International Flavors & Fragrances Inc. (IFF) Earnings Call Transcript & Summary

Okay. Good afternoon. And welcome to the closing session of day 1 here at CAGNY. Just a point of housekeeping, when we're through with today, please make sure to gather all your belongings. We will be heading over to the breakout session for Q&A, but this room will be locked and closed for rehearsals promptly at 6:00 p.m. So we do need to make sure you remove your belongings. To finish on a high note, I'm pleased to welcome IFF and CEO, Andreas Fibig, back to the conference. I also have the pleasure of introducing many of you to new CFO, Rustom Jilla, who joined the company just in January and who, I know, we are all looking forward to working with. I will let Andreas tell the full story, but I think it's safe to say that IFF has not been standing still. Already a leader in Taste and Scent categories half a decade ago, the company strengthened its standing into a top 2 position globally with its recent acquisition and integration of Frutarom. And it is today poised to broaden this portfolio even further with the pending addition of DuPont Nutrition & Biosciences. Measured in terms of both revenue and employee count, the pro forma of company will nearly triple in size versus the stand-alone IFF in 2015, serving over 40,000 customers globally, 9,000 patents and an R&D budget of well over $0.5 billion annually. So with that, to tell us more about IFF's transformation, I'll turn it over to Andreas.

Thank you, Steve, for the intro. And it's great to be back here at CAGNY. And it looks like it's the last presentation, so we have to make sure something exciting is happening during the presentation. So let me get started with something super-exciting, which is the cautionary statement. Please take a moment to read it. And then we have non-GAAP measures as well. With that, let me get started. So what I would like to do or what we would like to do this afternoon is to provide you an update where we are in the IFF story and why we believe we are an essential partner for our customers, how we have developed our business over time. And I would like to give you some insight about the merger with DuPont N&B business and why we believe this will be a very compelling value creation story for us. And Rustom will take the time to give you the actual financials and the outlook for the year. We believe IFF has a real, very attractive investment profile, very attractive growth and certainly margin profile, also compared to many of our competitors. We have a leadership position in high-value ingredients categories. A very diversified portfolio, meanwhile, which helps us as well with total solutions. We have an industry-leading R&D platform. And I will come to that, that if you look at our R&D spend and the capabilities that we're already leading in that space compared to our competitors, but with the N&B DuPont business, we will even accelerate that position quite nicely. Customer-wise, we have the broadest customer portfolio in the industry, and we certainly have a very strong free cash flow. Let's go to the consumer landscape. Everything starts with the consumers and then comes to our own customers. So not much has changed. I think our clean label, health and wellness, it's still a very important theme, and it's here to stay. What we see, as well as you heard from many of our peer companies here, that the small and mid-tier customers have a better growth profile. So they have higher sales growth. And it's up to us to basically look after these customers in a different way and to do business with them. We have a continued momentum in sustainability. We see that sustainability is becoming even more important for us as a company, even based here. And I will give you an idea when we have started our journey in sustainability, where we are and what we plan going forward. The emerging trends, I would like to focus on one. Many of our customers, big, mid-size or small customers, they are really hungry for innovation, real through -- breakthrough innovation, but also for speed, how could they get with new offerings and new products faster to their own consumers. And that's something where I hopefully can give you -- provide you an answer how we can help our customers to do exactly that. First of all, we provide many of our customers very good and valuable consumer insights. We ourselves conduct roundabout 500,000 interviews with consumers every single year across the whole globe in the different regions, which are important for our customers. We provide them critical consumer insights. We differentiated our service model in a way that we really have built it also for the small customers, in a very, let's say, speed-geared and agile way. And we help our customers, since we launched the Frutarom integration also with more integrated solutions, which we have not done before. Let me get back to our strategy. When we came up with our last strategy exercise and we are now going into the last year of that strategy, we put the focus on the consumer and customer very much in the middle. We looked how can we find ways to drive innovation always with the consumer and our customers in mind, how can we organize ourselves and how can we manage the portfolio, and I'll come to the portfolio in a moment, in a way that we really can create the most value for our customers, but for our shareholders as well. So let me explain where we are. First of all, we have established IFF once again as a partner of choice for many of our customers. You can see it in 2 measures. First of all, we have built this outlet, which we call Tastepoint, for the mid -- for the small and mid-sized customers. It's an outlet, which is really growing very nicely, because we have separated it from the rest of our organization. They just take care of that segment of customers. And we just recently, in the last year, got access to 3 more core list of our customers, which give us access to $450 million of Scent business. And we are already starting to capitalize on the access here. So that's a testament that it seems that the strategy is working here. Drive innovation across the portfolio. Just a couple of elements. Delivery systems were, for a long time, on our front and center. Now it's becoming even more important, because many of our big CPG customers are looking for green capsules, where the fragrance is in and which is completely recyclable. And that's something where we, probably this year, will have the first commercial product on the market, and that will put us very much in the forefront of that development. Modulation, which means, in particular sweetness modulation, you heard it from some of our peer companies that the reduction of sugar is so important. We can do it with modulation technology. And that's something, which is providing a good growth source for our business here. And I don't want to go too much into the other details, but a lot of more happened in our R&D portfolio. Key markets, good growth in EAME, but also in emerging markets. But what is really important for us is that with our wide and new adjacent portfolio, through the cross-selling of these products and technologies, let's say, we cross, for example, the Food Protection business and the Natural Color business with flavors or seasonings together. And this has worked out better than we thought, maybe a little slower than we expected first when we acquired Frutarom. But right now, we see it's moving in the right direction as it creates a good portfolio and a good pipeline of new businesses for us. Building talent and organization. I believe here, it's really important that we have an operating model, which helps us to extract the best value out of our portfolio, but also out of our assets, and that's working. And sustainability, I've actually an extra slide on that and will come to that in a moment. Let's talk about the journey, and Steve did it in his intro. When we started in 2015, a company roundabout $3 billion in size, we have spent $250 million in R&D, roundabout 1,300 relevant patents. And we're very much focused on Taste and Scent. With the acquisition of Frutarom, what has changed? First of all, we are spending significantly more in R&D. We have more R&D centers around the globe. We have more development or creative centers around the globe, which is really helpful. We have 300 more patents, which is important to defend our intellectual property and provide the right solutions for our customers. And we started the first time in the history of the company to provide more cross-selling opportunities and to bundle some of our products together in terms of solutions for the customers, a big step for us. We haven't done this before, but it's a good fertile training for us, because that will help us with the N&B acquisition as well when we go forward and have even a broader portfolio in place. Customers. And you know this very well, one of the reasons why we acquired Frutarom is, the vast majority of their customers were small and midsized customers. And that's exactly what we wanted to expand on. And then certainly, we went a bit more into the nutrition -- nutritional space. If you take now Frutarom just for a moment, it took us longer in terms of our, let's say, integration and we have probably some more dissynergies in terms of sales at the beginning. But still, if you look at the benefits of that combination, then you see we have a much stronger product offering in adjacent categories, growing customers. We're driving product superiority. And we really had our first, let's say, toes into the cross-selling area. And that's something, which is a big opportunity for us to learn how to do it in the right way. And as you can see, in terms of our fastest growing categories, at least last year, 3 of the Frutarom categories made it into that area. We talk about the adjacencies. Important here to say is that we have expanded the place, where we are playing, almost doubled. Because we're not playing any in non-adjustment fragrances. And in flavors, we are playing in Inclusions, in Natural Colors, Natural Food Protection and Health Ingredients. And the good thing about these markets is not just the size, but it's also the intrinsic growth profile of the market. So all in all, we expanded our market and we went into areas, which have a higher growth in terms of their own markets. We believe that this is creating a good benefit going forward. We talked about the customers. And you have probably heard it here as well over the course of the day that it's really important that you take care of these small and mid-sized customers. For us, before we acquired Frutarom, we had roundabout 50% in global CPGs, 50% in smaller companies. We are right now 35% to 65%. And that gives us also exposure, not just the smaller customers, but also to some of the private label business, which we believe it's important, it's growing not just in Europe, we see some growth here in the U.S. as well. So we believe we are very well placed in terms of our customer coverage, and that gives us a good platform to grow our business going forward. Innovation, I talked about it. Our pipeline, as you can measure it, has increased almost 50% over the last 5 years. I already touched on modulation. I touched on delivery systems. But they are more in other, let's say, innovations, which are really, really important for us, whether it is in new ingredients, new ingredients in the active cosmetic field, in health and nutrition as well. And we believe that this gives us a great opportunity going forward to grow our business. Because many of these, let's say, new technologies and new ingredients or new molecules, it takes a couple of years from invention to the marketplace, and we are now very well positioned to capitalize on it. And I'm not talking about capabilities, but a lot of very critical capabilities going forward. For example, in crop science, and let me give you an example. We have Food Protection -- Natural Food Protection business right now, and this is fueled by rosemary, a very -- it's a natural antioxidant. And we have a very good seed technology, which gives us to help us to increase the yield of that very plant. So you see, it becomes also in terms of the backward integration, a very important topic, the topic of crop science. Going forward, I'll show you some of the expanded capabilities, which are really important for cross-selling. Food protection as a botanical, we see it and bring it into sports drinks, together with some of our flavors. The colors, the natural colors, we are combining with seasonings for some of our big potato chip customers. We combine it into lipsticks for some of our customers more on the scent side. On health, a lot of functional benefits here, which are important for many of our customers in that space. And then in the F&F space, for food service and vegetarian alternatives, and I come to the plant-based theme of the day, anyway, when I go forward in terms of the combined products. Another thing, which is beautiful in terms of the acquisition we made, is that we have a good opportunity to reduce cost. We have reduced the cost already by EUR 50 million last year. We have planned roundabout EUR 35 million, which is good. A lot of these cost reductions are coming out of procurement, which has -- have we seen as one of the biggest source for value creation for us. But also in terms of, let's say, optimizing our manufacturing footprint, we closed roundabout 10 factories last year, more to come this year. But we will be finished with that roundabout October-November this year. And now I promise it on sustainability. I believe wholeheartedly, it's important that we started this journey on sustainability very, very early. Very early with smaller steps, but then we have built over time. And we are recognized by many institutions. The last one -- the last highlight is the third consecutive year being named on Barron's, America Most Sustainable Companies. And that's important, not just for ourselves, it's important for our employees and it's important for our customers as well who make this many, many times a prerequisite to play on their core list. So it's a good track record, and there is more to come on that front. Talking about the N&B business. That's the next step in the IFF story. And I just want to highlight a couple of things, I believe, are really important. The first one is on the R&D spend. The R&D spend, just if you combine the 2 companies, will be $550 million, which is unmatched of any of our competitors in our space and will give us the opportunity to move towards the most innovative technologies as fast as we can and hopefully outperform many of our competitors. We have 9,000 granted patents. If I take into consideration the patents which are already, let's say, applied for, it's roundabout 12,000. None of the other companies can deliver that. And that sets us very much apart from many of our peer companies. We believe that we can do real integrated solutions, and I will come to that in a moment. And we certainly have, by far, the broadest customer base. You see then the capabilities and the positioning where we are playing, it's taste and scent; nutrition, where we are already in, we're strengthening that; cultures, enzymes, probiotics and soy proteins. So let me start with a couple of more numbers side, and then Steve mentioned it, the company is expected to roundabout $11 billion in revenues, $2.6 billion in EBITDA. It's a pro forma number. But what is more important is we are very broad, we have a lot of capabilities, and we are much deeper in innovation and in R&D. And we believe that this is probably the most important thing for that combination. And here you go. In many of the areas where we are playing, we're in the #1 and #2 position; best-in-class R&D, I said this already; a lots of scientific expertise; and the strongest and broadest differentiated portfolio. We believe that for many of our customers, and now I come to the customer benefit, we can improve the speed to market, because we can do a lot of things already very much in our own 4 walls before we hand it over to the customers, and that could increase their speed to market quite significantly. And we can simplify the supply chain nicely as well. I don't expect you to read all the different categories we are playing. But the message here is that in almost all categories where we are present, we are in the #1 or #2 position. And that's actually very good, because again, that gives us a position of strength going into these markets and it gives us a lot of cross-synergies in between the different categories as well. And now I come to the examples. And that's probably, if you think about the heart of the presentation, I believe, that's part of the heart. So alternative proteins, everybody is talking about it. It's pea-based, soy-based. Everybody wants to have our plant-based proteins right now. What we can do is a combination. We always could do already before the seasonings and the flavor, the taste modulation, the natural color, the delivery system or the natural antioxidants. And I talked about the food protection just before. But now we can do -- we have the plant-based protein ourselves, emulsifiers, the system blends, the binders and the texturants. So basically, we can do the whole thing. And that is important, because if you engineer it in a way you can hand it over to your customers already in a way that it all works very, very nicely together, and it can help also customers and companies, which have not a strong R&D, because for many reasons, they are start-up companies or they need support here. The next thing, as an example, it's not just in the food space, it's in Fabric Care as well. As you well know, we are doing, for ages, already the fragrances. We do the fragrance, encapsulation for Fabric Care, for example. But now we have the enzymes as well and the microbial control. So many elements, which are important, because they have to work hand-in-hand when you deliver the product. Right now, many of the customers are bringing it together, and it's not always technically easy to bring these 2 ingredients together. And here, if you have a company, which already in the development, can do that step on their own, that helps them, because they get already a better and a functioning product in their hands. Personal care, I don't want to go too much into detail, but it's exactly the same thing as we just heard about the Fabric Care piece. Another one, which is super-important for us, is the ingredients and not just the fragrance ingredients, flavor ingredients as well. Huge biotech capabilities, 240 researchers in Palo Alto working just on biotech solutions. Intensive libraries where the molecules are in. Our targeted gene-editing capabilities, enzymes. We talked about biotech. And it comes together with all the chemical knowledge IFF brings to the table here as well. We believe that can help us with our ingredient pipeline. It can help us to backward integrate and make the move as many of our customers wish for going away from chemistry to biology. And that's something, which is a super-important step going forward in that journey. That's at least what we heard from our customers in the last couple of weeks. I talked about the consumer already. We believe -- and certainly, we have the right platforms to sell our combined products, the ingredients and the total solutions to the global CPGs, to the regional leaders and to the smaller companies as well as the private label. Certainly, it will step up in terms of size, if you look at the different peer companies, quite significantly, which will help us in terms of our regional footprint, because we are in the geographies where we want to be. It will help us, as I said, in the R&D investments where we are. It can help us in the outlets with our customers in terms of our creative centers. So it has a lot of advantages to have a higher reach and a good sales base in that industry. With that, I would like to hand it over to Rustom, who will give you the numbers, and I will be back for the summary. Rustom?

Thanks, Andreas, and good afternoon, everyone. So I'm also excited to be here at CAGNY, my first time. And I'm even more excited to have joined this great company at this very, very interesting point in its transformation. And given everything that we expect to do over the next couple of years, I definitely do not expect to be bored. So for my part, some of the things that I'm planning on focusing on almost immediately, one is driving -- helping further drive execution and accountability through the company. The other one is focusing on enhancing effective collaboration, and that's between legacy IFF, Frutarom, and also of course and hopefully in a year's time, N&B. The third thing is strengthening cost discipline, as we look across the board and we definitely want to focus on that as an area. And finally, ROI in terms of delivering solid ROI. So before I come back to N&B and the really exciting potential that it presents, let me take you briefly through our financials. Okay? In '19, we grew our sales by 29%, and that is mostly due to the fact that we have 3 quarter -- 3 additional quarters of Frutarom in our numbers, right? If you take out Frutarom, ex Frutarom, our currency-neutral sales grew 3%, and 1% of that comes from our 53rd week in '19. Okay? Operating margin, as you can see there, rose 30 basis points. Now that was driven by productivity initiatives, driven by acquisition-related synergies and a Brazilian tax recovery in the final quarter. And not up on that board, but on the slide, but -- our adjusted EPS, ex amortization, was $617 million, which was within our guidance range. Cash flow. So 2019 also saw a significant increase in cash flow. As you can see there, we went up by $261 million in terms of our operating cash flow, and that's a 60% increase. Again, this was primarily driven by higher cash earnings from Frutarom, because we included the business for the entire year. Our CapEx at $236 million was approximately 4.6% of sales. And what did we do this year? We invested in new capacity, that's plants; in new capabilities, the creative centers, as Andreas referred to them earlier, right? And also, finally, to drive Frutarom integration savings in terms of manufacturing plants. And we still had a strong $195 million or 73% increase in our cash flow over the period. So now our outlook, our outlook for 2020, the year that we're in right now. We expect our sales to be between $5.15 billion and $5.35 billion, with our adjusted EPS, excluding amortization, between $6.20 and $6.45. At this time, we do expect a modest impact from coronavirus on our sales and cost from the recent outbreak, but we're not really able to quantify this. And so therefore, what we did is to take account of this and also to take account of the volatile business environment we're in, we widened our guidance ranges on both sales and EPS. So the next slide provides some additional color on sales. So our sales expectation. And this is just an overview, given the many different parts in there. But our sales growth expectation for 2020 is to grow from roughly 1 -- from 1% to 5%. And that's on a currency-neutral basis. Now this includes a couple of things what's lagging there, and it's on this slide that's what's lagging. Headwinds of about 0.5 percentage points from portfolio adjustments, right, and about another 1% from the 53rd week headwind. And the portfolio adjustments, by the way, are the carryover of compliance and CitraSource from last year. Now excluding these, excluding these items, our currency-neutral growth rate is 2.5% to 6.5%, and that includes 2.5% from the organic business and 0.5% to -- 0.5 percentage point to 1% from cross-selling. And the M&A contribution is negligible during this period. EPS. So our EPS growth, again ex amortization, is expected to be between 3.5% to 7.5% growth that we see here and on a currency-neutral basis. This includes headwinds of about 5 percentage points for the incentive compensation reset. Now that's simply because '19's business performance versus our budget was well below expectations. And so there's a much lower payout in '19, and we expect to catch that up in '20 as we go. There's roughly about 0.5 percentage point from the portfolio adjustments and about 1 percentage point from the 53rd week. We do expect as well a 6 percentage point contribute -- 6% positive contribution from integration synergies. And Andreas referred to them earlier, and that's really something we're quite pleased with in terms of where we have delivered and what we've got there. So excluding all of these, our currency-neutral core growth -- EPS growth, ex amortization, is 4% to 8%, as you see up there in the middle. Cash and driving towards our deleverage target. Very important, obviously, not just in the context of Frutarom, but also in the context of N&B. So we are on track. We remain on track to delever to below 3x our net debt-to-adjusted EBITDA by the end of 2020, while maintaining an investment-grade rating. So in fact, we're already down at the end of the quarter to 3.2x, which is an improvement from the 3.6 of a year ago. And so going into 2020, we will continue to focus on improving working capital. We will tightly manage our CapEx, while continuing to invest in as necessary, and of course, growing cash earnings. And worth noting here as well is that part of our management incentives are also tied -- are aligned to deleveraging. So that remains one of our primary goals. So with that on -- said on the numbers, I'm now going to turn to the DuPont N&B combination and build on what Andreas said with regard to this exciting potential opportunity that's ahead of us. So first of all and probably most importantly, we -- and you see over there the business, the components, right? But first of all, we will greatly enhance our ability to serve our customers, right, number one. And we'll do this with a differentiated product portfolio, with over half of our revenue coming from the new business areas, nutrition, food and beverage, pharma solutions, health and bioscience, right? We will also remain a highly diversified company geographically with -- and you can do the math quite quickly, but that 70% of our sales will come from outside North America. So a new global leader, and that's important. From a synergy perspective, and this is going into the N&B deal, right, the combination, we have significant value creation and synergy opportunities ahead. About $300 million in cost synergies, as you can see, with half of that coming from procurement, about 40% from streamlining overhead and about 10% from manufacturing efficiencies. Then -- and this is by the end of year 3, by the way. So -- and then revenue synergies, as you see out there, we have about $400 million in revenue synergies, again, by the end of year 3. And this is led by the cross-selling opportunities that Andreas, again, highlighted when he was talking about as well as by our increased capabilities and our ability to provide integrated solutions. So what does this mean for the long term? Our long-term financial vision, we believe, has compelling upside. Financial expectations, as you see there, mid-single-digit top line growth; significant solid margin expansion; high single-digit EBITDA growth. And finally, we would expect to remain a highly cash-generative business, which is important, because we do also want to plan on our capital structure and deleveraging. So our capital structure, as you see there, our go-forward capital structure has clear objectives and priorities. The first is to take down our leverage from roughly 4x net debt-to-EBITDA -- adjusted EBITDA, just after the close, to about 3x -- to under 3x 2 years post-transaction close, right? We will remain committed to maintaining our investment grading -- investment-grade rating, credit rating through this period. And we will also continue to maintain our current dividend policy. So no changes there as well. And so our financial profile. We do expect to have an industry-leading financial profile, a strong platform to enhance growth and margin expansion, as you see there. And so bringing this all -- bringing all of this together, we expect to be sort of a leader in terms of both revenue and in EBITDA terms. And I thank you for your time, and now back to Andreas.

Thank you. Thank you, Rustom. So let me wrap up what you just have heard. First of all, we believe that this combination is -- really will change the industry and the face of the industry quite significantly. And I don't want to repeat what I just said, but we believe it's very compelling in terms of the capabilities we are building here for our clients and for our customers. And this is probably the most important slide. When we started this journey, and it's already a couple of years ago that we thought about this combination. We're always coming from the food side. What can we do in terms of our taste business and the N&B business? But over time, we figure that there are huge synergies on the Scent business as well and particularly on the household care products, whether it's on the shampoos or the detergent. But another aspect came, and that's the aspect of the ingredients pipeline and the biotech capabilities. And as we heard from our customers, changing from chemistry to biology is something which is pretty big for many of them. We believe we can help them. And with all the crisis we had in the last, let's say, 1.5 and 2 years in terms of our raw materials, just talking about the fire at one of the BASF plants and an end where the, let's say, the sourcing became very, very difficult and very expensive for us, we believe, with that, we have more opportunities to help ourselves with good ingredients where we control what we get from and how we can develop them as well. So we believe it has a lot of additional effects than just on the taste and food side. So all in all, in summary, we would say, attractive margin profile, and it will become even better in the future. A leadership position in that industry, because we are, in the combined company, always the #1 or #2 in most of the important categories. It's very diversified. It gives us the opportunity to really offer integrated solutions to many, many of our customers. R&D, I talked about this already, but we are very excited about this element. That's the reason why it comes again and again and again, because that should make a huge difference in how we operate with our customers. Certainly, a broad customer base, even a couple of more customers than we have today, which creates a huge customer base of more than 40,000 customers for us as a company. And that all in all will generate a strong cash flow going forward. So we believe that we have a good future in front of us. It will make this company, we hope, more resilient against crisis as well. More resilient in terms of different trends, because we can play with most of these trends and certainly gives us a great platform to grow our business. With that, thank you very much, and we can start the Q&A session. Yes. Let's start over there.

Great. I wanted to ask a little bit more about integrated offering, Inclusions, just to understand that a bit more. The slides were really helpful, but one of the questions we've had is the degree to which a supplier needs to be able to produce all those ingredients? Or could you outsource the ingredients and be good at putting them together, right, and blending them? So yes, that would be question one. Two is, what does the combination, the new creation of the company means for independent ingredient suppliers? How does that kind of change the competitive landscape? And then is there anything that can't really be integrated very well? I mean, is there anything that you think about in the portfolio that doesn't sort of fit into that integrated solutions model?

Okay. So let's start with the last question first. Thank you, by the way, for 3 questions. The last one is, we are looking into it. We don't believe that they are big businesses, which don't fit into it. Even the pharma solutions business has some interesting, let's say, synergies with our flavors business, because some of these medications need flavors, which is a good thing, and they're very advanced in terms of delivery technologies. So that seems to be a good fit for us as well. But there might be smaller businesses, but not bigger business where we have to look into it, whether we want to sell them, yes or no, but smaller pieces. In terms of the first question, the whole thing with integrated solutions, it started a couple of years ago when, in particular, smaller food customers who have not a lot of R&D. Most times start-up companies ask us, "Hey, listen, we love your flavors, but can you not do the whole thing for us?" And then it made us thinking how can we do it. And at the beginning, we started to buying all the ingredients for them and try to bring it together. But that has proven not a very, let's say, good way forward, because you always have to test in your applied science, how these ingredients work together. And you better test it well so that they all go with each other. And you need a certain expertise in your own labs as well to make it work. So we saw that it's actually good to have many of these ingredients in-house that you knew already how it works together. So that's one answer. The second answer is that over the last couple of years, we saw more bigger companies coming to us as well and asking for the whole solution and particularly in the food space. We said, okay, fine, that's a track we are already on. And then in the last 12 months, we had even some of the household care companies coming to us and said, "Maybe we need more than just your scent or just your fragrance." And I give you one concrete example. I was in a top-to-top meeting with one of our really big customers here in the U.S. and we were sitting with the CEO and the heads of R&D and the businesses, and he said, "Look, Andreas, we like your new solutions. We like your scents and your fragrances and you bring us delivery technologies. We can now print your preference as well. It's all great fine and dandy, but can you not do the whole thing for us, including the packaging?" We said, "Wow, that's kind of new." And I'm not saying that we want to do packaging, certainly not. But it made us think what can we do. And actually, when you look at the N&B capabilities and particularly on enzymes, then this is something which is really highly attractive for us. And with another case, which made us think is, last year, we couldn't capitalize on one of our $20 million of our business in India. We have one -- a product of one of our customers, actually a big laundry product. And unfortunately, the fragrance was clear, but they have changed the base 2 or 3 times. And all of a sudden, the base was not any longer working with the fragrance. So they had to test it again and it's coming now this year. If we have now these capabilities going forward, we can do the enzyme. We can test it with the fragrance. There will be a perfect fit and a perfect match even before we go to market or into big-scale manufacturing. And we believe that this really can create an edge going forward for us. Your second question on the smaller, less pure ingredients companies, I guess, we will see. There will be always a space for specialty companies who have certainly some technology or ingredients, which are needed by many of the customers. But I would say, in broad strokes, we are certainly the one who can deliver a lot of these solutions to them, in particular when you look at the R&D spend and the amount of patents we have right now in-store where we try to capitalize on. Yes. Sorry. Yes.

Two questions. One detailed one from, I think, one of your early slides. You talked about 1,100 cross-selling projects generating $150 million. I'm curious, at $140,000 per project, that seems like a pretty small number. Does that mean a disproportionate number of that cross-selling is going to small and midsize customers? Or is that just me not knowing the definition of project? That's my first question. And secondly, it strikes me that your customer intimacy, comfort with the IFF process, everything I've learned about this company, that has been the DNA, the glue, the competitive advantage that you brought historically. When I think about the DuPont business, it strikes me, science, cost or -- it's a science-first organization, there's some specifications, you meet them or you don't. And you -- it's a little bit less iterative, less relationship-driven for lack of a better word. How do you put those things together? I guess, you're saying that, that's a natural progression that's happening in the industry. But do you see a risk that as you put those people together to achieve synergies, that maybe the relationship aspect isn't there?

Yes. Let's start with the first one. It's true, these products in terms of the cross-selling go from very, very small products or opportunities to bigger ones. And let me tell you, one of the bigger ones is on combining seasonings and natural colors. I don't know whether I said it, but in California, now there's legislation on the table that they might put on the label of food products whether it's synthetic color or natural color. And we all can probably imagine what will happen when the consumer see it's synthetic color, they don't like it. And one of the customers came to us and said -- it's actually a very big customer for potato chips here in the U.S. and said, "Look, you do almost all of -- all the seasonings with us. Can you combine it already with a natural color and give us a solution for this?" This will be an opportunity of roundabout $10 million. So that's a big one. But most of these opportunities are, let's say, maybe $500,000 or $600,000, which is not unheard of in terms of opportunities in the food space. So it goes from, let's say, $10 million to a couple of thousand U.S. dollars in terms of the cross-selling. And that's the first step. The second step for us is now getting into the total solutions to do the whole thing. Second one was on science.

Yes. The science...

Yes. Yes. Well, I think that's a very, very important question, because we praise ourselves that we are a company which is doing art and science. And certainly, on the other side, it's even more science, and that's true. But we have seen in the DD and visiting many of their facilities that it is very close to our own, let's say, culture as well. And we should not forget that a big part of this business was old Danisco in Denmark, a company which is, let's say, producing -- has produced these solutions. [Audio Gap] look at their creative and R&D centers, which I've visited already, it's very much the same as you can find within IFF. We actually believe that the science, together with a bit of relationship and art, can be actually a very unbeatable combination going forward. Yes, please. Adam.

[indiscernible]

You just say it, and I repeat it.

All right. I was hoping to get just a little bit of both retrospective and forward-thinking on Frutarom. And clearly, it's had some discrete sales challenges in the first 16, 17 months that you've owned it. But beyond that, I mean, the premise was in part more fast-growing categories in naturals, more exposure, remixing the business towards small- and medium-sized customers. Is that premise still valid? Do you think you're delivering on the objectives outside of the discrete areas that you've called out? Or do you think there's more work to do in terms of we need to really put in place this Tastepoint structure around the world to really unlock that opportunity?