Ladies and gentlemen, welcome to the Givaudan 20 21 Half Year Results Conference Call and Live Webcast. I am Alice, the Chorus Call operator. Would like to remind you that all participants will be in listen only mode and the conference is being recorded. The presentation will be followed by a Q and A session. The conference must not be recorded for publication or broadcast.
At this time, it's my pleasure to hand over to Mr. Gilles Andre, Chief Executive Officer, accompanied by Tom Hallam, Chief Financial Officer of Giraudon. Please go ahead, gentlemen.
Thank you, operator. Ladies and gentlemen, so welcome to our 2021 half year results conference call. I'll make this call together with Tom Hallam, our CFO, who We'll take you through the presentation before answering your questions at the end. The company news on our half year results 2021 were published on our website this Morning. This is where you will also find the slides for today's presentation.
Along with the media release, you will find our 20 21 half year report on I'd like now to start going through the presentation. I invite you to turn to Slide number 3 to go through our performance So I'm very happy to share with you both the excellent sales growth and the Strong financial performance for the first half of twenty twenty one we published this morning. For sure, going back 6 months ago, as We started the year. The outlook for 2021 was full of uncertainties, difficult to predict consumption patterns In a world showing very mixed signals, both from an economic standpoint and from a pandemic standpoint. As our half year 2021 results demonstrate, our sales continue to benefit from a robust demand of the resilient categories, While the 2020 pandemic impacted categories strongly rebounded, these strong results demonstrate That our strategic choices for the coming 5 years make perfect sense.
Actually, many of the consumer trends, If not all of them, on which we have built our 2025 strategic plan have been amplified by the pandemic. Health, beauty, home and personal care, well-being, naturals, alternative proteins, to name a few. And the pandemic has certainly not stopped us To continue investing on innovation, to continue to be best positioned to support those different growth spaces with our clients. We made as well an excellent progress with the integration of our recent acquisitions over the last months and for the full the rollout of SAP and GBS on In a nutshell, our 2025 strategy is well underway. In the first half of twenty twenty one, we reached sales of CHF 3,400,000,000, a growth of 7.9% on a like for like basis and 4.7% in Swiss francs.
This was achieved across all markets, all segments And all customer categories supported notably by high growth markets, local and regional customers and many of our key strategic Product categories. Like what many of our customers do, the true comparison for 2021 is versus the pre pandemic levels, namely half year twenty nineteen. So I'm happy to share that Givernor has grown 12 point 3% on a like for like basis versus 2019. In other words, despite the virus Still being quite active in many parts of the world, the pandemic has not stopped us from growing faster than the pre pandemic CAGR rate. We achieved an EBITDA of CHF 809,000,000, growing 10.2% compared to 2020.
It represents an underlying EBITDA margin of 24.2%, improving from 23.7% in 2020. Free cash flow reached CHF186 1,000,000, representing 5.5 percent of our sales, the same ratio as for the first half of twenty twenty. So I'm very pleased with the strong performance of our business, With all parts contributing to these excellent financial results. In an environment which still contains many uncertainties, We have shown our resilience, our focus on supporting our customers and our ability to capture opportunities and assert Our market leadership, whilst keeping our employees safe on the givaudan side. Let's now turn to Slide 4.
On a like for like basis, our Fragrance and Beauty division grew 10.1%, and our Taste and Well-being division grew 6 0.1% versus 2020. As I mentioned earlier, this performance was driven by the virtuous combination Of the resilient categories, which continue to grow on top of the double digit growth of last year And the very strong recovery of the more discretionary categories, namely fine fragrances and food services. Once again, all our strategic focus areas complemented by acquisitions have contributed to our growth, namely health and wellness, Natural's local and regional customers outperformed sales with our multinational customers, Which also showed, by the way, a good momentum. When compared to 2019, this represents a growth of 15 for fragrance and beauty and 10% for taste and well-being. Actually, all customer categories, all regions and all product categories, With the exception of foodservice, are above 2019 levels.
Let's turn now to Slide 5. Since the start of the pandemic, a relevant way to look at our sales development has been to split our portfolio in 2 main categories: On one hand, the resilient categories accounting for 84% of our group sales, which include consumer products And Active Duty and the core business of Taste and Well-being. It is worth highlighting that after 4 consecutive quarters of strong growth, We were back to single digit numbers in Q2 2021 against the very high comparable of Q2 2020. Overall, the resilient categories grew 5.8% during the first half of twenty twenty one with an equal growth Between across the two divisions. On the other hand, we have the high impacted Accounting for 16% of group sales, fine fragrances and foodservice.
As you can see, these categories have grown 22.4%, Strongly recovering, especially in the Q2 against the strong decline of last year's Q2. Fine Fragrances showed a very strong rebound in the first half of twenty twenty one as retail activity picked up, Customers maximizing the direct selling and e commerce channels. Our fine fragrance sales were also certainly supported by consumers Redirecting what they had not spent on travel, restaurants and entertainment to those beauty categories. Again, if we compare to pre pandemic levels, spine fragrances is 13.1% above 2019 on a like for like basis. Foodservice has also strongly recovered in the Q2, but has remained below pre pandemic levels for the half year As corporate hospitality, sporting and artistic events have generally not resumed in most geographies.
Let's now turn to slide 6. In the first half of twenty twenty one, high growth markets delivered a 10 point 4% growth continuing on the regain momentum we already saw since the end of 2020. This was achieved despite the current pandemic still impacting major high growth markets such as Latin America, India or Southeast Asia. Latin America kept performing very strongly in its 3 major markets, namely Brazil, Argentina and Mexico. Africa and Russia contributed with strong growth levels as well as Asia Pacific as a whole.
China, which recovered from the pandemic as early as the Q2 2020, continued on a very strong double digit growth, Whereas India reported single digit growth and Southeast Asia, notably Indonesia and the Philippines, Remain more challenging. In the mature markets, we grew a more than healthy 6.1%. The recovery of fine sorry, the recovery of fine finances and foodservice supported the strong recovery in North America As the economy reopened faster than most other regions. Western Europe also recovered strongly as many markets reopened, whilst the markets of Asia, notably Japan, remain affected by the pandemic. High growth markets Made up 43% of our overall sales in the first half of twenty twenty one, a consequence of the acquisitions we made in mature markets, Combined with the currency situation in the high growth market, our presence in high growth markets has always been a key driver for our growth And continues to be one of our key strategies for 2025.
Despite recent hiccups in some market Structural demographic trends, the ever growing middle class and the strong urbanization trends will continue to support the growth of these markets, especially in Asia, where urbanization and the middle class are still below average. Our market position and our operations footprint to service the wide diversity of our clients. We have seen in the past 18 months How critical our geographical balance is creating natural hedges against a crisis like the COVID-nineteen, where the timing of the pandemic has been Quite progressive and with a different intensity depending on the geographies. Please now turn to Slide 7. I'd like to highlight the sales development by region for the group.
As you can see, all four geographies have contributed to our overall growth, None of them achieving a like for like growth below 5%, all of them significantly above 2019 level. Sales in Latin America continued to perform extremely well and remain ahead of the other regions with another outstanding growth of 1.2%, driven mainly by the 3 key markets of Argentina, Brazil and Mexico, Volume growth contributing to 80% of this growth. Latin America is 36 percent above 2019 level on a like for like basis. North America is also delivering an outstanding growth With a 7.5% like for like sales performance as a result of a much more favorable pandemic situation and a strong rebound of the economy and the consumer demand. The growth in Asia Pacific was 6.3% With double digit growth in China and single digit growth in most other parts of Asia, with the exception of Southeast Asia.
Finally, Europe, Africa and the Middle East grew 5.5% with a very diverse situation across the various markets, But generally supported by the strong recovery of Fine Fragrances. Let's turn now to Slide 8. The Fragrance division grew 10.1% on a like for like basis and 7.4% in Swiss francs. This double digit sales growth was mainly driven by the strong rebound of the fine fragrances, particularly impacted by the COVID-nineteen pandemic And the acceleration of the Active Beauty business. Fine Fragrances sales increased by 34.5% On a like for like basis, against the first half of twenty twenty, when sales declined by 16.4%.
In the 1st 6 months of 2021, there was a strong rebound of the existing business across all customer groups. In addition, new business wins contributed to the strong performance. All regions delivered strong double digit sales growth, Including Western Europe, where Prestige Brands showed a very strong rebound after having suffered strongly from the COVID-nineteen pandemic, Particularly in the first half of twenty twenty. North America and high growth markets also recorded strong double digit sales growth. Consumer Products sales increased by 4.1% on a like for like basis against the very strong prior year comparable of 11.8%, which was driven by an increased demand for household, health and personal care products related to the onset of the COVID-nineteen pandemic.
The growth in the first half of twenty twenty one year was achieved in both high growth and mature markets and across all customer groups. The sales growth was led by Fabric Care, followed by Personal Care and Home Care. Sales of Fragrance Ingredients and Active Beauty grew by 14 point 4% on a like for like basis against flat sales in the prior year. Active Beauty saw a very strong rebound in the first half the year and reported mid double digit growth in both high growth and mature markets. Fragrance Ingredients reported Strong single digit growth driven by key international and local and regional customers.
Now let's turn to the next slide, number 9. Taste and Welding sales were CHF 1,800,000,000, an increase of 6.1% on a like for like basis and an increase of 2.5% in Swiss francs. The strong sales performance was driven by new wins And good business momentum across all regions and mainly with local and regional customers. Whilst the sales performance was Still affected by the impact of the COVID-nineteen pandemic across many countries, there were positive signs of recovery in certain markets where Vaccination rates and progressive reopening resulted in higher demand for foodservice products, particularly in The Q2 of 2021. In the key strategic focus areas, sales increased double digit in plant based proteins and high single digit In Health and Wellness and Naturals, from a segment perspective, the positive sales performance was mainly driven by beverages, Sales in Asia Pacific increased by 5.1% on a like for like basis.
In the high growth markets, China delivered strong double digit performance followed by solid single digit growth In the Philippines and Vietnam, whilst Indonesia and Thailand were still impacted by the COVID-nineteen pandemic. In the mature markets, growth was driven by Australia, Korea and Singapore. In South Asia, Africa and Middle East, The business grew by 3.5 percent with double digit growth in India, Algeria and Nigeria, Offset by primarily a sales decline in South Africa. The growth was driven by beverages and dairy for the region. Sales in Europe increased by 1.7% on a like for like basis.
The mature markets of Germany, Italy, Spain and Sweden All achieved good single digit sales growth, whilst in the high growth markets, there was excellent business momentum, Driven by double digit growth in Russia and Poland. Throughout the first half of twenty twenty one, the region was still impacted by the restrictions related The COVID-nineteen pandemic with some relaxation in those measures being seen only more recently in a number of countries. On a like for like basis, sales in North America increased by 6.1% across all customer segments. The strong performance was a result of new wins, a rebound in food service and the growth of existing business beverages, immunity products, savory and sweet goods. Finally, sales in Latin America increased 23.4 percent on a like for like basis, led by a strong double digit volume growth in Mexico, Brazil, Colombia, Chile and Argentina and across all segments.
With this, I'd like now to hand over To Tom, who will give you more granularity on our financial results.
Thank you, Shiel. I would also like to welcome you all to our conference call. Gilles has taken you through the business performance of the group As well as the main aspects of the market and regional development. On the following slides, I would like to focus on the operating performance of the group as well as the 2 divisions. Let's start with the performance highlights on Slide 11.
Group sales increased by 7.9% on a like for like basis, which excludes the impact of acquisitions As well as the currency impact. In Swiss francs, sales increased by 4.7%. The reported EBITDA increased to CHF 809,000,000 Compared to CHF 734,000,000 in 2020, and the underlying EBITDA margin remained very strong At 24.2 percent. Net income was CHF481 1,000,000 or 16.3 percent of sales Compared to CHF 413 1,000,000 in 2020. Finally, the free cash flow as a percentage of sales was 5 point 5% compared to 5.5% also in 2020.
In the following slides, we will cover the group's performance in more detail. Please turn to Slide 12, Which shows the exchange rate development. Once again, the Swiss franc strengthened against some Major currencies in which the group operates, but is more stable against others in comparison to the prior year. The impact is less pronounced in major market major mature market currencies and more pronounced in some emerging market currencies Such as the Brazilian real. We still believe that our operational and geographical spread Continues to provide good natural hedges and our EBITDA margin remains well protected against these currency fluctuations.
Please turn to Slide 13, which shows the group operating performance. In 2021, the group continued to achieve productivity gains and demonstrate a strong cost discipline. This resulted in a gross margin which improved to 43.9% in 2021 Compared to 42.2 percent in 2020. Referring to the previous slide, Although we are naturally hedged at the EBITDA margin level, currency movements can cause some fluctuations on individual lines of the income statement, Including the gross profit. As I mentioned, the EBITDA increased to CHF 809,000,000 in the 1st 6 months of 2021.
In this period, the group incurred costs of CHF 7,000,000 related to to acquisitions and restructuring compared to CHF 24,000,000 in the previous year. As you can see on the bottom right of the chart, our underlying EBITDA margin was 24.2% in 2021 Compared to 23.7% in 2020. This increase is driven by productivity gains And a strong cost discipline. On the next two slides, I would like to spend a moment on the operating performance of the 2 divisions. Please turn to Slide 14.
We will start with Fragrance and Beauty. The Fragrance and Beauty division recorded a sales increase of 10.1% on a like for like basis And 7.4% in Swiss francs. The division recorded CHF 375,000,000 of EBITDA Compared to CHF 333,000,000 in 2020. The margin showed a good increase compared to the prior year, Driven by higher sales as a result of the recent acquisitions in the division and our actions taken to contain expense As mentioned at the group level. The EBITDA margin was 24% on a reported basis And 24.2% on an underlying basis.
If you now turn to Slide 15, I will comment on the taste And well-being performance. The Taste and Well-being division recorded a sales increase 6.1% on a like for like basis and 2.5% in Swiss francs. The reported EBITDA increased to CHF434 1,000,000 from CHF 401 1,000,000 in 2020, Again, as a result of continued productivity gains and strong cost discipline. The reported EBITDA margin was 20 in 2021 was 24%. And on an underlying basis, the EBITDA margin was 24.3%.
Please turn to Slide 16, which shows the net income of the group. The income before tax increased to CHF 566,000,000 from CHF 488,000,000 in 2020. The non operating expenses were slightly lower compared to prior year, CHF 47,000,000 in 2021 Compared to CHF 52,000,000 in 2020. The net income was CHF481,000,000 For 14.3 percent of sales, the group's effective tax rate increased to 15% in 2021 compared to 14% in June 2020. Basic earnings per share Increased to CHF 52.19 in 2021 compared to CHF 44.8 In the 1st semester of 2020.
Please turn to Slide 17 for the cash flow performance of the group. During the first half of twenty twenty one, the Givaudan generated a free cash flow of CHF186 CHF 6,000,000 or 5.5 percent of sales compared to CHF 178,000,000 also 5.5 percent of sales in 2020. The operating cash flow for the first 6 months of the year was CHF 415,000,000 compared to CHF389,000,000 in 2020. The group continued its investments to support the growth in all markets. As such, Total net investments was CHF 120,000,000 and as a percentage of sales, net investments were 3.6 percent in 2021 compared to 4.3% in 2020.
Working capital increased to 28.3 percent of sales compared to 27.9% in 2020 Due to temporarily higher inventory and accounts receivable levels related to the good business momentum and the continuing Overall, the group showed a strong financial performance In the 1st semester of 2021, I'm very happy with these results and the free cash flow delivery in the 1st 6 months of this year. Please turn to Slide 18 to look at the amortization of intangibles. We've updated the projection here to reflect the latest acquisition in Mirasync, We completed in the 1st 6 months of 2021, and it gives you a future perspective of the expected amortization. If we turn to Slide 19 to look at the debt profile of the group. The group continues to have a well balanced debt profile with a weighted average effective interest rate of 1.48%.
Furthermore, on this slide, you see the debt maturities of the maturities of our debt profile As well as the average interest rates for each debt maturity. With this, I would like to conclude my part of the presentation And hand back to Gilles.
Thank you, Tom. The company's 2025 ambition is to deliver sustainable value creation for all stakeholders of Giraudon. Giraudon's 2025 strategy is fully in line with its purpose And paces customers at the heart of its business, supporting them to grow and to create products that are loved by consumers. Let me remind you the main foundations of our current strategic cycle. The 2025 strategy is focused around 3 growth drivers.
First one is about expanding our portfolio. It's about expanding our customer reach, and it's to have a focused market strategy. And it is supported by 4 growth enablers, which are aligned with the company's purpose domains, namely creations, nature, people and communities. These three growth drivers and four enablers are all underpinned by a commitment to excellence, innovation and simplicity in everything we do. Let's turn to Slide 22 on our performance commitments until 2025.
We have initiated our new 5 year And as I mentioned earlier, so far business trends, customer needs and consumer behavior in an environment impacted by the pandemic Are confirming and reinforcing our strategic choices. Ambitious targets are an integral part of givaudan's 2025 strategy, With the company aiming to achieve organic sales growth of 4% to 5% on a like for like basis and free cash flow of at least 12%, Both measured as an average over the 5 year period strategic cycle. In addition, the company aims to deliver on key nonfinancial targets around sustainability, diversity and safety linked to Givaudan's purpose. I'm confident we are on the right path to deliver this ambition. Let's turn to Slide 23.
Let me now give you some facts about the coming months. H1, H1, the first half has demonstrated a strong recovery of the categories most affected by the pandemic And the further development of the categories, which revealed as being resilient in 2020. We are quite confident in our choices, our capabilities and the important role that we play in the global value chain for food and consumer products. The pipeline of briefs with our customers is strong, demonstrating their appetite for innovation and the trust in Givaudan. However, there remains a high level of uncertainty related to the continuing COVID-nineteen pandemic.
We clearly remain focused on operations By protecting and supporting all Givaudan personnel, by focusing on maintaining operations and supply chain performance at high levels to support Day to day our customers and continued cost discipline throughout the business. Finally, integration of the acquired companies onto the givaudan's operating platform continues as planned, and we are progressing further with the implementation of the 2025 strategy. So now, ladies and gentlemen, many thanks for your attention. Tom and I are looking now forward for your questions.
We will now begin the question and answer session. The first question comes from the line of Celine Panuti with JPMorgan. Please go ahead.
Good afternoon, everyone, and thanks for taking my question. So first, I would like to ask about the growth outlook. I mean, what you said that what The resilient part of the business has been resilient. If I look on the 2 year average, sequentially, we have Seeing a slight deceleration. So my question is, is it possible to for you to give us an idea of what is the Underlying demand now maybe that we are entering some form of normalization.
And the corollary to that question In emerging markets, I've seen that sequentially, there has been a deceleration. So any The views that you have when we hear that some of your customers need to raise prices a lot and Maybe there could be some elasticity on demand. So that's my first question. And my second question is on raw material inflation. So you have reiterated 1 And congratulations for the year.
If you could confirm the good visibility that you have on that. But more importantly, how should we look at your cost base maybe as we look a bit further out when a lot of the other Industries are seeing cost inflation. Is there something I mean, do you think that your raw mats are specific that you would not see that? So if you could comment
Okay. Thank you, Celine, for your questions. So well, I'll start maybe by the latter. So on raw material inflation, We can confirm that we are within basically the range of what we originally stated in January, so 0% to 1% of raw materials increased for 2021. And the confidence that we have in this visibility It's driven by the fact that we have a number of contracts with suppliers, and we obviously have Managed to source ingredients throughout the year as well with those sort of levels prices.
So for sure, we see inflation with other categories. Now the question was, what will happen in 2022? And that's a bit too soon to articulate a number because a number of contracts needs to be negotiated, and The year is not finished, so we'll make sure that we give an outlook on the raw materials development next year towards the end of the year. On the first question on the growth outlook, I'm not so sure I have the same reading of our own figures Because actually, if you take however you take it, Celine, on the resilient business and if you take, for example, I think The question was especially on the consumer products. One has to look at half year to half year.
So whether you take CAGR over from 'nineteen to 'twenty one or from 'twenty to 'twenty one, we actually are on a very regular pace of 8%. So the only thing that you could argue is the difference between Q1 and Q2. And it's true that we have had a very Strong growth in Q1, which sort of decelerated in Q2. But overall, the half year still has a good growth. And I would say the same thing has happened a bit in Asia Pacific.
So I'll give you the in a way, it's the same reason for both cases, Meaning that in Asia, and especially on taste and well-being, we have seen a very strong growth in the early part of the year, so in Q1, which sort of was lower in the Q2. But in both cases, that has to be put on The account of the fact that we have seen maybe a number of clients sort of preparing On a sort of in a nasty way, an urgent way, preparing maybe the for the post COVID By ordering a lot in the Q1 and then slowing down in the Q2. But this is not from what we hear from our clients, What we see driven by sort of a difference in consumer demand across Q1 and Q2. So it's really another pattern which has Sort of being stronger in the Q1 versus the Q2. But overall, if we read our figures half year to Half year to half year over 3 years or 2 years, the pace is really the same.
So nothing to be, I would say, concerned about. The only question in terms of Outlook, which is difficult to make for the 2nd semester, is simply the fact that it is really to look at the comparables of Q3 and Q4 of last year, and for that, you have all the figures. So that's basically what I can say for those two questions.
Yes. Thank you very much. Just on the point I was making about price being right across the board, it's not only in EMs, but as well in VMs by some of your Clients or many, do you expect this could have an impact on consumption and therefore on demand ultimately for you?
You mean the price increase of our own clients? Is that what you're saying?
Yes, yes. Like, I. E, some the elasticity of consumption given higher prices?
Yes. Well, so far, we have not seen any trends in this direction, any effect to this. And anyway, I count on the sort of the, I would say, the natural hedges that we have because Don't forget, we are again across all class, all categories and so forth. So when you have consumers trending down to other categories at lower prices, we are still there. So and we have seen that in the financial crisis.
We have seen that in the economic crisis. We have seen that every time where those natural hedges help us to Recapture consumers on other categories of the clients when they leave the sort of more pre owned categories. But so far, we have not seen any effect of that. And in a way, we could argue that fragrance, flavors, sort of value added ingredients around active beauty, Again, are critical to the consumer choices. The way brands communicate around Those consumer benefits and in a way helping or supporting Basically, the sales and whatever happened from a pricing standpoint, we have never seen this effect of elasticity on our sales From a overall standpoint.
Thank you so much.
The next question comes
from the
line of Jean Philippe Bertie with Vontobel. Please go ahead.
Good afternoon, gentlemen. The first question would be on your comment, Gilles, that you are like investing in new facilities. And When I look at the strong growth over the first over the past 3 years, if we take like LATAM or Active Beauty, If you still have some capacity, if you have to invest in additional capacities or facilities in those areas, I think that time is like 1 third more volume than in H1 'nineteen as an example. And the second one is on M and A. If you can give some color on the impact on both growth and gross margin improvement and especially on Matchex, Which probably was outperforming in this crisis.
And the sub question would be on your ambition in the makeup. You spent quite an amount on B color makeup, and what is your plan with that stake in this company, please?
Okay. So thank you, Jean Philippe. So yes, new facilities, CapEx expansion. Well, If we look back where we are growing extremely strongly, I mean, first, I would say China, India, Those two markets, we actually have invested quite a bit. And actually, the largest investment we ever made was for the fragrance And every time we make those very significant investments, it gives us Well, depending on the growth rate, but it gives us 5 to 10 years of capacity to grow within those And then you increase capacity as you go by adding equipment and so forth.
So in Latin America, Sure. We have plans to further expand some capacity, but this will be within the range of what we spend in terms of CapEx, 3% to 4% for the group. We can really accommodate for those types of facilities. But it's a good problem to have, in any case, Adding capacity to sustain growth. But so far, we are well equipped in terms of Capacity.
So then the second question about M and A. I'm really happy about the fact that we did not comment that, but it's true that if you look at already at the end of 2020 or if you look at the first half of twenty twenty one, That especially the acquisitions which went into Taste and Well-being, but also the one like Dorm going on the Fragrances, You can see from the EBITDA level that we already brought most of them to the level of the division pre acquisition. And that includes also Naturix, which basically, yes, there is still some Things to be done in terms of rolling out SAP, GBS and so on. So still a bit of savings to be made. But so far, so very good.
Bringing all those assets, and that's, to name a few, Dom and Angouer, Obviously, Naturaix Express Non Parfumet, basically to the level of the division. Then we are very happy also about what Naturix brings in terms of growth when you think about immunity products. Immunity natural extract NatuX represent roughly 40%, and all and let's say 80% of that is in the U. S. That has been booming in 2020 and continues to do extremely well.
So those are the types of when we talk about 2025 and when I talk about portfolio That includes those types also of products, which in such an environment with the pandemic, really plays a very good role. So in terms of M and A, we are really, really happy. I mean, if you just think about the value creation, as you've seen, Obviously, we passed the €40,000,000,000 mark in terms of market cap. I would say that acquisitions and the way we have created value through them Has contributed nicely to this increase. As it relates to Bigolor, Well, it's a very interesting step into a category which is part of beauty.
If you just think about, Let's say beauty the market of beauty in terms of retail, I would say to make things simple, It's 1 third, 1 third, 1 third. So 1 third fine, 1 third skincare and 1 third makeup. We are quite active, Obviously, in Fine Fragrances, we have made great progress with Active Beauty in the skincare. I know it's really our with all those I mean, Active Beauty is also a success story for Givaudan. It's going to hit more than €100,000,000 this year.
It's growing high double digit. It's really a success story. So makeup is really So makeup is really about exploring how we can participate with high Value added not only ingredients but solutions, actually what's very interesting with the bicolor is that in a way they have the same sort of business model Combining ingredients to create solutions which are specific and customized bespoke for the brand. So this is really something that we want to explore, build upon alongside of Bicolor. So very happy about this step into To this sort of 3rd leg of beauty where we never really participated.
So, yes, that's I hope I answered your 3 questions.
Thanks very much.
The next question comes from the line of Heidi Bessereden with Exane BNP Paribas. Please go ahead.
Hi, good afternoon. So the question the first question is on taste and well-being. If food service keeps improving, Should we expect retail to slow further? Or are there any new initiatives that could keep retail growing regardless of what happens out of home? And then on inflation, you had said 1% for the full year.
Could you tell us what it was in H1? And I wondered if you plan to add strategic Stock in H2, given it is an uncertain environment out there. And then another one lastly on margins, a related question. Given that many of your customers are warning on margins given high raw material costs, do you see incremental Appetite to reformulate or perhaps even price pressure or resistance to take pricing from customers? What's the outlook there?
Thank you.
Thank you, Heidi. So inflation on the raw mats, essentially, it's across The 2, we've seen 1% in the first half, and we continue to have the same level in the second half, so overall 1% of inflation. We usually don't play too much building stocks to play the market in a way because that's also eating a lot of free cash flow. But Those strategies are used in a sort of a minimal way. And So then your questions about margins.
Sorry, you said I didn't understand. On the margin, you said the high
On reformulation. On the reformulation, sorry.
So on the reformulation, we have not seen any ask, any request so far to reformulate. The Again, this demonstrates that it's the importance of those ingredients Basically, in the consumer liking and the consumer behavior, if you start to play around with the whole sensory profile of a product For cost reduction reasons, you really take a risk on the performance and the success of the brand. So it's and plus, we account for so little in the end products, it's whatever, it doesn't really help on the whole cost of the formulation. So this is really Not something we have seen. We can this is something which is being used when you have an increase of our own raw mats, and there we work with our clients Sometimes to reformulate and try to mitigate some of the cost increase.
Then on taste and Well-being, so your question, you said food service is improving. Is that what you said?
Yes, food service improves.
Yes. What happens to retail?
Yes. Well, it's yes, what you don't eat Outside, you eat inside and vice versa. But at the same time, you still have potential increment net benefit because In Foodservice, you have a lot of things around, for example, sports events or corporate events in hotels or All those events basically are being served and help the development of the food service. So those things, As this sort of come as the activity sort of increases, can help the foodservice without necessarily cannibalizing So yes, there might be an incremental improvement of the but you have to also take Be mindful that foodservice only accounts for CHF400 1,000,000 to CHF500 1,000,000 of sales Out of €6,300,000,000 €6,400,000,000
The next question comes from the line of Matthew Yates from Bank of America. Please go ahead.
Hey, good afternoon, everyone. A couple of questions. Maybe the first one for Tom. You talked about cost discipline helping the margins. But also in the introductory remarks, you emphasized that things like travel and entertainment are probably still well below precrisis levels.
So Can you just elaborate for me in terms of when you say cost discipline, how much of that is just transitory or temporary savings that haven't gone back into the business yet? And how much is perhaps more fundamental or sustainable? And then the second question maybe for Gilles. There's an awful lot of distortion at the moment from the comp effects of last year and you talked about the customer restocking, getting ready for reopening. But are there parts of the portfolio where you believe you're meaningfully taking share from your competitors because of your better product offering?
Yes. So I can start with the second question. Well, to answer the question on market share gain, We are the first ones to publish, so let's wait for the other ones to publish to know to answer more accurately this question. If I go alongside of what has happened for the last not only year, but I would say years, we certainly have gained market share From some of our key competitors. And I'm confident that we are, If not market share gaining, but clearly being at the level of the market.
But let's see how the others are doing. Again, we are very happy about the sales development on all fronts. And really something that I think needs to be reminded Since we are comparing to competitors, you will know as the sort of broadest Natural hedges across the three dimension: clients, products and geographies. And this is really something that I think It's helping delivering those consistent results. This is part of our strategy.
This is part of the way we do acquisitions. This is part of the way we define the spaces in which we want to grow, usually the spaces where we have low market share. So this is really the consequence of this natural hedges is the consequence of the strategy, and I think that helps us growing well against competitors. And so the first question, Tom, maybe you want to?
Yes. Thanks, Sheldon. Thanks for the question. Look, I think if you look really from a macro perspective, I think the easiest to do is to look at the improvement in the margin over the last this 1st 6 months compared to the last or the 1st 6 months of 2020. And on that incremental growth of just under 8%, we had an EBITDA margin of 31%.
When we are growing, we are growing at a higher margin to our existing margin. A couple of the items that you mentioned, I mean, you mentioned travel and clearly, We were not traveling in the 1st 6 months of this year. To be very honest, we were probably not traveling for 4 months out of the 6 months last year as well. On the other hand, and of course, you've seen this from many companies, and Gilles also referred to it, if you look at Some of the ancillary costs, I mean, particularly freight costs, has been extremely high in the 1st 6 months of the year. Just the general transportation cost is high.
And then very specifically, The so called Texas freeze, which had an impact on us, and here we were Absolutely determined to make sure we continue to supply our customers. And of course, that came at a certain cost. So I think, as I've said probably last year, it's swings and roundabouts. You tend to have one cost bucket going up, the other one going down. But overall, we maintain a very, very strong cost discipline.
The next question comes from the line of Daniel Borte with Serje Cantonal Bank. Please go ahead.
Yes. Good afternoon, gentlemen. I would have a question regarding your restructuring costs. They are much lower than we thought. It means you are ahead of Plan with the integration of all the companies?
Or is more coming maybe in the second half? If you could elaborate a little bit on this. Thank you.
Yes. Actually, Daniel, I think we're probably slightly behind plan simply because of The way that we're operating today, I mean, if you look at many of our facilities, as Sheila And I have both mentioned, I mean, we're very much focused on meeting the demand of customers with an extremely high volume demand. It's challenging really to also look at the let's say the supply chain and the footprint. So We're slightly behind. It's more a timing issue.
And there will be some in the second half of the year And probably some more coming into 'twenty, the first half of next year as well. Thank you.
The next question comes from the line of Lisa DeNeve with Morgan Stanley. Please go ahead.
Hi. Good afternoon, everyone. So, so far we talked a little bit about reformulations and market shares. And coming back to that and More broadly, what are you seeing in the consumer pipeline and in customer briefings? Is there a difference between regional and multinational customers?
Is there a notable difference between certain categories, for example, between Active Beauty and Plan Based? And alongside that, I've also you mentioned a number of New business wins. So I would like to understand if this references to, again, you taking share, is this a better market Backdrop or is it you growing into newer markets such as plant based, functional nutrition and so forth? A bit of granularity around that would be very helpful. Thank you.
Well, it's a bit of everything. That's the magic of our business. So yes, what we see so first, what we In terms of the nature, and that's always interesting to analyze what we call the bridge pipeline. What's the nature of the bridge that we receive? So essentially, when we say that the strategic choices that we have made around Naturals around clean label, around plant based proteins, around essentially But as well on the core business, around fine fragrances, around Fabrica using more capsules, for example, the importance of making Fragrances performing on fabric and so forth, all those things which are, in a way, consumer driven For more cleansing, caring but also enjoying are true and have been amplified, especially The thing on health and I've been really amplified by the pandemic.
The thing which comes on top is also The whole, let's say, and this is really very much are customers driven, basically much more an appetite for sustainability, meaning that even though you could argue that what we make in terms of ingredients have a very small CO2 footprint, extremely small CO2 footprint. It's still part of we are still part of the journey that we are Embarking with our clients to make products and to whether on the ingredient side or the way Our perfumers and the flavor is formulated to make those formulations less CO2 impactful. So the element of facility is coming on top and is contributing to the nature of the To the nature of the brief that we see, so what's the difference between local and regional clients and the large ones? Usually, it's about time. It's About the speed of the execution of locals is quite fast.
The appetite for risk is quite high. And so it's and the granularity of understanding consumers and so forth is also quite fine. So that's also the typical differences that we see across those categories of clients. Then in the yes, in terms of new business, this is at the heart of our business. To grow To grow faster than competitors, it's all about winning more briefs than the others.
That's as simple as that, simply because, as you know, the arithmetic About our sales growth is a combination of an erosion of our existing business, Which we can't do much about because that's what is being driven by our clients, by consumers, and we can't really act upon it. And this is compensated by enough new wins to have a net growth of, whatever, 4% to 5%. And so That's the part that we can influence. And so winning more briefs on the brief pipeline that we work on, on a continuous basis is the key to Grow and to grow faster than the others. So yes, we when we grow faster than the other, it's just a question of winning more business And the others, and that's driven by the combination of a number of things, which is basically the magic formula Maybe of Giraudon, our artist in our business, which is about client relationships, innovation and so on, and making Products which are successful on the shelf for our clients.
Thank you very much for that.
The next question comes from the line of Vishay Sharma with Stifel. Please go ahead.
Hi, good afternoon, gentlemen. I have actually just 2 left. One is on plant proteins. You mentioned that you saw Strong growth at Plant Produce. Could you just tell us the size of this business and how should we expect this to develop?
The other question is on the So we've been talking a little bit more about Active Beauty recently and you've renamed your segment Fragrances as well. Just wondering where do you see the opportunities the most, because the competitive landscape seems to have not changed. So what are you doing differently that puts you at an edge compared to competitors? And where should we see The business developing.
Yes. So the size of the plant based protein, I mean, actually, it's a very Exciting space because we actually started innovating, developing specific ingredients and which are usually called taste modulators Combined with flavors to make solutions which actually make those proteins, those alternative proteins, whether it's made Of peas, of soy or whatever other source of proteins, it's all about making those things Taste good and because that's extremely key for consumers. At the end of the day, it's not good enough to say I replace animal by plant based protein. If it doesn't taste good, consumers won't try a second time. And so the business now, the business size It was CHF 66,000,000 in the first half.
So we are talking roughly, we are at the pace of CHF 130,000,000 CHF 140,000,000 For a full year and growing very fast because we started maybe 4 years ago. How far can it go? Well, it can go quite far, difficult to define because it's all going to be it's a new space. It's It's a new space for consumers, so it's all going to be defined by the fact that our consumer is going to pick up The plant based proteins propositions, but a lot of startups, a lot of existing clients are investing into this space. And I think it's whether it's a risky one or not, we ought to be in this business because the likelihood that this case should be big It's fine.
And we are very well placed in this field, if not the best place in the plant based protein. The Active Beauty It's also a space which we came into as an adjacent space to 2 fragrance and to 5 fragrance. Why is it successful? I think it's a good we achieved a good combination of the acquired company in the path of InduChem, of Soliance, but also of some other small businesses, and we managed to expand A portfolio which is becoming much diverse, wide, and we are becoming a Significant player in the space of highly specialized active beauty ingredients. On top of that, the value proposition which I think is unique and very important is that all of those ingredients are natural but made In a sustainable way with Biotechnologies, and that's very unique because it's a very good way to make products which are claimed To be natural, but in a sustainable way.
So that, I think, also explains the success. And the third thing, which I think explains the is the unique combination with our Fine Fragrance clients. We have access in a very intimate way with most, It's not all Spine Fragrance beauty players in the world, and so we leverage the relationship with those to actually Present and welcome Active Beauty England. So some of those thoughts to answer your questions on both sides. So now I think we'll take the last question, operator.
The last question for today comes from the line of Kenny Kessel with Davy Research. Please go ahead.
Good afternoon, folks, and thanks for taking my questions. Two questions for me. Firstly, for Tom, Just how should we think about operating leverage in the second half in the context of a recovery in fine fragrance and foodservice? My second question relates to natural extracts and the beverage category. Just interested to know your comments on The opportunity set around that, I think you referenced that was booming in North America.
So there are my two questions. Thank you. So just on the operating leverage, I mean, I think you probably if you look at the half year numbers last year when we saw significant line in fine fragrance and in foodservice, there's not such an impact on the overall margin. I If you look at the relative size of the businesses, 16% of the portfolio is discretionary, 84% It's resilient. So overall, it has very little impact on, let's call it, the operating leverage.
And you see it actually even in the 1st 6 months of the year. So it's more driven by the total Leverage of the group and the use of the facilities rather than any single category overall. Maybe on the natural aspects, I'll hand it to Gilles for the comment. Yes.
What I refer to is those what we call the Phytoactive or immune boost immunity boosting type of natural extracts, which was really a which is, again, a legacy Family of products which had been developed by Naturix and which we thought was really attractive. That's also part of the reason why we acquired Naturix. And as I mentioned, 80% of that is very much in the U. S. And that goes into not only beverages, but All forms of applications because that's really sort of a nutrition type of natural extract that you add to a number of applications.
And those things are have been really welcomed, especially in the context of the COVID pandemic in the U. S. Thank you. So that ends us that ends our Q and A session for half year results. I thank you very much for your questions, and I'd like to welcome you in person or virtually.
We'll have a sort of a hybrid half conference on the 26th August in Zurich. And that session that day will be dedicated On our Nutrition, Health and Sense offering, which I think will echo some of the questions you asked About this space, which is quite interesting and exciting. Thank you again for your questions.
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