IFF creates flavors and fragrances for products such as soaps, detergents and beverages.

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What do you imagine success to smell like? It might be hard for some to describe, but for International Flavors & Fragrances (IFF), it might be a new car smell, a signature perfume from Estee Lauder, or the smell of the ingredients of roasted chicken.   

These are just a few of the thousands of scent and flavor profiles the company has a hand in developing, and its options for new profiles in the future are limitless.

The New York-based firm creates flavors and fragrances for products that range from fine fragrances and toiletries, to soaps, detergents and other household products, to beverages and food products. Of the 31,000 compounds it produces annually, about 46 percent are flavors and 54 percent are fragrances.

One of IFF’s key strengths in the industry is its ability to “help customers grow their brands, ingredients and technology, as we focus on consumer understanding and insight and what drives preference,” Executive Vice President and Head of Supply Chain Beth Ford says.

Armed with a cadre of perfumers and flavorists, IFF can work with a variety of customers to help position their brands based on research and development and creative thinking. “We’ve made significant investments in R&D; this is the future of our business,” Ford maintains.

Global Footprint
Growth in both the flavor and fragrance segments has placed IFF in a good position to continue to develop its R&D capabilities. Based on 2008 earnings, the flavors business saw growth in all markets, with categories such as beverages and confections outperforming the competition, Ford notes.

Fragrances experienced most of its growth in Asia and Latin America last year. “We feel fortunate to be in an industry that is resilient in the face of economic pressures,” she says. “Some 75 percent of our sales are outside of the United States, in the fast-growing and emerging markets.”

IFF will continue to focus on emerging markets in the future, as well as in mature markets where it sees growth in the beverage, savory and confectionary, as well as fabrics, home, personal wash and fine fragrance markets.

“We want to look at emerging markets because we have not grown as rapidly as we would have liked,” Ford says. “We would like to focus our manufacturing footprints in those regions.”

Creating an Experience
IFF has sales, manufacturing and research facilities in 31 countries. Skilled flavorists, perfumers, marketing and product application teams translate tastes and scents into an array of products based on consumer preferences. IFF recruits consumers near its main U.S. research facility in Union Beach, N.J., to conduct research.

“Our customers typically come and have in mind an experience that they want to create,” Ford explains. “We have research, consumer insights and creative centers where customers can really test different products and options to get the experience right.”

If IFF wins a contract, it then determines how the flavor or fragrance will be included in the manufacturing of the end-product. The company can create small batches or bulk tanks of a product, depending on how it will be involved in the manufacturing process. Although IFF watches trends in the marketplace, it is not at their mercy. Instead, Ford says, it prefers to listen to its clients and create product accordingly. Trends such as the natural ingredients phenomenon in the past two years has provided opportunity for the company to experiment with new fragrance and flavor creations.

“We are focusing on natural flavors and fragrances, which has been a huge area of interest recently,” Ford notes. Examples include exotic tea varietals, such as white peony and Long Jing, and a toolkit of chicken flavors benchmarked against dishes created by IFF’s own master chef.  

As part of an ongoing global program to expand and modernize its facilities, IFF announced in February the opening of its new Shanghai Creative Center. Then, in March, the company opened its 8,500-square-meter, four-floor creative center in Sao Paulo, Brazil.  

  The centers include state-of-the-art creation and application facilities, as well as consumer insights facilities that allow IFF and its customers to better understand the rapidly changing needs and preferences of the regions.

The centers provide a customer-focused environment for flavor and fragrance creation, and give the company a stronger presence in the regions. They will help it satisfy customers located in China, Asia and South America.

“This new center will give our employees and customers unprecedented access to world-class equipment, applications, and technology,” Chairman and CEO Richard A. Goldstein said in a statement about the China facility. “That's good for our co-workers, good for our Company as a whole, and good for the rapidly developing business community in Shanghai and throughout the Greater China region.”

With regards to the Sao Paulo facility, Goldstein added, “This investment strengthens IFF’s presence in Latin America and is part of an ongoing global program to expand and modernize facilities. IFF is dedicated to helping our customers grow their brands. To deliver on this, we must sustain our leadership in material science, creativity, and consumer insights. The new Sao Paulo Creative Center is another demonstration of this commitment.”

Strategic Alliances
IFF maintains a large network of suppliers – about 3,5000 supply between 8,000 and 10,000 raw materials – to support its manufacturing facilities worldwide. IFF’s global procurement team takes a categorical approach to managing the supply chain. “We’ve found a proven process for sourcing through a product category such as citrus or indirect material supplies or naturals,” Ford explains.

“If you look at the portfolio of items that we purchase, a significant number of them are in naturals, so we need to be concerned about crop output or spice output because were are using those base natural supplies, such as vanilla,” Ford says.

“We do global purchasing because we have a global business,” she adds. “We might want to source something depending on the currency situation or crop output and we have local vendors who can execute that for us.”

But Ford says the procurement process isn’t so much about finding a less-expensive product than it is about finding the right quality. “It’s not just a matter of finding a new citrus guy; these suppliers have to be approved from a regulatory and quality standpoint,” she notes. “We have specific tolerances and specifications on the raw materials we use.

“We work with our suppliers at the front-end by forming strategic partnerships,” she says. “If they have a certain technology that we don’t have or if they are making investments in a different product or in research, we partner.”

A formal quality management program helps the company comply with industry standards and bring competitive products to market.

Every IFF facility is ISO 9001: 2000-certified, and employs the HACCP system, Good Manufacturing Practices and also meets the American Institute of Baking standards. It audits new suppliers’ business, quality and technical systems to ensure they meet IFF’s requirements. Also, special testing programs are employed to detect and prevent contamination and other irregularities from entering IFFs’ raw material supply.

Furthermore, each product goes through quality checkpoints from raw material to the final product before being released to the marketplace.  

The company says all finished products undergo final quality control testing, which consists of sensory, analytical and microbiological analysis.

Appealing to the Senses
Demand for flavors and fragrances in the United States is forecast to grow 3.7 percent per year to $5.3 billion in 2012. Increasing consumer interest in natural ingredients, which are generally more expensive than their synthetic counterparts, will support growth.  

Also, trends toward more complex and exotic flavors and scents will boost demand for new flavor and fragrance blends. These and other trends are presented in “Flavors & Fragrances,” a new study from The Freedonia Group Inc., a Cleveland-based industry research firm.

Through 2012, the cosmetics and toiletry market will record advances. Skin care products are expected to provide strong opportunities for growth, reflecting expansion of the skin care industry itself, as middle-aged baby boomers and older adults seek anti-aging products and manufacturers continue to target growth segments such as men, teenagers and infants. Fragrances will continue to play a role in product differentiation, aiding demand growth.  

Environmental fragrance goods will also experience healthy gains through 2012, driven by sustainable products and household applications, as well as consumer desires for more sophisticated fragrance combinations.

Candles and a host of innovative air freshener products designed to control offensive odors or provide a pleasant smell in living and working areas will spur demand for fragrances.

Despite relatively slow growth, food will remain the largest market for flavors and fragrances, based on the widespread application of flavor materials in processed food, dairy and bakery products, candy and confectioneries, and other items. The expansion of fortified food, as well as beverages, will provide opportunities, since flavors are often used to cover up the off-tastes of vitamins, minerals, antioxidants and other added ingredients. Although beverage flavor demand will grow slowly, good opportunities remain in this market.