actually support the infant against infections, basically.

Very good. That's extremely helpful to understand what HMOs are and how critical they are in this particularly critical category. Can you also say some words about Glycom, the company?

Definitely, with Glycom, we have welcomed into the DSM family, the largest manufacturer of HMOs in the world. Obviously, having HMOs as part of the family makes sense because DSM were obviously the leading manufacturer of early life nutrition ingredients with our vitamins and our lipids. And now we're able to offer our customers a complete solution for their early life nutrition and their formulas.

Very good. So the Glycom acquisition in HMOs in general, am I getting that right, is mainly for early life nutrition or can you add some perspectives on some other areas as well?

Yes. For now, definitely, it is early with Early Life Nutrition. This is where we're seeing it in the market. However, we already have for human clinical trials that have actually given us several irritable bowel syndrome claims for growing up children as well as for adults. So we see the HMOs' role and as we develop more science, we're expanding into more segments as well as being able to offer more health claims.

Okay. Very interesting. So there's definitely some perspective on further breadth. And with that in mind, how big would you say the market is for HMOs?

So right now, we see that the market is around EUR 100 million, which we expect it to grow by fivefold over the next few years. Obviously, how is it going to grow? It's going to grow because via the science, and obviously, more understanding of the ingredients, more inclusion rate as well as penetration into new segments with medical nutrition, with -- also in F&B and possibly also in pharma.

Very good. Well, thank you. So some really interesting perspectives on -- we've talked about ingredients and product solutions. I want to now come back to the word solution, right? We touched upon that a little bit earlier, and you're often talking proudly about your unique business model. Chris himself earlier mentioned, global products integrated into local solutions. Can you elaborate more on your journey from an ingredient supplier to a full solution provider?

Yes. So at DSM, we pride ourselves in being the end-to-end partner for our customers. What does this mean? It basically means we pride ourselves in being able to provide our customers with very high-quality ingredients straight. So a vitamin C, a vitamin D, just a single ingredient. We also pride ourselves in being able to support our customers in premix, where they're actually looking at having more than one ingredient put together, where we're able to support them with sourcing multiple ingredients. And last but not least is to support them in market redistributions. Just as Philip mentioned earlier, in regards to getting a complete product for them, where they get to focus on the branding and commercialization, or in certain instances, where even they ask us to support them to be able to support them in marketing activities into new regions. For example, in China, which is what we have here with our -- one of our customers support with [ Victor Accel ] in China.

Okay. Well, so yes, really, really interesting, adding a whole raft of additional value for our customers across that whole solution. So is this a model for the future?

We believe so. So we believe in the way for us to be able to support our customers to grow is going to be able to help us provide our customers with a long-lasting relationship. Obviously, the more ingredients we're able to bring in, the more support we're able to provide them with running unique solutions and innovation, then we're able to make sure that our customers are focused on their strength, and we are focusing on supporting that -- supporting them. Today, our -- 60% of our sales is straight and 40% is from solutions. And we see that balance of sale shifting over the next few years.

Very nice. So I'd like to now talk -- build on that topic of solutions. And Philip, coming back to you, the CEOs talked earlier about the opportunities that you see in digital and gave the example of Personalized Nutrition, a topic very close to my heart. Now of course, it sounds exciting. There's a lot going on. How real is it? Is this really the next dimension in your business model?

Thank you, James. I think it is absolutely real. We see this space developing very rapidly. And we also believe that for DSM, this could be a very significant opportunity. Some analysts say that this could be up to a EUR 60 billion opportunity by 2040, not for DSM, but for the globe. So yes, I think it's a very exciting space. And if we look at the market today, the players are primarily start-ups and challenges, and we see no champion yet that has to date pulled together already all the necessary building blocks, which are: one, the diagnostics; two, the recommendation engine; three, the personalized nutritional products; and four, the kind of delivery format that would go with that. So there's certainly an opportunity here.

Very good. So -- and what specifically does DSM have to offer here?

I think we've got all the necessary building blocks for a science-based Personalized Nutrition. In the first place and foremost, we bring the nutrition. We are experts in nutritional ingredients as well as all the science that comes with it and the optimum delivery formats, if I can say it like that. Secondly, we've built a network, an ecosystem, let's call it like that, through investments that we've made, with also partnerships that we've made, that give us access to diagnostics, to recommendation engines, et cetera, et cetera. And I think what is critical is bringing all those elements together because that is what there is customer pull for. Customer basically wants fully proven end-to-end concepts. And in order to deliver that, we're currently in the process of setting up a separate from DSM venture called hologram sciences, that's going to be based in Boston, and it's going to be led by an experienced start-up team, and we'll provide them with EUR 50 million to EUR 100 million over the next 5 years to get the venture of the ground. And products will be coming soon, already in the coming quarters. We'll have launches of concepts around immunity, but also, for instance, around diabetes treatment for type 2 diabetes. So very exciting.

Yes, thank you. Very exciting. Thank you so much for sharing. Really, really exciting news. And yes, as we perhaps work towards a wrap-up now, we've talked about a lot of exciting areas, right? So I want to ask you, Philip, how will they also make a meaningful contribution to our growth? How important are all of these programs to that growth?

Very important. I think there's still a lot of signs to be developed in this space. And so you've seen all the innovations that we're working on, a number of new products like ampli-D, like HMOs, like new lipids, like new pharmaceutical concepts, et cetera, et cetera, but also a number of new business models like the market-ready solutions, like personalized nutrition. And then there's still some share to be gained for us in the space of medical nutrition, for instance, but also in pharmaceuticals where we're not yet at a fair share. So still lots of opportunity that should allow us to grow at least mid-single digit in this business, James.

Thank you. And Maha, perhaps from your side, some last words alongside the numbers side of things, anything you'd like to add?

So obviously, the numbers are very important, and we have a good understanding of that. But we also know that our mission is to provide health through nutrition, both for the growing population as well as for the developing countries. And with that, we really understand that our products are what we are creating is product with the purpose. And we fully -- we are proud of that mission, and that is what we're trying to deliver in -- right next to the numbers.

Thank you both so much the excitement and passion really shining through again. So I really appreciate the time. And with that, I'd now like to hand over to our other studio to Patrick Niels, DSM Food Specialties. Patrick, over to you?

Good afternoon. My name is Patrick Niels and I'm here today to talk to you about food and beverages. Food, over 800 million people don't have enough. Nearly 1/3 of the global population is missing out on essential nutrition from their diets, one way or the other. Another 1/3 is overconsuming often the wrong things. We at DSM are uniquely placed to help address this, helping to make the food and drink that we all need more delicious, more nutritious and more sustainable. Together with my team, [ highly ] DSM Food Specialties and is exactly what we aim to do. The food and beverage market is subject to rapid change, driven, of course, by evolving consumer needs. The name of the game for our customers, food and beverage producers, anticipate on these changes and develop and deliver on trend, differentiating products, faster than the competitors. So what do they need? Taste and texture. It all starts with taste. The physical and emotional experience you have when taking a sip or a bite is absolutely critical. Food simply has to be delicious. Besides this, consumers are increasingly aware of the role food and nutrition place in their health and well-being. And now I have become a lot more label conscious in recent years for myself and for my family. And as consumers, we want shorter and more recognizable ingredient list. But we also look for food with additional health benefits and improved nutritional value. And last, but by no means least, sustainability becomes more and more important. It starts with more efficient food production, more cost-efficient and more resource efficient. 1/3 of all food is currently lost or wasted and not consumed, nearly $1 trillion in wasted value each year. So there's a clear and urgent need for sustainable solutions. And in this market environment, speed is key. Our customers need partners that help them get the market faster and differentiate from the competition with market-ready ingredients and solutions. Over the years, we at DSM, have built a really strong and broad global product portfolio of specialty ingredients for the food and beverage industries. We supply dairy cultures, enzymes for multiple applications across dairy, baking, beverages, coatings and preservation systems, yeast extracts, and flours and flavors, cetera, et cetera. These are all about taste, texture and supporting the efficient and sustainable production and consumption. But as Chris said, it's all about bringing these global products in local solutions for our customers. And we do this by increasingly focusing on our end markets. Over recent years, we've expanded our portfolio with the acquisition of our hydrocolloids activities, giving us much stronger capabilities in texturizing. And the increase in consumer interest in health and wellness creates enormous opportunity for us to add our global nutritional products to the mix, with our vitamins, our minerals and our nutritional lipids as well as opening up clear opportunities for new innovations. So our portfolio is increasingly about integrating taste, texture and our health offerings. Summarizing, we have a unique and broad range of global products. Next, that we have a deep expertise in application in our core end market segments that allows us to pull these together in integrated local solutions, combining taste, texture and health, at the same time, is bringing efficiency and sustainability benefits for our customers. Now let me illustrate this with an example. I have to admit, I personally do enjoy a good burger. I'm not alone in that. One of the fundamental shifts in our industry is the boom in demand for plant-based options, alongside the traditional choices. So the race is on to deliver the best, the most authentic, plant-based burger possible. That means, first of all, delivering authentic taste and flavor and a fantastic texture at mouthfeel, needs to be firm, needs to be juicy, needs to be succulent. DSM yeast extracts and process flavors deliver this authentic meaty taste and flavor. With the hydrocolloids and soon with CanolaPRO, we can help deliver the perfect texture and juiciness. Now the next wave of demand by consumers is going to be for a better health appeal and a comparable business choice as well as enriching the protein. This will allow our customers to support their product positioning with front of pack health claims. By the way, although it's a separate value change, our enzymes are also included as well as the vitamins and lipids in the bun. And of course, in case you would prefer a cheeseburger, we have also our dairy solutions providing everything for the cheese. You get the picture. So the key takeaway here is, we're increasingly using the full potential of a nutrition portfolio to differentiate ourselves from competition. We are the only player in the market who can bring taste, texture and nutrition with efficient and sustainable clean label solutions. I'm excited about the potential for expanding our share of wallet in this fast-growing plant-based space. It's much more background on our integrated solutions, how they bring value to producers of meat and dairy alternatives in the virtual venue. So I encourage you to take a look. So going forward, what are our drivers for sustained growth? First of all, we will continue to deepen our integrated application knowhow. I'll give you an example of how we do that in a moment. Secondly, we will further broaden our global products portfolio, and we will power that through our innovation efforts as well as through M&A. Now Dimitri, Geraldine and Trish talked about how the 4 Ps are guiding our innovation strategy. And as I said, we are deepening our application know-how and expanding our product portfolio. Let me give you an example of application-driven innovation. We recently launched a combined enzyme and culture offering for the production of mozzarella specifically tailored for the U.S. market. The mozzarella is the biggest global cheese segment and the biggest application area for that is pizza cheese. Our solution of enzymes and cultures enables pizza cheese with a more balanced and buttery taste profile and better texture with a softer stretch, which is actually what U.S. consumers prefer. It also enables an increased yield per liter of milk, very important, too. This launch is doing very well. We're growing double digit in this segment. Great example of application innovation. Now our innovation platforms and pipeline also enable us to expand our global product range, including our CanolaPRO and our Avansya EverSweet offering. I already mentioned CanolaPRO in relation to meat and dairy alternatives. So let me say a few words more about it now. With CanolaPRO, DSM developed a proprietary process to source a high-quality, nutritionally complete plant-based protein from canola, rapeseed for us. It improves taste, texture and nutritional value of vegetarian and vegan products. Earlier this year, we formed a joint venture with Avril, joint venture is called Olatein, to produce this CanolaPRO. And Avril is a very strong partner for us. Avril's backwardly integrated the canola, and we have a factory already on construction in France. DSM will take care of the route to market and further R&D and application development. Commercial launch is expected in 2022. Now CanolaPRO is an excellent match with our portfolio of ingredients for meat and dairy alternatives, giving producers in this area much more formulation flexibility for taste, texture as well as nutrition. And a canola protein will be a key builder block as we look at further growth in alternative plant-based proteins. One of the other product innovation areas I want to manage is the work we're doing in sugar reduction, specifically our Avansya joint venture that we have together with Cargill. I'm very proud to say that in this first full year of operation, we expect Avansya already to hit double-digit million sales. I think this is a great example for large innovation with early market success. The opportunity continues to grow and the market and societal demand for great tasting, 0 calorie, nonartificial sweetener is only becoming more and more urgent. More background on Avansya's progress and how EverSweet is hitting the market with consumers and customers in the virtual venue. Now next innovation will also use M&A to boost our growth and to support deepening application and broadening our ingredients profile. Most recent example being the acquisition of CSK, where we have significantly strengthened our position in dairy, which is our biggest segment. We have strategically improved our geographic footprint with a state-of-the-art manufacturing facility in the Netherlands, in the heart of Europe. We've also deepened our dairy application innovation capabilities, for example, in travel, very popular category in Eastern Europe. Additionally, we've expanded our product portfolio, especially in taste and texture, with unique starter cultures and complementary enzymes specifically for semi-hard cheeses and fresh dairy. The integration of CSK is proceeding very well, and both top line as well as bottom line synergies are already beyond the business case expectations. So summarizing, what does this all mean for our future growth? Well, we have a winning business model. We have a clear focus on integrated solutions in taste, texture and health. We will drive growth by further strengthening our global product and local application offering, both through innovation as well as through M&A. As a result, we will continue to deliver above-market sales growth. While the market growth is around 2%, we aim for mid-single digit. I personally am very excited because we, as DSM, really are uniquely placed to bring value by helping our industry partners make the food and drink on which all of us rely more delicious, more nutritious and more sustainable. With that, it's time to turn to DSM's activities in Animal Nutrition & Health. And I will hand over to James.

Thank you, Patrick. I'm now joined by Ivo Lansbergen, President, Animal Nutrition & Health; and Christie Chavis, Vice President, Specialty Solutions, Animal Nutrition & Health. Welcome to both of you. Ivo, as we just heard from Patrick, our colleagues at DSM Food Specialties are enjoying a great success story with alternative proteins. Aren't you a little bit afraid that your attractive market will disappear or at least drastically decline over the next few years?

Right. Yes, thank you for the question. Actually, a question I hear more often. And I'm quite confident. I'm quite confident that this is not going to be the case. We will see animal protein growing by a level of 1% to 2% for the foreseeable future. And why is that? Because the current population is about 7 billion. It is expected to grow to -- by 2050 to grow to 9.7 billion people. That's about 40% increase. So that's number one. Number two is all those people, of course, they would like to actually consume animal protein, but also it's linked to GDP, GDP per capita. People have more spendable income and, therefore, will consume more animal protein. So these are the big drivers actually for the future growth, for sure. And in addition, and let's actually not forget about that, alternative protein is very important indeed. But it's still fairly small compared to animal proteins in itself. To give you a bit of a flavor, it's about $2 billion market for alternative proteins and it's about $2 trillion for animal proteins. So still quite small, but growing quite nicely.

Okay. Thanks for that clarification. So the overall market, still very large and steadily growing. Does this mean that the feed additive market that you're targeting will also grow only at that 1% to 2%?

No. We expect actually the market to grow faster. We expect the market to grow by 4% to 6%, so let's say, mid-single-digit numbers. And the reason for that is actually a couple of drivers. One is the professionalization of farms, and that's happening as we speak. So in China, we see that happening. And actually, that's demand or creating more demand for premixes for feed additives. So that's number one. China, APAC, Lat Am, that's where we see it happening. Feed conversion remains and is, right now, a very important point. So driving up efficiency, very important, indeed. Actually, the banning of antibiotics as a growth promoter. Also, that actually is going to be a very important driver. And last but not least, and this is absolutely something which is up and coming, it's been in the news for quite some time, but it's now becoming quite serious: environmental concerns. If you really want to tackle the environmental concerns, we have to do something there. And feed additives will play a very important role. And actually, we'll, therefore, actually also see the growth of the 4% to 6%.

Very clear. Thank you. I also want to touch on demand crisis. We've seen African swine fever. Do those types of crisis worry you?

No, not really. We have seen, of course, the crisis hitting us to some extent, but we've actually shown to be quite resilient. We have been able to navigate through the crisis because we are so uniquely positioned. We have premix locations in all continents. So we are very strong in that sense. But also, we are not totally dependent actually on swine. Swine is an important factor and, of course, the market. But of course, yes, we are also active in poultry, layers, broiler; ruminants; beef and dairy; aqua. So that in itself, with our business model, feed additives, and at the same time, the premixes, made us actually quite resilient. And last but not the least, let us also not forget, I mentioned professionalization of farms. And that's happening also because of an outcome of ASF, and that will actually drive growth. Rather than actually being negative, it's a positive. So overall, I'm not that negative.

Very good. So with that being said, what about the overall situation? What type of growth do you expect for your business going forward in the coming period?

Yes. I expect, at least, it would be growing at mid-single digit, mid-single-digit numbers. As you see here on the graph, we've actually been showing this over the last 5 to 10 years, quite nice and steady growth, and we expect that to continue in the future. And why? Based on the drivers, as I mentioned before, again, the banning of antibiotic growth promoters, the environmental concerns. And for that, of course, you need innovation funnel, and we have that. And we're working on that, tackling these biggest kind of challenges in the industry. So I'm quite optimistic for the future.

Very good. Thanks, Ivo. So a nice segue to talk to you now, Christie. Ivo mentioned pressure on productivity, increasing need to control emissions. And also this -- given this very rapid population growth that we're facing, is it actually possible to feed close to 10 billion people on the planet in the future?

Well, thank you, James, for that very important question. And so the answer is, it depends. It's a yes if industry continues to innovate as it has over the last couple of decades. If you look at the trajectory of animal output, overall agriculture output from farm to fork, it has dramatically increased from what we've been able to do with fewer resources over the last couple of decades compared to the period prior to that. If we continue to work together and to innovate, bring new technologies to the market, we can meet the demands of the future, we believe. Because of this, we've launched our We Make It Possible sustainability campaign. This is a campaign designed more than a campaign, really a platform and a strategy of how we will continue to do business. Everything from our portfolio today, as it is and what's the impact of those products and how they can influence sustainability, all the way to guiding our innovation and research efforts. And so through this We Make It Possible campaign, we are very committed to bringing sustainable solutions to the marketplace.

Very good. Thanks. Let's explore some of these themes in more detail now, Christie. Would you care to give us some examples of those growth drivers?

Yes. We have 6 sustainability business drivers that we're focused on. I'll mention just a few of them today. So think about reducing livestock emissions, reducing food loss and waste. How we can improve food quality or improve the lifetime performance of animals. So let me give you just a couple of examples. So if you think about products that can increase the strength of egg shells. Today, billions of eggs never reach a consumer because they've been broken along the way. Billions. So imagine, if just 10% or 15% of those eggs actually reached a consumer. It's one example. Another example would be from our enzymes platform. We've developed a product called Balancius with our alliance partner, Novozymes. Balancius improves the overall gastrointestinal health, digestive performance and the overall performance of an animal. And so by supplementing with Balancius, you can improve the lifetime performance of that, the growth and reduce the need for antibiotics. Lastly, I would mention Veramaris. Veramaris is a very cool technology that's designed to bypass catching all this wild-caught fish to feed into the salmons for the source of omegas. Instead, we go straight to the source of omega, which is the algae and feed it directly. And so a very cool technology that we're very excited about that can and will have an impact on marine biodiversity.

Thank you for those examples, Christie, really inspiring. I'd like to pick up just quickly on Veramaris, which you mentioned at the end there. Now obviously, Veramaris has already been in the market since around the second half of last year, if I'm not mistaken. What progress have you made since then?

Yes. Thank you for that. So we've already had sales of our Veramaris product, and we're ramping up production of our Blair, Nebraska facility in the U.S. But even more exciting is we're expanding into other species, including shrimp and some applications in pet. So there's a lot of excitement and a lot of information on Veramaris in our virtual room. So I would ask that you take a moment to check that out.

Yes. Thank you. Don't forget. Please go to the virtual rooms to find more detail on some of these projects. Now continuing the theme of sustainability, Ivo, I'd like to pick up on another really important project in this space, Bovaer or Clean Cow. Would you like to explain a little bit more about that, please?

Right. Let me just -- small correction here. It's Bovaer.

Bovaer.

Both because we are actually indeed tackling the emissions. The emissions actually into the environment. And yes, it's quite a bit of an excitement. We see Bovaer getting more and more traction and more attention actually from media, but also actually in the value chain. We, in the meantime, have conducted trials with 10,000 animals across the world, varying from New Zealand, all the way up to Europe. So it is a lot of database. And the data are quite striking. 30% methane reduction is quite substantial, even sometimes higher. So in that sense, I think there's quite a bit of an excitement. We are right now in the regulatory approval stage. That means it goes a little bit into a black box in the European kind of constellation, EPSA. There, we are waiting, of course, for questions, and we expect actually approval towards the end of 2021. So therefore, to commercialize probably early 2022. So that's where we are right now, but quite a bit of an excitement.

Got it. Thank you. Bovaer. Bovaer. Thank you. Really appreciate that. Now I'd like to continue on the theme of emissions reductions. What are your thoughts on how to create further impact in the coming years in this space of emissions?

Yes. I think a very good point indeed. And this is something, as I mentioned before, the key growth drivers in feed additives, environment concerns becoming as really top of mind of players, players like retailers. And we do believe that we should really make it measurable because we do believe that what you measure you can act on. So we are working on a service, a sustainability service, which is going to be able to provide an environmental footprint on the farm level. And that means that we can actually determine the environmental footprint on the farm level, and then it also actually translates to the retailer who's buying from that farm and then actually links to the retail, of course, the consumer. So they will get far more transparency in the environmental footprint of the protein. So that's what we're working on and soon to be launched.