Got it. Finally, good morning, everyone. Welcome to our 2019 Investor Day. Really exciting time for us to share with you our new Vision 2021 strategy. Before we begin, if I can, I just want to cover 2 quick housekeeping sections?
1, I want to start with the cautionary statement. A lot of words on the page here, but mostly I want you to focus that we will be using forward we will be making comments on forward looking statements. Please refer to our full disclosures in our 10 ks that was filed in February of 2018 2019, I'm sorry. The second key point here is that we're going to use non GAAP financial metrics. For a reconciliation of the non GAAP to GAAP measures are set forth on our press release on the non GAAP section there.
At a very high level, I want to set the agenda for the day. Are going to start with morning presentations where we have the opportunity here to just highlight. We are going to start with Andreas in terms of the vision and strategy. We are going to turn over to Francisco Fortinet to lead us through our business transformation section and then have the BU leads come through, talk about scent, Nicolas Mirjanes, Matthias Haney in taste, take a little bit of a break, come back, have Yoni Glickman come through and present the Nutrition and Ingredients section and then come into 2 key sections, which would be unlock growth opportunities, this is really around cross selling integrated solutions and then drive innovation, which is really around Greg, you have taken us through the whole R and D platform. Finally, we'll have Rich come up and give the financial outlook for the next 3 years, the 'nineteen to 'twenty 21 period.
Then we'll finish up with a full Q and A session. At the end of the Q and A sessions, we'll break the webcast will break and we'll be all invited downstairs for lunch. We have a chance to kind of go through and experience the product portfolio of IFF, the expanded product portfolio. We have 16 different boots, so you'll have all the technologies and categories and creative teams down there taking you through the lead from that perspective. So with that, let's start the program.
And I'd like to introduce Andreas Fibrigert, our Chairman and CEO.
So good morning to everybody. Thank you for making it here. We believe that we will have a couple of exciting hours in front of us because we really want to show you what we believe this business can do in the long term. And we have almost all of our leaders here in the executive team who can present and then we'll be all on stage for a good Q and A session. But in all honesty, these are the slides and these are the calculations you will see.
I think the real interesting stuff happens when you go to the booths because you can experience, you can smell and taste all the innovation and all the different categories and that will make a big difference. So let me get started with a brief summary of my presentation. First of all, what you will see over the course of the presentations that we have now 20% of our portfolio derived from faster growing and very profitable adjacencies. It's a big difference to a couple of years ago. We have strong coreless access, and we have just recently won 3 more core lists on our scent business.
And Nicolas will present on this, but gives us great access or potential access to new business, which was not the case for many, many years. So we are with the call list right now where we want to be, we are on the call list, where we want to play, and we really believe that this will give us good growth opportunities. We are now industry leading in terms of the naturals portfolio, and we have a great innovation pipeline. You will experience it certainly in the presentation from Greg Yap, but you will see downstairs a couple of these innovations over the course of the day as well and it's really amazing. I believe and we believe as an executive team that we have a compelling vision for the next 3 years and now it's down to execution.
We adhere actually for the last 2 days our 115 senior leaders, global senior leaders. We were discussing the strategy. We were discussing the implementation and the execution. It was a great atmosphere and a great momentum for us as a company because we really believe that we can win in the marketplace going forward. And the numbers will look good, in particular, in terms of total shareholder return.
We believe it will be more than 12% over the next couple of years, build out of the EPS growth and the dividend yield. But now let me start where we are in terms of our journey. When we had our last investor meeting, which was actually in New York City in 2015, we laid out our 2020 strategy. It was the envision and building the business that was the first phase. We are right now in the second phase of our journey.
And the second phase is integration and execution, what we have. We believe that we have now the right asset base, the right portfolio to win in the marketplace, to become the leader, the undisputed leader in this industry. Just going back, what we have told you in 2015 was we had 4 pillars which were driving our strategy and driving our business. 1 was innovation, and you will see today that the innovation pipeline we have right now in terms of encapsulation, modulation, cradle to cradle fragrances is actually unheard of and it will be now merged or is merged with the Frutarom innovation pipeline as well. By the way, tonight, we have a big event here where we honor 1 of our performers, a press release will go out over the course of the day.
And one of these Cradle to Cradle fragrances is done with a very, very prominent celebrity, and we are very happy that we can host her more to come over the course of the day. Win where we compete, we believe that we made great strides in the geographies where we wanted to strengthen the business like here in North America, and I come to that in a moment. Becoming partner of choice, I don't want to read everything. But one of the main steps forward for us as a company was the formation of Tastepoint because we have seen in early stages that many of the small and midsized customers have just a higher and better growth profile than the big CPGs. And that gave us the opportunity to form an extra business here in Philadelphia, and I talked about this or we talked about this for quite some time, which is the outlet to deal exactly with that customer group.
And Matthias, in his presentation, will show you how that was progressing over the last 3 years, the success it was yielding and that this gives us a blueprint with the Frutarom acquisition for the integration of the global Frutarom taste business into a Taste Point model. And I think that's great because we did it, we did it successfully, and we have the blueprint to go, and now you will see it in different markets as well. And then we certainly were pretty active in terms of acquisitions, whether it's technology or bolt ons or then the transformative step with Frutarom. So we executed actually pretty nicely on our strategy, and we said that is now the time to start with a new one. In terms of the numbers, you see what we have achieved over the last couple of years.
I don't want to read all the numbers, but we were very happy with what we have achieved, how we have grown our business, how we have grown sales, adjusted EBITDA and our market cap as well. So now the big step happened. We acquired Frutarom. We're in the middle of the integration of the business. We did it because we have now even more exposure to naturals.
We have a very broad portfolio, and I come to that in a moment. We have more than 30,000 customers, new customers to our business. We have the opportunity to get great savings out of the 2 companies together with €145,000,000 in cost synergies, and we have cross selling and integrated solutions opportunities to boost our top line. And all of that we will explain to you much more in detail in the next couple of hours. So where are we?
We came from number 3, number 4 player. We are number 2 player in the industry. We came from a very traditional flavors and fragrance business. Now 20% of our business already in the fast growing adjacencies. More customers, I talked about this.
That's very much of an asset. Very innovative platforms, good center of excellence around the globe and certainly a big move forward in terms of the sales number as well. Let's talk about the ranking. You see the industry is now fairly consolidated. If you look at the different players in the industry with the 2 top 1 and 2 players where IFF is one of them and then the rest of the industry actually quite clear.
And the top 4 players probably have a market share of more than 70%. So let me talk about the second part of our journey towards our aspiration, what it is and what we want to make to make it happen, what we want to do to make it happen. First of all, let's talk about for a moment about the context and the market. We believe that the trend and shift towards naturals is something which will be very sustainable. So it is here to stay the health and wellness trend.
We don't expect that anything will change. Clean label traceability will stay. We believe that many of the small players will still produce some higher growth rates. We believe as well that private label will grow further, in particular in geographies where they're not as strong, like in the U. S, for example.
You see it when you talk to the people from Aldi and Lidl, how they try to penetrate the U. S. Market. That's something which is super important for us as well because that creates opportunities to grow our business. And we believe as well that the momentum in sustainability will be strong and not just in geographies like Europe, but around the world.
And if you want to play as a modern innovative company, you have to be top notch in terms of sustainability. So we believe that will stay. But we see a couple of things changing. When we came back from the CAGNY conference in Florida this year, we have seen that many of our customers, even the big customers, said they want to focus more again on top line growth. They want to even jeopardize margins to grow the top line.
We haven't seen it so far in the marketplace, but what we see is that more of them are showing up in our R and D facilities, asking for innovation. And if that would happen, that would be great because with our exposure to the big CPG core list, that could give us a real, real nice tailwind. We have seen raw material volatility, in particular, in the scent business, and Nicolas will give you a clear view that this was unheard, I would say, in the last 30 years, what happened here. And we give you our perspective where it might end over the course of the year and next year. We see that many of our competitors are going into faster growing adjacencies as well.
We believe that's a trend which is here to stay as well. And we see, which is actually good for us as a company, which has almost 50% exposure to emerging markets, that we see again growth out of the emerging market. It might be a little counterintuitive with all the trade war talk we have right now, but we see in China good growth. We see certainly very solid growth in India and a couple of more of these Asian or Africa Middle East geographies. So a couple of sustained trends where we believe they will stay as they are and some emerging trends here as well.
So, let's talk about the next 3 years, what we want to do and how we're going to organize ourselves. Very clear focus on the customer, very clear. We want to show you how we can unlock growth opportunities. What can we do more and better and faster than what we have done in the past? Where do we believe the innovation is in IFF?
And where are we and how good is our pipeline in new technologies and new products? How can we accelerate our business transformation? And how do we manage our portfolio because here we did a very disciplined approach to manage our portfolio, and I think we will show you where we are right now and where we want to place our bets going forward. So let's start with the growth engines. And this is probably one of the most exciting slides in the whole presentation because we believe with our broad customer base of more than 30,000 customers, we have an asset none of our competitors has.
We have an asset which we really, if we leverage it as well, could drive the growth forward fantastically. Just imagine for a moment, you have a great innovation pipeline and you have not any longer 3,000 customers but more than 30 1,000 customers where you basically can sell your innovation into this customer base. That has to generate growth. There's no doubt about it. So we believe that's good.
The second thing, and I mentioned it, is on the global core list. We are in a very, very good position. I talked about the geographic asset, geographic access. We are very well placed in most of the geographies. We might need some more investments in particularly in Africa, but in all other geographies, we are very well placed in are very well positioned.
We do 45%, 50% of our sales in these emerging markets. We want to invest, as I said, more in Asia and Africa and Middle East because we believe there's more growth to come. By the way, we are just right now in that moment building the most modern, the most efficient factory for Flavors and Fragrances in India because it's such an important market for us. We are a market leader in the taste field, and we are growing double digit here in India, which is super important to us. So, very focused.
On the portfolio, I told you 20% in high growth adjacencies. We focus our investments in some of these areas because we really want to build them. We want to build these areas because of growth and because of profitability, and I talk about the innovation pipeline. Then what you see we'll see today as well is that we have great opportunities in terms of cross selling and integrated solutions. Here, Yoni and Greg will present to you what the journey will be for IFF, going from very simple cross selling to more sophisticated total solutions and why that is so good for us as a company and can generate good growth.
And then we show you that we will not slow down to do some very targeted M and A steps as we have done earlier this year as well. And we want to show you as well what might be good targets in areas where we want to go in and why are they so important to our growth story. I talked about the customers. I think we have now shifted more towards the midsized and small label small and private label companies. I think we talked about this already for a while.
And then you see where we see more geographic growth potential, it doesn't mean that Latin America or Europe is not important for us. They're super important, the U. S. As well, but we are already super well placed in these geographies. And now the growth focus probably will shift more towards these areas because we believe that we can grow faster here in Asia and Africa, Middle East.
So another key slide. I think it's super important. Again, going back to 2015, we were playing in Fragrances, Fragrance Ingredients, Flavors and some flavor ingredients. But we were playing in a market of $25,000,000,000 to $28,000,000,000 Now we are playing in a market universe of $50,000,000,000 And you see, we have added cosmetic actives with Lucas Meyer's cosmetic in 2015, right after we had our investor meeting. It was our first step outside of the very traditional business.
We are very happy. Every quarter double digit growth, much bigger, very profitable business we have here. We are very happy with it. We have now added inclusions. And you will see when you go downstairs for lunch what we mean with inclusions and why we believe that inclusions are a great opportunity to grow the business.
You will see natural colors as well, natural food protection and then the health ingredients as well. So all mostly smaller markets, but a very nice growth profile here as well. So important slide because that explains a lot how we want and how we will grow our business going forward. In terms of cross selling, we already did 8,000,000 quick wins to date. The team will present to you what it is, what it means.
Target is $100,000,000 2021, we believe very achievable, will come in Greg's and Yoni's presentation. Let's talk about R and D. The R and D platform is amazing, amazing in a sense that we did, I would say, our homework in legacy IFF to look how we run R and D, how we inform R and D, where they put their money. And we have, for example, in encapsulation, a great innovation, and Greg will talk about this, where it goes to renewable caps. And we have put all our money behind this one program and I think it's delivering right now.
So a bit of a different way to run innovation. We have great new molecule pipeline and great new technologies. More will be explained. But that's all the legacy IFF. But now with getting Frutarom into this universe, just if you look in Enzymotec, for example, which is part of Frutarom, we bought 150 patents, which is amazing.
And this is amazing because it goes into nutrition, it goes into infant nutrition, and it gives us another, let's say, platform to grow our business going forward, but more will come in Yoni's presentation. A lot of enabling capabilities and very complementary what we have right now together. Just imagine that we have now really good capabilities to do very robust clinical trials we never had before, and that will help us, in particular, the health and wellness space where so many of our customers are now moving. And then the sustainability part, I come to that in a moment. So what did we do with the portfolio?
You might ask now the question, okay, now with the 2 combined companies, it's a lot of different categories. We move from 7 to 14 categories. How do you manage it? What are the good guys? What are the not so good guys?
And how do you deal with it? So we looked at what is the future growth rate? What is the EBITDA margin and how big are these businesses. And you see we have a couple of businesses which have really attractive margins and we have a couple of businesses where we need to fix the business as well to bring them up above our average. We believe good approach.
We have done all the homework. We are now in the implementation phase, and we certainly will focus on the areas where we can move forward with Lightspeed and where we can move forward to produce really, really good results. That's how it looks. We had 10% of our portfolio categories in the fixed area. So we will put some effort behind to fix them in terms of growth and profitability.
If it doesn't work, we have to figure out what we do with these areas. We have 50% where we have a very balanced approach. I think they're good there. In the middle, they're the core. And then we have 40% of our portfolio, which is really has good growth opportunities and great profitability ahead of us.
And that's where we put a lot of emphasis to make sure that we use these categories to move forward. And usually, Mike is joking with me that I'm talking too much about ice cream, but I can tell you ice cream ingredients and inclusions are probably part of it. It's very tasty. By the way, when you go downstairs, it's the first one on the right hand side. Okay.
Business Transformation. It's certainly super important to grow the top line. I think there's no doubt about. But the Frutarom acquisition and some of the other things we are doing right now give us a unique opportunity to look at our cost base as well. To look at the cost base, what can we get out of the integration synergies, and we are very confident that we will achieve the $145,000,000 Francisco Fortinet, who is running that exercise, will give you more detailed numbers right after my presentation.
And we have done another $100,000,000 in productivity programs. And these are not just, let's say, out of the air, out of the blue programs. They are, let's say, a continuation of programs we are running and manufacturing already. There are a couple of programs like bringing parts of the finance organization in a global shared service center in Hungary, which we just opened this year and we are moving, and other programs like that. And I know that, for example, Nicolas in his Sand Business Unit has taken good steps forward as well to manage the raw material crisis and to adapt the organization in a way that we are more lean and more agile to deal with all the challenges we have from the outside market.
So actually, a quite significant number was 245,000,000 So sustainability. I know it's probably not for all the investors, super important, but for us it is for many reasons. The first reason is we believe it's the right thing to do for a company like IFF. The second one is if we want to work with certain parts of our customers, in particular the bigger CPG companies, it's basically it's the entrance ticket to play. If you are not good on in the sustainability field, then you can't play.
And number 3 is we have, in many areas, we have a good win win where there's even more cost effective to manage our business with a good lens of sustainability. Here you've seen we had our 1st sustainability report in 2011, and I can tell you we came from behind. We were certainly not top notch. Now in 2019, I would say we are really top notch in terms of sustainability. And you see on what kind of reports and lists where we are and it's embedded in our corporate DNA.
And I tell you, the most important part is not just putting the sustainability head off when you have all your products in place and look what do you do with it. You need it already ingrained in R and D. And that's what we are doing with Greg's organization that when we design technologies, when we design new products, new solutions, we have already the sustainability mindset on our mind and with the 1st Cradle to Cradle fragrance, I think we could show it very well. And it's, by the way, it's now in one of the new artisan perfumes and fragrances. And it's a very, very, very good thing.
I think I even can say this was Michelle Pfeiffer because she had mentioned us in her press release as well. By the way, we will have dinner with her tonight at this big event, and we are looking forward to that. So M and A, what happened since end of last year? And here you see the focus of our M and A activities very, very, very clearly. Technology, beyond.
Technology, Aribal and the Additive Advantage. Additive Advantage you will see when you go downstairs, it's printing of flavors and fragrances on any surface, huge opportunities for our customers here. You will see it. Aribal is a digital nose, and you can see how digitally you can detect smells and fragrances and you can use it from quality control to many other applications over time. So it starts here, but it has endless opportunities to use it.
So technology will stay a focus for our M and A activities because, again, with more than 30,000 customers, every technology you bring on board, you have a broader base of customers you can sell it in and it gives you a bigger bang for your buck. MITEI, we closed Savory Solutions because it's part of our business now in Thailand earlier this year. We talked about ice cream already. We have a very nice business with Leagel we acquired earlier this year in San Marino. Now together with our business in Brazil, it's probably $46,000,000 $48,000,000 in sales, very attractive margins.
And when you go downstairs, then you know what the opportunity is because the opportunity is to take this business and globalize the business and make it a real global business in the areas and countries which really have the right consumers in place, very profitable by the way as well. And then earlier this week, we just brought the last share of the VEVERG Corporation in Canada, which is a subsidiary of VEBERG in Salzburg. So portfolio alignment, and I come to the org structure more. We have scent, taste, nutrition and ingredients. I think that's important how we have categorized everything after we have done our portfolio exercise.
We thought we'd do it that way because that's the best way to organize ourselves to capture all the opportunities we have to grow our business and to cross sell our products and solutions to our customer base. That's the organization. Here you see it with all the green areas which are legacy Frutarom, and then the blue ones are legacy IFF. You see clear focus on scent, on taste and nutrition and ingredients. We really believe that this is a great setup for us.
It's a great setup for collaboration. It's a great setup for getting all the synergies out of the organization as much as we can. We have kept the 2 market organization always intact because there are no changes in the sales force. There are no changes in the creative centers. The only change may be that we do some upgrades on creative centers, which is actually exciting for the customers.
And we use and again, I'm saying you that listen to Matthias' presentation, that Tastepoint is now the blueprint from the U. S. For global organization here as well. What we have is, particularly on the side of Frutarom, a lot of really good general managers who know how to run their businesses on the ground, and we protect this organization because we believe it will be very beneficial for us going forward. So what does it mean?
Now coming down to the numbers. We believe the revenue growth, 5% to 7% is doable over the next couple of years. Certainly, we can expand our margin. I think it's very, very obvious just if you take the €145,000,000 in synergies where most of it is in procurement and in the manufacturing footprint. So it has to happen here.
We will repay our debt. We are very well underway here because it's a very cash accretive business. We will grow EPS more than 10%, excluding amortization, and we are striving for 2% dividend yield as well, but that is nothing new. I think you knew this already, but all gives us a top third a TSR of more than 12% or as we're saying here, 12% plus. So in summary, we believe that we have now a real great base to grow the business, diversified product portfolio, a lot of categories we didn't have before, but they are very close to our core, which help us to grow the business faster.
Great access to core lists. We have actually the access we need. There's not one single core list we want to be on right now. I think it's where we are. We have 60% of our sales with midsize and small customers.
We have the greatest, biggest, best pipeline innovation we ever had. We have certainly an industry leading portfolio in terms of naturals. And remember, the naturals is a trend which is here to stay. We believe that we have a compelling strategy. At least the last 2 days, we were discussing it with our senior leaders, and the feedback we have received was very, very positive.
And now everybody is out there in the field and executing on it. And we believe that we will have a very, very competitive and compelling shareholder return. So all in all, a good position, a good situation for us to grow our business for the next 3 years. With that, I would like to hand it over to Francisco Fortinet, who is running our operations, but he's doing also the transformational efforts within the company. So, welcome with me Francisco.
Thank you.
Good morning, everyone. I'm going to present the transformation agenda. Very few companies, certainly in this industry are in position to create value in a significant way, in a material way. Frutarom gave us that opportunity. Frutarom is the catalyst that trigger our transformation agenda.
I will present an overview of that agenda and for sake of simplicity, I will split in 2 parts in activities related with the integration and those beyond the integration. The bulk of my time will be dedicated to the integration. My real objective is to give you the latest update on the integration, the value creation, the rationale of the cost savings and why we are so confident that we will achieve those cost savings. Probably the most important question, I'm going to tell you how we're going to achieve that, how we're going to get the cost synergies without affecting our customer, without affecting the commercial dynamic. The vision, the strategy, the objectives like growing above 12% TSR, Those are clear, communicate, aligned in the corporation.
The Transformation Office is about execution, is about laser focused execution. Our priorities have been clear and we are making good progress to them. Number 1, the organization is now settled, is communicated. And just to repeat what Andreas presented, the Frutarom flavors move already into IFF flavors. In Q4 last year, we moved North America.
In Q1, we moved Latin America and Asia. In Q2, we moved in. So all that flavors portfolio now is inside the IFF flavors. By the way, the performance of these businesses in Q1 was very good. Number 2, inside Frutarom, with leadership from Frutarom, we team from Frutarom, we created 2 global platforms, Savory and Inclusions.
Moving forward, going forward, those 2 will report to the tax division. Finally, Nutrition and Ingredients. This was actually from day 1 communicated under the leadership of Johnny. Number 2, cross selling is probably the most exciting part of the integration. When you go downstairs, you will see what we mean by exciting.
Johnny and Greg will present the details of this program. Just let me summarize the main points. We have a clear process and flow inside our company, both legacy IFF and Frutarom, how to do this. We have a leader. We have an easy sponsor.
We define their ambition for 2021. And so far this year, we have achieved $8,000,000 On innovation, Greg will expand on that, but now we have a good map of what Frutarom has from a hardcore R and D Now we're working on the synergies. As I said, Greg will expand on that. I will do a deep dive on cost synergies and just let me finish this part with the most critical, the most important aspect of the integration that is our talent, our people. We defined a 1 IFF culture from day 1.
Of course, this is a process. This will continue. But this week, we had a very important milestone. We bring our leaders of both legacy IFF and legacy Frutarom and culture, the vision, the culture, the behavior, the values was front and center of our agenda. With the information we have today, with the knowledge I have today, I can tell you that I am more than confident that we will achieve $145,000,000 in P and L savings by 2021.
There are 2 main levers: procurement and network optimization. And that is not an accident. That is by design because we communicate from day 1 that we want to have very little or none effect in the commercial areas. Also these two levers give us very nice balance because procurement will come in the 1st 18 months of this period, while the savings associated with the network will come in the back end of this period. The rest of my presentation is going to be about numbers, is going to be about cost savings.
But just let me pause for 1 minute and talk about our priority number 1, that is the customer. Andreas presented our new vision. At the center of that vision is our customer. This trigger the integration agenda. This trigger our strategic intent.
Number 1, we support the growth of the business, and we do that when we keep our customers happy, when we deliver our products on time, when we deliver our products with the quality that they expected, but also when we position our commercial team to discuss innovation, to discuss how to improve our customers' brand instead of talking supply chain issues. Number 2, and only once we achieve that, then we ask ourselves how we can achieve that with less cost and less cash flow. 2018, as you know, this industry have a significant crisis, has been described as the largest crisis in the F and F sector, and we agree with that characterization. It was a very complex year for this industry. In 2018, our quality performance and our safety performance was the best ever recorded in the history of IFF.
By 2018, we already surpassed all of our objectives in our sustainability Vision 2020 objectives. Even in the delivery performance in the Fragrances, 2018 was slightly better, but better than 2017. In the context of the integration, having that performance in a deal with those characteristics for us is very assuring that we can handle these complex situations. As I said, once the customer is happy, then the question is how to do it with less cost. Fact based, we have had a very significant productivity agenda and our performance in the last year exceed $125,000,000 in savings.
Actually, if you track our manufacturing record in our manufacturing performance with one exception 2018 for obvious reason. Also happy to report in Q1 2019, we returned to normality. The main reasons, the main components of that productivity agenda was process improvement, procurement and manufacturing network optimization. And this is important because these are the same levers that we are going to use for our integration. So we have a path, we have experience doing this.
Let me talk for a second about our manufacturing footprint. It's one of the most important decisions we as a matter of fact, any company needs to make. And the design of our network follows our principle of first support the growth of the business. In this context, Frutarom give us tremendous geographic expansion. The network of Frutarom plus our IFF plus our network in geographies like Latin America, Eastern Europe, even United States and Western Europe has no parallel, particularly to supply, particularly to serve the customers in the middle, the small customers and medium sized customers.
Also, IFF has invested over $500,000,000 in our assets, in our network, in the emerging markets, Once we do that, we believe we have the network for the next many, many years to supply the customer as we want. This will affect this will change the need for capital going forward and Rich will expand on that. Finally, the network organization also give us opportunity to reduce costs in a structural way. We have planned to close more than 35 plants. In this graph, that is quite busy, you will see rows.
In those rows, main equals a plant. Each plant has a plan. That plant has a beginning and has an end. There is a team and a team leader associated with those plans. So far, we have closed 2 sites, and we are going to announce the closure of 2 more sites very soon.
Also, let me tell you what is our evaluation of the risk profile of the things we're going to do with network. First of all, let me qualify that we believe the risk profile is low. This is my rationale. Number 1, 80% of the revenue in Frutarom associated with this has nothing to do with the network optimization. In other words, only 20% of the revenue of Frutarom will be associated with the network optimization.
60% of this 20% is associated with 2 geographies. In 1, plants from Frutarom will move into our taste point plans that already have the same customer profile, already have the same dynamics. In the second geographies, a group of plants in Frutarom will merge into a brand new plan fully designed to support the Frutarom customers. So this is a rationale number 1. Our rationale number 2 in the credit centers is we're going to do the exact opposite.
We're not going to not only touch them, we're going to invest on them. And of course, we're introducing the IFF technology. And number 3, as I said, our manufacturing performance in the last many years, the main reason for that performance is network optimization. So we have experience doing this. Let me move into procurement.
This is one of the fastest ways to see what the transformation means. As I said, in the 1st 18 months, we will achieve most of our savings. The volumes in Frutarom actually are very high, higher than our volumes in IFF days or similar and also has a significant matching. So imagine from one day to the other on back on October 4 that basically we can go with our partners and say, is my portfolio and it doubles, literally double, not 20% more, 25% literally double. So what can we do?
What conversations can we have win win conversations that we can have to leverage these volumes? And so far, our conversations have been very, very successful. Number 2, it is well known in Frutarom. So how we are going to handle that complexity? We partner with a technology company.
And with digitalization, we manage to put ingredients and families of ingredients together and actually did an de auctioning of the entire family. We're very pleased with this. Actually, the biggest savings as a percentage are coming from this activity. We already did 3 e auctionings and we're ready to put 5 more. And make versus buy, the best way to represent this is before Frutarom, almost 100% of what we buy from our citrus meat, and if you think of citrus is a very important ingredient in taste, We need to go to the market and purchase that.
Now it's different. Now we have vertical integration in citrus. This is the same in the exact opposite direction. Frutarom needs vanilla. They purchased vanilla.
IFF is vertically integrated in vanilla. So these are just two examples of the tremendous potential in Makers Who's Buy. Again, knowing what I know today, I am highly confident that we will achieve not only our goal for 2021, but we will achieve the high end of the objective for this year. Let me give you one more one fact. Today, actually 2 weeks ago, our run rate savings already achieved $50,000,000 Finally, let me move to the activities beyond the integration, and this is only this slide.
Before Frutarom, we already had a productivity agenda, and I presented to you this a few minutes ago. And that productivity agenda will continue. Of course, there are certain activities, particularly in taste that it match, that will be part of the integration. But the rest of the agenda will continue. And as I said, we have been very successful.
Let me comment about 3 aspects of this productivity agenda. The cornerstone of this has been our process improvement. This is I'm not going to bore you, but this is how we can make our chemical process better, how we can better yields, how we can reduce the cost per kilo, how we can improve the flow of our systems. We have been very successful for many years, and we expect this to continue. Again, actually, the biggest savings are coming from here, and we have a large group of PH working on this.
The second thing is simplification. As I said, it's well known, the complexity. So how we're going to address that? We will continue with that, simplifying our raw material pallet, simplifying our formulas. Finally, centralization.
We already had many activities centralized. For instance, all the quality analysis are done in India and Mexico. All of our planning activities are done centralized. The question is how we can continue with this agenda without affecting the local systems. I'm happy to say that we opened our new center in Budapest that we will take advantage and continue this agenda.
Finally, I have to admit that every single time is more difficult. The quick wins are quite gone and the question is how we're going to re energize this program. Digitalization give us that platform. In that sense, we created a group with people not associated with the day to day with specific skills, big data, artificial intelligence, automation. And this is how we believe we're going to assure that we achieve $100,000,000 by 2021.
Let me finish. There are only 2 points I would like you to remember. First and foremost, our number one goal is to satisfy our customers. And only when we do that, we move to our second goal. I am very confident, highly confident that we will achieve $145,000,000 by 2021 due to integration related activities and $100,000,000 related to our legacy productivity agenda.
Thank you very much. With that, I pass the microphone to Nicolas Marciejens.
Good morning, everyone. Warm welcome to all of you. Happy to see some familiar faces and to meet some new ones. This morning, I'm very excited to share with you the Vision 2021 for the SEM division. I want to start I will start by saying and sharing with you all the progress we have made since last year.
I will talk also about the challenge in the industry. But most excited, I will share with you why we are very confident about the progress we've made and why we're confident about the future. So if you look at our portfolio of categories in which we play, there are 4 major categories. First of all, consumer finances, which is all about fabric care, home care and beauty care. Then we have a fine fragrance, which is the most premium of our categories.
Then cosmetic active ingredient, which is one of our newest adjacencies, which is about active and functional ingredients, botanical that our customers are using in beauty care. And then fragrance ingredients, which are the backbones of our creations, both synthetics and naturals, that we're using internally but we're selling our excess capacity to the industry. So when we look at our market, the industry in which we play is about $17,000,000,000 in terms of size and growing at about 3%. And here, as you can see, beyond the typical fragrance and fragrance ingredient in which we play, we have now gained access to fast growing category with the cosmetic active. Something very important.
With the acquisition of Frutarom, we are strengthening our expertise in cosmetic actives with a company that just had bought IBR based in Israel. And also, as you know, Frutarom, 80% of the portfolio is based on naturals. So not only are we already the leader in naturals, but now with this additional capabilities and vertical integration, it strengthened our leadership position. And I want to highlight that naturals have been one of the fastest growing segments for our portfolio. When you look at our customer base, you can see it's a very balanced portfolio.
And what you have to remember is that when we have access, when we gain access, we win. So that's very exciting. And I will share with you some very important development, positive development that took place in the recent year that give us great confidence for the future. So I want to share first some key highlights about where we stand today in terms of the strength of our portfolio and positioning. As you can see on the left side, we have some industry leading position in some key categories as well as in some key geographies.
I will take the example of Fine Fragrance. I'm pretty certain that the vast majority of all of you in the room today is wearing a Fine Fragrance that we have created. And being also the leader in fabric softener, I'm pretty confident that most of you at night are going into your bed and using bed linens that have been washed with a fabric softener where we are leveraging our leading technology in encapsulation. The our predecessors have been quite visionaries and they've invested already in the 50s, 70s in fast growing market, which were not yet known as the BRICS. But we are leading position in LATAM, and we are number 2 in Asia, which is positioning us well for the future.
And I was talking about our strengths in Naturals. This is really the future, and by far, we are the leader since our acquisition in 2000 from the company LMR Ingres. We have a strong exposure to multinationals. And as I told you, where we compete, we win. And because we have been in emerging market for 50, 70 years, 100 years, we have great exposure to regional customers, which are expanding very fast.
One thing that Francisco mentioned in terms of our portfolio of ingredients, we have the largest portfolio of ingredients in our industry, which was actually critical for us to withstand the supply chain crisis that took place in the industry last year. But I would like to focus on the next column because it's very, very important. What are our strong capabilities? And these capabilities that I will share with you have been instrumental for us to gain additional market access in the recent years. As we know today, the consumer is in the driving seat.
Understanding the fast changing consumer is critical, and we have the leading consumer insight expertise in our industry. That's fundamental. With a more fragmented market, you need to be able to partner with our customers to tell them where the market is going and where the growth opportunity are. Strong innovation pipeline. It's the strongest innovation pipeline in our history and why.
Innovation is about differentiation and innovation is about accelerating growth and accelerating your margin profile. So this is fundamental. Our expertise in natural, I already spoke about. And delivery systems, some of you might remember that we were the pioneer in the industry by launching this technology in 2007, which was really the most important breakthrough in the industry for the last 30 or 40 years. So I told you that we win.
That's exciting. But what is more important for our customers is that we know how to develop winning fragrances. But there is a big difference between liking a fragrance and loving a fragrance. And here we have also a very strong track record of the fragrance that we launched with our partner are not only staying in the market for a very long time, but also they are in leading position and we have more leaders in the market than most of our competitors. And obviously, we could not do anything of this if we didn't have best in class talent.
Talent is fundamental and also talent today is even more important in the mindset. And IFF is very well known for our teamwork and the way our teams are working across the globe to support our multinational customers as well as local and regional. Last year, we closed the year at 1.9 €1,000,000,000 with €17,500,000,000 in terms of segment profit. So would like to share with you the progress we have done against Vision 2020. But I would like you to start to focus on the right side because you will be talking about growth and you will talk about margin.
And when you look to the right side at the bottom, you will see that on a peer reporting adjusted basis our growth has averaged 4.5 percent with strong growth volume. But you can see that after a peak performance in terms of margin in 2016, with the supply crisis, the disruption in the input cost increase, we have been affected, and I will come back to it in the next slide. So now moving back to the left. We had very clear priorities when we shared with you a few years ago Vision 2020, and it was about building the strongest innovation pipeline, which we have achieved. So very pleased about this.
We have significantly increased our call list access. This will be in the few slides, one of the most important slides for you to remember. We have made strong performance with our key targeted customers where we wanted to grow, and we also made strong progress with our strategic priorities. We have grown in the margin accretive categories as well as in the new adjacencies that are very attractive. And we have achieved in the very challenging environment, price prioritization and also as Francisco shared with you, we have delivered consistently in terms of cost savings, not only in operations, procurement, but also in the business.
So what happened? The biggest crisis in terms of supply chain. I've been 31 years in the business. This was by far the most difficult year of my career and the most difficult for the industry. And here you can see that this raw material cost increase 20% over 2 years.
That's really significant. And this has impacted the entire industry margin. Everybody has been impacted. And on the right side, you can see the different force majeure fires that took place in Europe, in India, some challenges also and regulatory stress in China. This has affected everyone.
It was not a single week where we didn't have to deal with a new situation. But I'm very happy to report, number 1, the resilience of our team. We have close to 1,000 people working to resolve this challenge. And I think it was very important to work seamlessly and to work as a teamwork to resolve it from procurement to quality control to manufacturing and also to our go to market teams. But also the partnership, the strong partnership that we have with our customers help us to find some solutions together.
But most importantly, because we have the strongest portfolio of ingredients and because of our strong vertical integration, we were able to find very quickly some alternative and some solution to the ingredients that were more impacted by the crisis. And as Mr. Leonard Lauder told me in a prior crisis, never waste a good crisis. And I think there were a lot of learnings for us from what took place, which is informing our strategy moving forward. So setting our stage.
We have significant change in the fragrance industry and but I would like to focus on the first 2 that are really as a result of our strategic priority in Vision 2020 and then the external forces. Market access was the number one priority for the business unit. For the last 7 years, we worked on gaining access to the most important customers because getting this access gives you growth opportunity, margin expansion and the ability to reinvest. And here you can see we've increased our market access by close to $500,000,000 This is meaningful. Number 2, project pipeline.
We have great access to regional customers, which are growing faster. But I also want to underscore that there are meaningful opportunities with the largest global companies on their largest brand. And here we have won recently some very, very big equity, which is good and it's already impacting our pipeline. And we have still ample opportunities of growth with our global companies. So this is very meaningful to us.
Then I will talk about the outside. Sustainability is a must, no surprise to all of you. And given our strengths in naturals and given the steps that we have taken in R and D and across our portfolio, we are really strengthening our resource not only to leverage our strengths, but to capture new opportunities. But it's a new environment, and the first one to be able to capture will be able to accelerate
their growth. We spoke just a few slides
unprecedented industry wide crisis in terms of cost. So it was about price realization, it was about reformulating with our customers, it was really dealing with this new crisis and redeploying our resource to the most margin accretive categories as well as the most attractive opportunities. So in results, you're seeing an accelerating in terms of the growth. You have seen some pressure in terms of our margin, but here we are recovering and putting the plan in place to be able to go back to where we were. Through the recent sand restructuring program, through procurement saving and also through manufacturing savings as well.
So here are the 4 pillars of our strategy moving forward. And they are based on some similar pillars from the past where we're going to continue and accelerate our progress as well as to learn from that we have the strongest pipeline of innovation, how do we leverage it across all our portfolio of customers. Then management of portfolio, Andrea started to speak about it. We have identified the most attractive category and the one that we're the most affected by the crisis. How do we make sure that we invest in the margin accretive category and we achieve strong margin improvement across the rest of the portfolio.
And the rest is about mix improvement given our new market access and delivering the cost savings identified across the business and operations. This is one of the most important slide. I talked about market access. Here on this slide, you have the top largest customers in terms of fragrance potential. Obviously, I cannot share the names with you, but these are the top 15.
In blue are the one where we're already playing. In green, 3 out of the top 15 we were not engaged a year ago. This is a result of 7 years of very long term initiative to achieve this. This is a major achievement, and I cannot remember for the last 31 years of AltaFF that we had at any given time access to the top 15. This was our goal, and I'm very pleased that the team have delivered again that commitment.
First of all, we have very, very low market share with them, 6%, way below our average market share with any of the other 12. So just to get where we are with the one where we're playing will create significant growth opportunity. They are sometimes leaders in their own category. They are also customers who are in margin accretive categories, so it will also drive our mix improvements. And I'm happy to report that not only have we started to receive some briefing, but we have also started to win.
So very quickly, we can win. And that's also a message I want you to remember. Where we compete, we win. And in one of these customers, after being back after 1 year, we already have a 45% win rate. That's very, very strong when you compete against many competitors.
You might ask me why and how have we been able to come back, And that's important. That goes back to the capabilities I was sharing with you in a previous slide. First of all, the innovation pipeline. Our customers need to drive their growth and they believe we are a very strong partner to unlock growth opportunity for them. Number 2, our leadership in naturals.
They know that it's a largest trend right now and they want to be part with our key capabilities there. Consumer insight. I told you that today the consumer is key and really understanding the fast consumer need is critical and we've been able to show them and to identify growth opportunity for them. And last but not the least, they also believe in our vision of the future in terms of new technology and new adjacencies. So when you bring all this together, it's not just capabilities, it's innovative and impactful solutions.
That's the reason why we're back and now gain access to close to $500,000,000 in terms of new potential. Innovation is about differentiation. Innovation is about driving growth and margin. And I'm very, very pleased to report that we have today in the same division the strongest pipeline of innovation in our history. This is not by accident.
This is a result of 10 years of work with an acceleration over the last 5 years. And the bread and butter of innovation in our business is about new molecules. We have 17 new molecules in the pipeline, which is about performance, impact, but it is also very strategic for our clients because today it is about IP protection. Through using our ingredients, the brands we work with can better protect their brands. Naturals, I told you we were the leaders.
Last year, we launched 41 new natural ingredients. That's the strongest pipeline we've ever had. And as I told you, we were the pioneer with the biggest breakthrough in our industry with delivery system. There are some new regulatory potential regulation coming up and we want to be the 1st to market to innovate again with sustainable capsule moving forward. On the right side is really about the future.
Scent modulation, what is beyond edonics? How can Scent can play a role in health and wellness? How can we enter into new platforms, new customers and new industry? So this is a big bet we're placing in terms of digital, health and wellness. So very pleased about the early progress.
And you will see downstairs some of the partners that we have decided to partner with, which are best in class in each of their fields. But Greg will share more details about our platforms later on. So managing our same portfolio. So with a new framework that we had, we looked at our different categories. And you can see we have categories across the 3 buckets.
The first one, very simple, high growth margin, very attractive margins. So we want to invest disproportionately to accelerate the growth. That's the green ones. Then you have the blue, large category where we have leadership position. And by leveraging our innovation, by also leveraging innovation with some customers, we can grow and generate a lot of free cash flow.
And then categories in orange that we call the fix. Why are they in the fix? For one very simple reason, for the cost situation and the supply chain disruption that we had 2 years ago. Some of the ingredients that were impacted by the crisis are more used frequently in these categories than some others and therefore impacted the margin profile. But we know what we need to do.
And also now with our new market access in these categories, we will be able to accelerate our growth, number 1, above our average growth. But number 2, we have gained access to margin accretive categories, which will also impact our margin profile, plus all the margin improvement initiatives that we have. Francisco started to allude to you some of the progress that we've made and that we're making. Here are 5 initiatives where we have already taken some actions: procurement excellence, leveraging best in class practice to lower our input costs, number 1. Price realizations, we've made some very good progress and partnered with our customers, but there is some more opportunities this year in applying procurement best practice to drive input cost savings.
Reformulations. We've been partnering with our customers to reformulate the formula that were more impacted by the crisis, which will help our margin profile. For many years and for those of you who have followed us, you've seen that we've consistently optimized our manufacturing footprint. And also not only that, but we are also reducing operation complexity. And so that's part of the plan that Francisco was sharing with you.
We're going to continue to do so in the same division. And last one, strategic resource allocation. With our portfolio analysis, we want to make sure that we are allocating and shifting resource to the categories that will represent the biggest growth and margin improvement over the period. So in summary, we have gained access to really meaningful growth opportunity and this is a result of many years of work, and we're very pleased about this, and that's one of the most important component to remember. Now we have the opportunity to leverage the strongest innovation pipeline that we have created across this new market access.
We have now very increased focus in terms of margin expansion across our portfolio through portfolio management and through productivity initiatives. And tremendous value creation will be created from all the category, but even more so from the fixed category through the grow and fixed dimension. So I'm very pleased to have reported to you all this progress. I'm very confident about the future. This is a tipping point.
We are now positioned in a way that we always wanted to be in terms of market access and to come to the market, as I say, with the strongest innovation pipeline. Thank you very much.
Unique diversified portfolio we never had before. Next to flavor compounds, that is our former legacy core business that we build out the last 130 years, we are going to add savory solutions to our portfolio. Savory solutions that call for fine ingredients, functional blends, mainly geared to the meat industry, but also soup sauce, condiments, also marinades. These are categories IFF in the past never played, and we feel excited what we can leverage, what we can leverage from a technology point of view, from an infrastructure point of view, but also from a go to market point of view. In addition, we are going to add inclusions.
And inclusions, they stand for high concentrated fruit pieces, for example, but also for whole foods ingredient systems that will provide texture and taste. Think along the lines of all the chunks of your cookies on an ice cream, but also we are going to add ice cream or, let's say, fine ingredients to manufacture gelato. Actually, it's gelato instead of ice cream. And I share my love for this business, as Andreas alluded to already. If somebody would have told me some time ago that with fine ice cream ingredients, you can generate a higher margin profile than the flavor compositions, I would have hardly believed it.
Together, we will operate in a market on pace that offers an opportunity of $24,000,000,000 We estimate that we have an underlying market growth of roughly 4%. And together with Frutarom and the inclusion business that has a higher margin not higher margin profile, but growth profile also than our flavor business, we are also seeing some acceleration. What is very different to what Nicholas just presented to you is the overall relative access to customers. 50% of the entire Taste business can be generated by small and local customers. And the recent trends from farm to table further underlines this.
It's a local business where you need to have local presence, and we feel excited of what we can do in addition together with Frutarom. Before I will share a bit where we are going to on our new Vision 2021, I want to share where we are coming from. IFF legacy business has a very strong business. We are clearly the number 2 in our industry. In a few select markets, including mid tier in U.
S, thanks to TazePoint, we are the number 1. We have a few very strong capabilities such as Central Consumer Insights, our truly differentiated go to market model with PhasePoint, but also we have a very strong leadership position in modulation and in delivery systems. And modulation is an area we feel excited about. Over the last 3 years, 4 years even, we have seen double digit growth in modulation year over year. And modulation does not only stand for sweet modulation, it also calls for savory modulation to increase richness.
We have opportunities that we have masking modulation for proteins. We also are in the business to have modulation that are targeted and specialized for acidity. Together, last year, in our legacy business, we had $1,700,000,000 revenue and we have industry leading margin profiles. Now, what we have outlined for us back 4 years ago, what we shared with you in New York on our Vision 2020, I think really served us well. We have seen strong growth in the last few years between 5% 7% if we adjust like for like to competition.
We have seen also continued very strong segment profits, and this speaks a lot for the portfolio, for the quality of it. It also speaks a lot about the discipline that we have in the taste division when it comes to cost allocation or our ability to pass on to well with customers input cost increases that we have seen over the last few years. Now, going forward with the Frutarom integration, we see a significant enhancement. We have a very different exposure now to naturals than we ever had We have access to a lot of mid- and smaller sized companies and I will share with you later on why I'm really excited because we have a proven track record that we can make it happen. In terms of geographies, we are going to have a presence in Central America, something that we admired quite some time ago.
We have now our own presence, including manufacturing in Peru, we feel excited about. We have a very different exposure in Europe, Eastern Europe and Southeastern Europe, where traditionally IFF had rather a lower market share relative to the other regions. We are adding capabilities that are going to be unique, that are going to be exciting for us, that really will help us to drive growth, and we are going to add talent that are very entrepreneurial, exactly what we need for a different go to market approach. In our vision of what we were drafting, we have taken 5 key dynamics into consideration: the market access, which I outlined before the innovation pipeline that is very strong, where we have seen very strong momentum over the last 5 years Obviously, the integration, that is going to be key for us, not only for taste, but also for the savory solution and inclusions. As we move into a new business, we also need to deal with a different set of competitors, but I think that's a great learning for us.
And there are some recent trends that are not necessarily favorable with the softness with the multinationals and some isolated pressure points with Savory Solutions. Our vision is aligned in the corporate with the corporate strategy on 4 pillars: the business transformation. I will walk you through each of it in a couple of slides and share with you what exactly it means for the PACE division. First of all, we see immense additional opportunities for us in markets like Africa and in India as well as in the Middle East. It doesn't mean that we don't have a presence, but we want to have an increased presence, also a technology transfer in faster growing areas.
We see that there's a market potential in taste of roughly €2,000,000,000 in this cluster with an underlying growth rate of 8%. That is double of what I shared before on a global basis. We feel excited what is to come, and I think we are really going to differentiate ourselves going forward. When I look to our innovation pipeline, I said before, I feel very good about what we have delivered. There's no need for us to make a significant correction, but rather to further invest.
We have all the programs. We have programs that are cross categories. We have programs that call for a global impact. And we have programs that really have a proven track record. When I look to modulation, again, I think we are rather going to double down on modulation.
We feel very strong about the culinary reimagine program as well where we can fully capitalize together with Frutarom on Savory Solutions. When it comes to Savory Solutions and how we go about integration, we have a clear focus. We want to globalize the business. In the past, Frutarom was rather focused mainly on Central Europe and Western Europe, some cases Eastern Europe and Mexico. Being part of our division, we want to globalize it.
We want to capitalize on technologies. We want to further improve our presence. And IFF will be a wonderful platform on a global basis of what we can do together. On inclusions, we have a similar agenda. Particularly here in U.
S, we already decided that we are going to see an investment. We want to bring the concentrated fruit pieces of taura into the U. S. These applications are mainly in baked goods, in chocolates, in seaweed walls, in diverse applications that really can well cross sell opportunities for us in taste. Additionally, we will globalize the inventive business.
These are the full matrix, full ingredient systems that provide texture and taste. You will experience and taste some of them in the afternoon. And we feel excited about the gelato business. Now before I will share with you what exactly we're going to do on taste, on how we want to integrate taste, I would like to share with you probably my most beloved video on YouTube. I said yesterday to the senior leaders probably out of the 2,000,000 clicks, 50% are coming from myself.
I really love this video because it explains well on what we're going to do together with Frutarom. Thank you.
Every great idea starts with a spark, whether it's starting a business or perfecting a recipe. It's a fusion of skill and soul, a connection that brings people together and makes something unique. For more than a century, you've known us as David Michael and Auden's Flavors. You've been there as we've led the industry with service and innovation. Together, we've witnessed the pace of shifting taste hit warp speed and a surge of new ideas from unexpected places transform the market.
Now, it's time for these trusted names to come together and create something new to create a company that's nimble, adaptable and resourceful. Say hello to the newest name in taste. TastePoint by IFF is a fresh perspective from the same people that made David Michael and Auden's flavors exceptional. We're a company powered by passion, enhanced with the technology and insights of IFF. Together, we're small enough to care and big enough to make it happen.
With an energized spirit, we'll tackle customer challenges and craft consumer delight. We'll flex with ease. We're agile partners always ready to jump in. With the perfect blend of heart and science, we're here to move you forward. That's the purpose of TastePoint.
We're more than just a great idea. We're rolling up our sleeves, creating a new take on taste. We'll meet you at the table.
Together,
we have a unique vehicle. We have a unique business model that really gears towards smaller accounts. This business model has been implemented here in the U. S. 3, 4 years ago when we acquired Ottens and David Michael in order to be sure that we stay nimble, that we are going to be agile, that we are much more relevant in the marketplace, Think about that many of these smaller customers, not only in U.
S. But around the globe, they probably successfully avoided to work with companies like Shewel IFF, Simmerize, FEMLINK in the past because they were not part of our growth agenda. And these companies are very often entrepreneurs that have a very long memory. We clearly defined that we need to have a different service model for them. We want to preserve what smaller companies like David Michael and Optimum have built up.
And the very same we are going to do with Frutarom. We are going to have taste points that we are going to bring abroad and international. And it really ties in well with our own strategy. Even before we were acquiring Frutarom, I had many of my colleagues in the division asking me when are we going to bring TASTE Point Life abroad international. We have already decided that we are going to open a Tastepoint West in the area of Los Angeles.
We also have taken a decision that we will have a Tastepoint in Brazil. In addition, we are going to have a Tastepoint in China where the team feels extremely excited about that we can already having a HEX start in Shanghai area and in Hong Kong. And we are going to define together now with Flutarom on how we're going to position ourselves in Europe, Africa and the Middle East. Likely, we are going to have a taste point in South Africa, and we will still figure out on how to position it in Europe. Everybody feels excited.
Everybody wants to keep the speed and the agility that really made this company grow faster in the past. Think also that many of the smaller companies, they are in the business for private label. And private label is an area IFF traditionally in the past was not really strong. It helps us to have a very different leverage in Europe. So, in summary, I think we have a very strong underlying business at IFF when it comes to the taste business.
We know what we talk about. We have a very strong innovation pipeline. We will focus on targeted key growth areas in Africa, the Middle East, Turkey and India to further increase our presence and to further cement our leadership position in India. We will globalize the position in India. We will globalize the Savory Solution business as well as the Inclusion business.
And we will fully capitalize on taste point by IFF in new markets in order to bring speed and agility into the market to further grow and accelerate the business. I can assure you that the entire Taste team feels very excited on this journey, and I have no doubt that we are going to be successful in the years to come. On this note, I think we are going to have a break, as far as I know, for 50 minutes sorry? 30 minutes. 30 minutes as we are ahead of time, which is a good thing.
So we'll have a bit more time to mingle and I invite you to enjoy a coffee or tea. Thank you.
Know I'm finally free. Every single word is perfect as it can be.
Ladies and gentlemen, please welcome Yoni Glickman, President, Natural Product Solutions.
Good morning, everyone. My name is Johnny Glickman, and I'm happy to be here today tell you a little bit about IFF's newest division, Nutrition and Ingredients. So broadly, what do we do? We're involved in 4 categories. And as was mentioned earlier, you'll have the great opportunity of going downstairs later to be able to experience some of these products to see what we're talking about, which is much better than the way that I can try and explain it.
But nevertheless, really we have 4 categories, Natural Food Protection, which is about shelf life extension for food, beverage, cosmetics and more. So how do we replace synthetic ingredients with natural ingredients which can extend shelf life? Natural colors, again, food, beverage, largely in cosmetics coming from plant sources. Our health portfolio, which we'll talk about a little bit in more detail, but again, largely comes from the Botanical Kingdom. And last but not least, our flavor ingredient business also relying on natural sources of botanicals.
So maybe just to explain it a little bit better, we can just take an example of the humble rosemary plant, which grows in gardens all over the Mediterranean and gardens here in the United States as well. A very, very interesting source of innovation for us. And just by using the same plant, we can extract part of it, which is used for natural cell plaque extension called carnosic acid. Then we use another part of the chemical structure of the plant, which is used as a strong antioxidant, say, in the sports nutrition area. And last but not least, now that we're part of IFF, there's an essential oil, which can also go over into the scent division.
So really, that's what my business is about, looking at botanical sources, understanding how we can take interesting ingredients from those botanical sources and ultimately deliver them to the segments that we play in. So just a quick look. We're about a $7,500,000,000 market size for the categories that we play in. Health Ingredients. The Health Ingredients market is actually much larger, but here we're just talking about really our addressable market.
And the reason that I emphasize that is that we really play in the higher end, higher value part of this market where we're not really players in, let's just say, some of the more commodity space like vitamins, minerals, etcetera, etcetera. And then the additional markets, which are already of interesting size. And I think that what you'll see here is that all of these categories are growing very, very quickly with an overall growth rate of something like 6%. And the reason for that is really that we sit on the nexus of the trends that are going on in the Food and Beverage and Wellness Industries. We'll talk about that a little bit more.
In terms of the customer base, the potential customer base, about 50% is Monthly Nationals and then small and medium. And I think that one of the really nice things about being a part of IFF now is it gives us much bless you. It gives us bless you again. It gives us much better access to the multinationals. A lot of multinationals are moving into the space of health and wellness.
Nestle, for example, who has been there for a while with Nestle Nutrition, making additional investments in this area. So as part of legacy Frutarom, we were more focused on the small and medium sized parts of things. So given this, we have much better access to the multinational side of things. The only thing that I would like to stress is that we do have a very wide customer base. We start by selling to large pharma in certain cases and really all the way through to start ups in the world of health and wellness.
And there are many, many of those, And we've worked with them traditionally over the years to grow with them over time. So some of our key points, some of our strengths. We have, I think, a very, very strong portfolio in terms of its functionality and scientific basis. If I look at our peers, our competitors in the market, I believe that we have really products which are which we have better functionality, better science. I think that we really, really bring very, very strong products to the table.
Backward integration, which I'm going to talk about a little bit later, but and I'll talk again about the Rosemarie story. But a really important part of what we do because a large part of our business, most of our business is naturals. And not only securing your source of raw materials, but also optimizing your source of raw materials is a very important part of this game. And you'll have a look. I'm going to show you some examples of the way that we leverage our brands.
So we have ingredient brands. We're not a B2C player, but we play with obviously the B2Cs. And what we try to do is integrate our ingredient brands into the finished product, sort of like an Intel Insight kind of thing. I'll show you some examples in a second. And as I mentioned, we've learned over the years how to serve the small and the large customers.
That was part of our traditional business model. And very nice profitability, as you can see, high 20s EBITDA margin for the business. And going forward, we're very optimistic about being able to continue to deliver those numbers growth rates. Just a couple of examples, just so you can just get a feeling because I think it's a little bit different to what you've perhaps seen in the past. On the left hand side is a product called Nureva, which has recently been launched here in the United States.
Those of you who are feeling that you need some cognitive support, I would recommend that you run down to your local Walgreens and pick up a couple of bottles. But this is a Rekutbenkysa product. It's got I don't think you can see it so well on the slide, but basically on the side panel, it calls out our active ingredient, which is called SharpPS. Many clinical trials behind it, which is the reason that basically they chose us as a customer as a supplier, I'm sorry. The second product is a product which has been again here in the market in the United States actually for many, many years.
And you can see it called our Go Less. Go Less is actually our ingredient brand, one that we started with 10, 12 years ago around urinary health, 5, 6 clinical studies behind it and a very, very successful product. And last but not least, for those of you who can read Korean, personally, I can't. But this is an infant formula, which is sold by a local Korean brand. I'll talk a little bit more about our infant nutrition, which is an important part of our business.
But at the bottom, you can see the logo in fat, which really calls out again our scientifically based infant nutrition ingredient, flagship ingredient. I'll say a few more words about it later. So I guess the question will come up is why create this separate business. And I think that there's a couple of things here. First of all, our go to market is a little bit different.
So it's less a brief driven business, but really we have to try and take a little bit of a more proactive I don't want to say more proactive, but we really have to go to our customers and really present ideas and concepts around wellness for them. So that's really how the go to market discussion looks. Where are you trying to drive your brands? How can we try and support that in terms of the products that we're going to deliver to you? And above and beyond that, I think that we see this as an important growth platform, which deserves its own incubation and the ability to continue to drive high profitability and high growth targets.
I think another important thing to understand is that we have fantastic opportunities. We'll talk about it a little bit later. Greg and I will talk next about the cross selling opportunities. But if we look at these products, many and many of these products, if we think about natural colors or food, again, it's exactly it's the customer base that Matthias has in his taste division. And again, it gives us fantastic access now to this customer base, which we never had in the past.
So the flip of Matthias saying, now Taste has access to small and medium sized. On our side of things, now we have the access to the large IFF multinationals, which is very exciting for us. So just some of the major trend shifts, I think that all of my all of the people who have spoken before me have spoken about the natural side of things. This is not a trend. I think it really is a shift.
This is what's happening in the market. I think that this is there's no question any longer. If we look at the Natural Colors market, for example, only a few years ago, it was still around 30, 70, between 70 synthetic, 30 natural. That market has already moved to sixty-forty more or less. So definitely, that's something which consumers, brands, etcetera, are demanding.
Proactive health. So people really want to go to their doctors and the pharmacies and take tablets. And pills a lot less, but we're worrying about our health proactively every day, whether it's through exercise, diet, nutrition, etcetera, etcetera. Interesting thing that we see in the global markets is this is not just a trend in the West. We see it very dramatically in countries like China, India with millennials really starting to have the same sort of look on things as we see with their Western counterparts.
Raw materials availability and volatility. So I think that you've probably a lot of you have heard about the vanilla story over the last couple of years of increasing vanilla prices. And obviously, anybody who is working, playing in this market, we are subject to certain volatility. And that's the reason that we really try to mitigate as much as we can of that risk through our own backward integration plan. I've said quite a lot about what integration means to us in terms of access to the sales platforms, consumer insights, all of this cool stuff, which we're learning about more and more as we become part of the wider IFF team.
And just a couple of words about recent trends. We have, unfortunately, a couple of headwinds going on, a little bit of pressure in our citrus sauce business. In our infat business, we're a little bit maxed out on capacity. We're going through a new we're going through a new CapEx plan at the moment with our joint venture partner, AAK. So at the moment, that's importantly holding up our growth a little bit, but we'll have that sorted out.
So this is sorry. This for me is a really, really important slide. And I think that it says like this. First of all, if we look at the health and wellness space, a huge amount of consumers are moving away from the idea that they want to take a pill and capsule. In fact, I saw new statistics came out yesterday that I saw in the United States dietary supplement market, which is an important market for us to play in, already almost 50% of the products that are taken are no longer pills and capsules.
So they're moving into what we call other delivery forms, gummies, fruit pieces, etcetera, etcetera. And here, I want to emphasize that I think that we're really uniquely positioned at this nexus of what's going on. So on one side of things, this moving to the more the functional food space, the people want to moving away from pills and capsules to be able to take their to get their wellness through intake of food. And together with IFF, again, not only the market access, but very important market technologies around taste modulation, we really, really need to continue this journey of how do we bring those things together because the product can be great for you. But if it doesn't taste great, then at the end of the day, consumers will not consume over time.
So this is one that I think that we should all be very, very excited about because I think it really brings huge opportunities to the table. So again, we have in terms of the strategy, we'll go into a little bit more details on how we intend to unlock our growth, drive innovation, portfolio management and a little bit about transformation. So in terms of growth, I would say that we have 3 very important levers. The first one is geographic footprint. And here, our focus is clearly, 1, on Northern America.
Again, as legacy Frutarom, please remember that our market strengths were in EMEA and, to a certain degree, in North Asia. We are very, very underrepresented in this market in the United States. We're putting important resources into this market at this point in time with fantastic support. And we really intend to grow this market very, very strongly here locally. 2nd of all, we have a market leading position in Asia around the infant nutrition, which I will talk a little bit about more later.
And we see great opportunities to be able to continue leveraging that opportunity as the market grows quickly and also to bring innovation. Differentiated products around our innovation, again, I didn't mention it earlier, but if you looked some of our historical peers, the EBITDA margins that we make compared to our historical peers, you can see that we have much stronger EBITDA margins than our peers in this space, much stronger. And the reason is really between our differentiation, the science that we bring behind these things, the innovation, And we'll talk a little bit about that more. And last but not least, cross selling integrated solutions. How do we work with all of these technologies across the new corporation?
Again, Next one up, Greg and I will talk a little bit more about that. So just to give you a little bit of a quick look at some of the things that we're doing in innovation, these are really just some of the things. We intend to introduce a new infant nutrition ingredient every year. Maybe just a little bit of a clarification. Our go to market there is through a joint venture company between us and ANK, which is called Advanced Lippets.
At IFF, we recognize the profit and not the sales. So this is a very, very important business for us. And bringing innovation in that business is a very, very important part of what we're doing. We recently, just 2 months ago, introduced a new ingredient in China, which is where a huge part of the market is. We're very, very excited about what these new ingredients can bring to us.
Our clinical science capabilities, we have strong clinical science capabilities. It's not just enough to talk about health and wellness. We have to prove it. We have to prove it through our clinical trials. And if you remember the examples that I showed you earlier, they're really driven very, very much by the clinical support that we can do on those things, and we really continue to invest in those areas.
We have an interesting platform around natural antimicrobials, which is another important part of the shelf life extension. And just maybe to say a couple of words on microalgae, which is another part of the business. We have a very nice microalgae business based in Israel. I think that looking into the future, microalgae is a sustainable powerhouse to bring very, very interesting nutrition ingredients, color ingredients, many, many interesting things that we can be involved in. And we have a reasonable or we actually have very, very good expertise in this very complicated area, which combines agriculture, biology, chemistry, etcetera, etcetera.
And I'll say a few words about food next in a sec. So just to showcase a little bit, INFACT, which is, I think, is again our very, very important infant nutrition ingredient without getting into too much technical details. Basically, the idea is that we want to take, first of all, the first message, of course, is that breast milk is always better. But there are certain geographies where it's not possible always to breastfeed and people are using women are using formula more and more, particularly in Asia, particularly in China. And basically, the mission here was to try and help develop a formula which mimics human milk better than what existing formulas did.
And this is really about the fat fraction, which really, through our clinical research and analytical abilities, we have something in Israel called the Human Milk Research Center. We really try to mimic human milk as best as we can in terms of the composition, structure, benefits, etcetera, again, supported by multiple clinical styles and giving us really a very, very significant market share in this area. And the product which we just recently introduced was around the same idea, but we're really going deeper down into some demographics. And the idea is that there's human milk, sure, but again, between the demographics, there's a difference in the last product, which we introduced recently in March, is closer to Chinese mom's milk. So that's really the direction that we're taking this thing.
FoodNext, another initiative which we have. And really here, what we wanted to do was to try and unleash the potential that we have in I come from Israel, and I'm proud to be part of Startup Nation. And also, we have this whole very important food tech center growth in Israel. So we partnered together with the Israel Innovation Authority, which is a government authority, to build really an accelerator. We call it an innovation lab because it's even free accelerator.
Really to get this deal flow, to bring these startups inside, We get an equity investment in the startups. We support them, and it really gives us a fantastic access to the deal flow that we see. So just for example, a couple of things that we're working on, a very, very interesting ingredient in the world of overweight and obesity, A second one, which is personalized pods, which are going into the food supplements I'm sorry, the food the sports nutrition space and collecting biometric data, personalizing the pods. So a couple of interesting things that we're working on there. And we're very excited about what this can bring to not just Nutrition Ingredients but to the wider IFF portfolio.
So a little bit about our transformation. I mentioned a few times vertical integration. So if I go back to the humble Rosemary plant, we realized at some point in time that we needed to be much more serious about the way that we source this thing. So we went through a large process of, a, optimizing the species after we had an optimized species plant propagation, then starting to grow through partnerships with farmers. We're not farmers ourselves, but to grow through partnerships in farmers in Spain and now in Northern Africa, what we will have ultimately around 50% of our crop.
And that's not only good for sustainability, but it also ultimately because we can optimize what we want to have in the plant, it also another lever to increase our profit margins going forward and our operational costs decrease our operational costs. Obviously, we're not going to be we use 100 and 50 botanicals. We're not planning on vertically integrating all 150 botanicals. Although besides rosemary, we grow annatto, which is an important source for color, in partnerships in Guatemala with small farmers in Peru. We grow our own algae in Israel.
Downstairs, you'll see one of our interesting products around cognitive health, where we extract from oats, which we grow ourselves in Poland under contract. But at the end of the day, we need to continue working with sourcing with local partners, working with them in a long term partnership so that we really can ensure our supply source and not only that, continue to bring to them crop science, which is in many, many areas from species to irrigation to organic growing, which we also have some expertise in and really to optimize this. And obviously, as you understand, the whole partnership and also very, very actively looking at some acquisitions, which can help broaden out portfolio technologies and market access. So in summary, we see this as a growth accelerator for IFF. And really, we have some really nice opportunities to continue growing through the combination of geography, technology, acquisitions, cross selling.
And that's really, I think, a good way to move into the next presentation where we're going to talk a little bit about what we're doing in cross selling across the corporation. So thank you very much, and I'll be back in about 3 seconds. Okay. So I'm going to start off talking a little bit about cross selling, and then I'll hand it over to Greg, who will talk a little bit about how we're looking at the whole question of integrated solutions. So really cross selling that you can see on the left hand side is really how do we lever existing products and technologies into our customer base.
So some of the examples that I gave you earlier, how can we sell natural colors to an existing IFF customer? And as you'll see very, very successfully already, some of the very interesting IFF technologies around modulation and delivery systems, which we've already started to bring to Fiverr on customer base. So that's a little bit about the cross selling side of things, I'll talk about. Integrated Solutions, Greg will talk a little bit about a little more. But in general, that's a little bit more about how do we work about in the continuum of combining these products to bring additional value, particularly into specific customer base.
So one is cross, the second one is combination. Okay. So just to get into a little bit more detail about where do we see the opportunity. So all of the IFF technology platforms, which Matthias talked about, the reimagine platforms, which you will also have the opportunity to experience in a short amount of time. Bringing those to Foerong customers has already started to deliver growth for us and certainly brings them a new offering, similarly that was done in Tastepoint in the past, now to the traditional customer base.
Our inclusions business, the Tower of Fruit Pieces, which is a fantastic delivery system also with Health Ingredients, but also at the same customers if they're making a bar or if they're making cereal, certainly great opportunities to sell this 100% concentrated fruit, which also tastes great. And similarly, the other things that we're doing in the world have been inventive, and everybody is excited about the gelato, which we'll be able to talk later. So this world of inclusions. Our natural colors business, where we do formulated solutions. And again, every customer who buys nearly every customer who buys a flavor buys a color, okay?
That's 95% of the folks who are buying a flavor are buying a color at the moment, they're buying a color from someone else. Food protection, similarly. And here again, in the consumer goods market, there's always the need to extend shelf life, exactly the same customer base and the ability to kind of talk to them about more technologies and obviously to leverage on that. And now Health Portfolio, which I've mentioned quite a lot about, but again, you'll have the opportunity to see downstairs. AB Fortis, for example, a very interesting one, which is a microencapsulated iron.
Iron deficiency is a huge subject for kids and for moms. We can deliver iron. Iron doesn't taste so great. We have a microencapsulated solution where we can deliver food into the I'm sorry, iron into the food matrix very, very successfully. And that says you have the opportunity to taste chocolate with iron fortification in it.
And many other examples, which we can talk about a little bit later also. So what have we done? Basically, we've put together a center of excellence. We have a dedicated leader who is leading this thing. We have a plan with headcount, which we've already started to put into place and will continue rolling out in the next quarter or 2 with really all of the necessary functions that we need to have there.
So whether it's commercial, C and A, innovation, marketing and so on and so forth, really to build a bridge which works through the whole organization and really to deliver around our cross selling promise. So I think the resources are in place, and now we have to execute. So just an example of some of the quick wins that we've already had, and please bear in mind that we've only been together for, what is it, 6 months now. So these are some of the opportunities that have come up, delivering modulation to a customer in Peru, vanilla, which is a very, very interesting opportunity, a Frutarom customer that needed the IFF vanilla Fair For Life. So many, many of these technologies we've managed already to bring successfully to our customers and to start bringing new growth to the company.
So with no further ado, I'd like to call Greg to talk a little bit about the Integrated Solutions.
Thanks, Joni. Appreciate it. Good morning, everyone. In this next segment, I want to talk to you about a concept called integrated solutions. And if you can see here, we have legacy IFF portfolio in blue.
We also have legacy Frutarom in green. And you can see here we're well positioned with our technologies and our platforms to do more than just sell a flavor. And let me tell you why we're in that position. If you look at the market, the market is evolving, especially with our small, medium and midsized customers, they're asking us to do more. They're asking us to do more than just supply them a flavor and other ingredients.
If you look at what we do today, obviously, flavor is paramount. Flavor is key. You really can't sell a product if it doesn't taste great. And then we provide a service to our customers to say, listen, this is the flavor. We can provide application studies for yourself, but we all know that the application and the products are becoming more and more complex as we move along.
For example, let's say the customer wants non GMO. Let's say they want natural and let's say they want added health benefits and no sugar. And also, by the way, I want plant based protein. This is a very, very difficult application to solve, very, very difficult application to produce. So tomorrow, that's the application of tomorrow.
We have taste as paramount, but we can see all the other ingredients around that, the proteins, the hydrocolloids and the fruit prep that make up a complex application that our customers actually need help in. And by the way, we've been doing this. We've been doing this for many, many years. We understand actually how to make these applications because we need to demo our flavors in these applications as we move forward. So let me tell you where we're going to play.
In Integrated Solutions, Yoni talked about cross selling and this is basically taking our portfolio and selling products to existing customers. But let's say the customer wants a high value technical bundle, We can still sell our ingredients, but they can have a potential functional benefit. And even if we go further, we can actually make a prototype for them. We can make a prototype for them because we already know how to do that. We've been doing it for many, many years demonstrating our flavors, but now we can provide this service.
And if we keep going, we can provide a fully integrated solution. We'll provide the full product with them and maybe the customer will provide the proprietary base or we go all the way to the finished product, meaning I can provide the full finished product to you and deliver to you as you need it. This is where we'll selectively play. This is the degree of integration that we have a right to succeed in and we already know about from our cross selling and from our expertise between the two companies. We're well positioned to do that because we're going to we're going to expansive portfolio of looking at and capitalizing these ingredients.
We're going to drive creation application science, meaning that we're going to look at matrix to matrix interactions there. We're going to look at the base. We're going to look at everything and really drive those capabilities forward. And then we're going to leverage our core listing.
We're going to leverage our
core listing with small, medium and large customers because they're already there. And by the way, we'll provide them the flavor, but we'll provide you the full product if you would like. We're going to start with Savory Solutions and we're also going to start with Sweet Goods because we do a lot there already in those applications. And we're going to have a dedicated multi disciplinary team to do this. You can't do this as a hobby.
You can't do this as a side note. This is something you have to dedicate yourself to really be positioned to win in this area. Our revenue targets to be over $100,000,000 by 2021. We're very confident we can succeed in this area. We're very confident we can succeed in all these areas, including cross selling and integrated solutions.
So in summary, we will win in cross selling. There's no doubt in my mind we will do that. We're also well positioned in full integrated solutions. We have defined targets. We have an appointed team with an appointed leader.
And we'll reach our $100,000,000 in cross selling and integrated solutions by 2021. Thank you. Now I'm going to reintroduce myself for the another exciting part of this. I want to talk about our innovation plans. And I want to talk about our innovation plans today, but more importantly about innovation plans for tomorrow.
As we all know, the world is evolving. It's an innovation imperative to stay ahead of the curve, but consumer is really driving a change of how we actually look at technology. Our customers are asking us to solve problems and challenges and opportunities in their space that are very, very difficult. These areas are not written about in books and these areas are white space areas that we need technology to be able to solve this. The good news is that technology is evolving very, very rapidly.
There's things that we couldn't do 2 years ago that we can do today, for example, in biotech, material science and in Crop Science. The already good news is we also need to cross fertilize technologies into our space to really make this happen. You'll see a big theme of that in my presentation today, but also downstairs, you'll see a lot of cross fertilization of technologies, other industries into our space. The customer is also demanding pipeline innovation earlier than we have before. It's not uncommon for us to show a customer pipeline innovation 2 to 5 years out.
The good news is that they expect us to be an extension of the R and D organization. The consumers change it very great over 2.5 years ago and we're ready for the positioning today. And sustainability is a must. It's not just nice to have. Sustainability is needed in all of our products and we're working very, very hard to design sustainability in the design of our products.
We also value innovation. Innovation is key for us. Why? Because we use innovation to differentiate ourselves from our peer group. We use innovation to differentiate ourselves from the industry.
We also use innovation to stay on core lists, to maintain core lists and also to win new core listing as we talked about earlier today. We're not just looking at everyday innovation also. We're investing in transformational research to prepare for tomorrow. And that leads me to our R and D strategy. Our R and D strategy is really looking at focusing on high platforms and capabilities that have high value and high return.
This is not just about an academic exercise. This is about getting that high return and really commercializing those products into the industry. And I'll touch on some of these platforms very briefly and I'll go deeper and you'll see more of that downstairs actually in a touch and feel session. But these platforms are also fueled by new capabilities, and some of these capabilities are uncommon in our area. We have to look at new capabilities to drive these platforms forward.
Let me just take delivery systems. We're moving into non microplastics now ahead of the curve, ahead of the regulations. We're also looking at new delivery systems that are natural and next generation. And modulation is not about just low in salt, fat and sugar anymore. It's about the total sensor experience.
And by the way, we're taking modulation to scent. Scent is one of our key areas that we'll be moving into in scent modulation and scent that can affect your mood and emotion and can also affect your well-being. And what about naturals? So really embrace the way naturals give us. Naturals give us in the environment, but what also naturals give us in waste streams and side streams as we move forward.
And ingredients, Nicholas said already said we had the strongest pipeline of ingredients in our history, and we're not just stopping there. We're looking at going from point A to B in new synthetic methods and new catalysis moving forward. And Yoni talked about our health and nutrition. We're really concerned about what goes in your body, but also what goes on your body in skin nutrition. We're going to put a lot of effort and time into that and also in our active ingredient line.
Skin nutrition is very, very important to us, which means we're going to study the skin micro very, very closely as we move forward in the future.
And then
we turn to our capabilities. In Sensory, we no longer need to ask the consumer what they think. We can predict what they think through biometrics. Then our AI on data analytics, we're all using robotic technology to make new molecules. We have 2 robots now in Union Beach.
We're going to add a third. And then we also go into next generation processing. How can we get the best out of fruits and vegetables with drying them in a unique way that can hold the nutritional value? We have state of the art analytical. Our application science is actually going to be strengthened through our integrated solutions program.
And then in clinical research, Joni mentioned our clinical research, the resources we're putting into that because everything has to be based on credible science. And then our Crop Science area, we're doing really remarkable things in Rose in France, but also in Rosemary in Spain, and we're not ending there. We're really looking at our crop science area in a new and better way. The acquisition of Frutarom only reinforces our platforms and capabilities. If you look on the right side in our platforms, it really increased our capabilities in Naturals and beyond, also in Ingredients and Health and Nutrition and Active Cosmetics.
And our capabilities, state of the art analytical, state of the art sensory capabilities, our clinical science and crop science will be leading in the industry. And then our pipeline, very healthy and balanced. As you can see here from the different colors, we have taste, centered nutrition and healthy and balanced across all the platforms. And we prioritize these ingredients and prioritize these platforms based on market potential, technical likelihood success and sales viability. We also see a strong demand from innovation from our customers in 2019 to 2022.
And we have the strongest pipeline in our company history. We're one of the largest natural extractors in the world. We're the leaders in encapsulation. We have the strongest fragrance pipeline globally. And we have a broad portfolio of modulars, not just taste, but also scent modulars and we're doing cutting edge research in white space areas.
And if you look at our platforms a little bit closer, we right now have 118 initiatives spread out of all the platforms. And these are active projects. We're putting a lot of research in globally with our R and D force to make this actually work in high value, high return platforms. Let me go a little bit deeper into platforms. In delivery systems, we're looking at fully biodegradable delivery systems that are natural and regenerable.
We're also looking at new delivery systems for the next generation, delivery systems that we can print on any matrix, including food, clothing and plastics. They have the same delivery technology we currently have, but it can be printed in any format. We believe this is the future. We believe this is low cost and efficient way to go in the delivery system format. And in modulation, like I mentioned earlier, it's not just about taste anymore in lowering salt, fat and sugar.
It's about the full sensorial experience that we're going to deliver into a concept. And then in scent modulation, really looking at mood or motion scent enhancement. What can we do in areas, for example, such as sleep? And I'm often asked about our digital strategy in scent, nutrition and wellness. Our digital strategy is very, very strong.
For example, in this case, I call it capture, analyze and transmit. We have the ability to capture the airspace in this room, in your bedroom or in the car. I can analyze that airspace and transmit a scent to 1 to help you sleep, but also I can transmit a scent to help you wake up. Imagine the possibilities there. Also imagine the possibilities in your car.
I can analyze in the car if you're getting tired driving, but then I can transmit a scent to wake you up. And I can do that and then our sensor technology is state of the art and you'll see a booth stairs to be able to really look at that how we capture all those different types of, scents moving forward. So in summary, innovation is a key driver. Innovation is how we're going to differentiate ourselves, but it's not just innovation, it's transformational research. Frutarom acquisition strengthens all our platforms as we move forward and we have the strongest pipeline in our history in a number of initiatives.
We're focused on maintaining this leadership in cutting edge research. Thank you very much. And now I'm going to introduce our CFO, Rich O'Leary.
The last friend here before gelato and lunch. So, pleasure to be here. Mike wouldn't let me play my walk up song from yesterday, but I'm going to my objective for today is really 3 things. 1, briefly talk about our recent views on performance and our expectations for 2019. But really the focus we've been putting into context, the strategic drivers that you've heard from Matthias and Nicholas and Yoni and Greg, the financial implications of those.
And then how does that translate into our financial performance or policy and ultimately the outcomes over the next 3 years.
As you saw
previously from in Andreas' slides, by we're executing across our Vision 2020 strategy plus the acquisition in 2018 for Frutarom, we drew strong growth metrics and performance over the last 3 years at a sales level, EBITDA level and from a market cap standpoint. Turning more short term, we got a lot of feedback on our Q1 earnings call in terms of our peer based performance reporting. And I want to just take a quick moment to give a little bit of a longer perspective on that phenomenon. As you recall, it's been driven by a stronger U. S.
Dollar environment, particularly in the last 2 years, and in particular, some significant devaluations in emerging markets. That had about a 3 percentage point impact in the Q1 2019, about a similar but 2% impact in 2018 and a much smaller impact in both 2016 2017. So on an apples to apples basis and comparing us to our largest competitors, we feel that over the last 3 plus years, our performance is quite consistent and well positioned versus our direct peer group. From a 2019 perspective, similar to what you heard me talk about on the Q1 call, we still see pressure in certain elements of the market. We had a good start to the year in terms of Q1 performance with solid top line growth and margin expansion and profitability expansion year over year in Q1.
But we continue to see some of the a continuation of the trend that I talked about on the Q1 call. We see good percent growth in Q2. We continue to see a lack of growth and pressure from multinationals within the taste business and some pockets of negative growth in PTI, Citrus Sors and Colors within the Frutarom business. We continue to be able to mitigate a large portion of that pressure from a top line standpoint through mix enhancement, productivity initiatives and cost discipline. But I think the key message for me and what I want you to take away from this discussion is our expectations for the year have not changed.
We continue to see and expect to see a stronger second half of this year compared to the first half of the year, driven by more favorable comps in the 2018 period in second half. We get an increased benefit as we progress through the year in terms of the M and A that we've executed during 2019. We'll of course have the infamous 53rd week impact in Q4. We'll continue to get a ramp up and greater price realization on the within the scent business as we progress through the years. And from an earnings standpoint, the ramp up of the synergies, you heard from Francisco talk about synergies and our confidence and be able to deliver them this year.
The impacts will continue to grow as we progress through 2019. So overall, we feel good about our ability to deliver 5% to 7% top line growth including M and A in the 53rd week. That translates into somewhere between $5,200,000,000 $5,300,000,000 in sales. And adjusted EPS excluding amortization between $6.30 $6.50 which is between 8% 11% growth. Our financial targets, again, as you saw previously in Andreas' comments, but accelerated growth of 5% to 7%, margin expansion on top of that will help drive 10 plus EPS growth over the next 3 years.
From there, that combined with strong cash flow generation, which I'll go through in the next couple of slides, will enable us to rapidly pay down our debt and deleverage the company. And overall, with that, we feel confident in our ability to deliver a 12% return or greater for our shareholders over the next 3 years. The portfolio segmentation that we went through and Andreas alluded to this early, to me was a critical step in the process with the strategy work that we've done over the last 3 months. It was critical and imperative that we step back and look at the new IFF and look at all the different categories and businesses that we had and assess where are the priorities, what are the profiles of those differences. Those choices that we made and you heard us talk about grow versus balance versus fix, then inform our decisions and we make conscious decisions that ultimately drive performance expectations, resource allocation and investments.
Again, my takeaway from this slide really is that we have a broad spectrum of options and category profiles to choose from. They cover all three of the basic profiles in terms of investment perspectives, in terms of fix first to prioritize investment. And while there will be some pruning more at the customer and product level, I don't see anything material in terms of discontinued business beyond what we've discussed already. Long term financial targets, 5% to 7% and 10% plus EPS adjusted EPS growth. But now let me walk you through how we get there.
You've heard from Nicholas, Matthias and Yoni on their strategic growth drivers, including our customer and market expansion. You've seen how we wanted to have a great we will have a greater indexation we've developed specific go to market approaches to attack and benefit from the faster growing small and medium sized customers that now make up over 60% of our total customer base. You've heard how we want to enhance and leverage our vast technology and capabilities platforms to drive innovation and accelerated growth. All this will translate into underlying organic growth of 3% to 5% over the next 3 years on average, to which we will add about 1% each for integrated solutions and cross selling as well as bolt on them and M and A. And all that gets us to our overall growth rate on between 5% and 7% on average.
But top line growth is not the only story here. By proactively managing our portfolio, our products mix and price realization, plus manage maintaining cost discipline, driving fixed cost leverage, delivering upon our synergy targets and continually to transform and optimize our business, we also expect to be able to deliver between 203 100 basis points of operating margin expansion over the next 3 years. As you heard from Francisco, we have made tremendous progress since the deal closing in terms of defining, prioritizing and executing on our operational integration plans. Based on the latest information available, we'd expect to meet or exceed the upper end of our $30,000,000 to $35,000,000 target for 2019. We also are very confident in our ability to deliver upon $145,000,000 target for 2021.
We continue to add to and identify new opportunities each month. And as such, I do feel like there's some upside to the 140 $5,000,000 So how does that then translate into the 12% total shareholder return model that we've put forth as our target for all of you? You can see there's a good balance between growth, the 5% to 7% volume growth that we've identified from a top line standpoint. From there, there's a pretty equal amount that comes from margin expansion, productivity, cost synergies, net of normal investments. Those are the 2 biggest drivers that drive the top line and overall profitability over the next 3 years.
You can see that in the 3rd column, we have ring fenced at a corporate level, about 1 percentage point of investments for targeted white space, principally around IT Investments, Basic R and D and Business Development. This is beyond the investments that have been built into Yoni's, Nicholas' and Matthias' business. We'll be able to manage them and we will manage them over the next few years based on the individual business cases, based on probability, success, impact and timing. From there, we would, on top of that, get financial benefit from deleveraging the company and that fundamentally those 4 frame drivers get it to us 10 plus EPS adjusted growth. And on top of that, we integral part of our capital allocation policy is still to maintain a competitive dividend in the 2% range, and those are the combined factors that drive us to the 10% overall return for our shareholders.
The attractiveness of IFS come from the strong and stable cash flows that we generate. Cash flow from operations driven by high margins and above market growth in a business that has a high level of customer stickiness. We then reinvest a portion of those cash flows into the most attractive areas of our business to maximize returns for our investors. This reinforced this business cycle and continuous cycle is the connection between how we link our business strategy to our financial
policies.
As I talked about that strong top line performance over the next 3 years plus the attractive margin expansion provide the foundation for improving cash flows from operations over the next 3 years. But it's not just that. From there, we expect to see decreasing demands in terms of CapEx over the next 3 years as well as continued improvements in working capital, mostly through payables and inventories. This translates into a significant uptick in operating cash flows comparing the last 3 years to the next 3 years. Francisco alluded to this a bit earlier, but I want to just take a bit of more time to go into it in detail.
We do expect to see a decrease in CapEx expenditures over the next 3 years. We expect to be between 4.5% 5% in 20 19, it's driven by those major investments that Francisco talked about. But this year, we expect to complete the major part of the investments in India, Indonesia and China, as well as some significant investments we've made in creative centers in North America and Europe. Over the next 2 years, we also finished the majority of the investments related to integration CapEx to drive the synergies that we've talked about. And from there, we see that we should be able to sustain at a level of about 3% of sales by the time we get to 2021.
And even at that level, that's more than enough money for us to cover business as usual CapEx, plus continue to strategically invest in growth opportunities, new technologies and cost savings projects. This improved free cash flow generation, we see over the next 3 years a significant uptick also in free cash flows. Over the last 3 years, we've averaged about 10% of sales free cash flow, operating cash flows less CapEx. So as we accelerate growth, expand margins, have decreased internal needs in terms of working capital and CapEx, I expect over the next 3 years progressively improve and be between 12% 16% of sales in terms of free cash flow generation. M and A is still an important part of our capital allocation part strategy as well as our business initiatives.
We will continue to regularly evaluate our opportunities. Our focus, as we have said, will start to be more focused on targeting technologies and capabilities. We have very clear defined priorities, enhance the prioritized adjacencies that you've heard about, align our investments and choices around the portfolio prioritization metrics that we've discussed earlier, and into a lesser extent address any gaps in market or customer access. As we've gone through this process and in the context of our overall capital allocation priorities, we have raised the return thresholds to evaluate any individual opportunity that we look at going forward. Debt repayment and deleveraging is a critical and top priority for our business and our leadership team over the next 3 years.
Given a strong cash flow generation, the reduced internal cash flow needs and a disciplined approach to M and A, I'm confident in our ability to achieve these targets. Just as a reminder, these targets and debt repayment have been incorporated into our incentive compensation plan for senior leaders. We've suspended our share repurchase program during this interim period, and we'll revisit our capital allocation priorities once we achieve the 2.5x deleveraging target. And finally, as I mentioned earlier, a key component of our overall TSR model is an attractive and competitive dividend yield. We believe the 2% dividend target is an important one.
It's one that broadens the potential share base for our IFF investors. We'll continue to manage our dividend in the context of the overall return framework. So in summary, we have a strong record of growth and profitable growth. We continue to focus and manage our portfolio to optimize growth opportunities as well as margin expansion. We do expect to see an acceleration in both of those key parameters in terms of top line growth as well as margin expansion.
We continue to be disciplined and focused in terms of capital allocation and believe all those all three of those factors in total will enable us to deliver strong return for our shareholders. Okay. Thank you very much. Let me turn it back over to Andreas.
Thank you, Rich, for all the financials. Let me summarize what you have heard this morning and then we will bring our Executive Committee up for a robust Q and A session. So, in summary, I think what is important is that the snapshot of the new IFF is quite different than 4 years ago in terms of the categories where we are playing, in terms of the capabilities we have. And I think Greg and Yoni have explained actually quite well what these new categories can do for us as a corporation, as a company, and how they can help us to accelerate growth in terms of sales, but profitability as well. And you see also that our global footprint is actually very nice and matches nice to capture growth opportunities going forward as well.
And I believe the growth engines everybody was talking about, they are quite strong. Now it's up to us to execute on it, to execute on the customer base, to see how can we get more growth and cross sell out of the customers, how we can expand some of our activities, in particular, in Asia and Africa, Middle East, how we can accelerate also some of the adjacencies in terms of organic growth, but some very targeted M and A activities here as well. And I believe the innovation pipeline you have seen looks really, really, really strong. And again, I would like to ask you to see downstairs some of these innovations and you feel that there's a good potential to grow the business going forward. Certainly, the Frutarom acquisition gave us the opportunity trigger even more than just an integration.
Productivity programs are quite strong here as well, and they will help us. And if you remember Rich's slide right now, how we will grow the profitability over time that even leaves some money for us in reserve we can invest in R and D or in some business development activities as well. That creates probably the greatest or biggest amount of flexibility we had over the last couple of years in terms of the size of the opportunity. With that, I'm quite confident that we will achieve what we have shown here in the circle. There are strong, strong numbers.
There are probably even some areas as in on the synergy savings where we feel very, very confident that we can achieve or even overachieve, which creates even more opportunity for us for reinvestments in different parts of the business. With that, I believe we have a quite strong thesis. Still, it is a very, very attractive segment we are playing in. I believe even with the growing exposure to some of these adjacent markets, it's even more attractive. It's a highly diversified customer base, probably the most in our industry.
It has a great product portfolio, a good geographic reach. We have good capabilities in innovation. And if you remember Greg's slide in what comes from legacy FF and from legacy Frutarom, there's quite a nice match here between the two companies, which strengthening our capabilities even further. The cash flow is amazing, and it will help us a lot for paying down the debt, but then reinvesting in the business as well. And that all will lead to an above average TSR delivery.
I'm quite sure of that. With that, I would like to close the presentation session and I will bring now up the whole Executive Committee because you never have the opportunity to talk to all of us. You usually see Rich and myself and I'm boring Mike, and we thought we bring somebody else up that you can really ask good questions on innovation and in other areas. And everybody as soon as they are up will introduce themselves. I'm very, very strong with this team because we have a very diverse leadership team as you see and as you will see in the Q and A, and I think we are in a good shape here.
Come, guys. The older men need a little bit time, but that's okay. So let's start with an introduction of the team. Let's start with Nicolas. We go that and then we go that way back.
Nicolas? Yes. Good morning. Nicolas Pinaud Saillons, the Division CEO of the Centimeters Division.
Johnny Glickman, Nutrition Ingredient.
Richard O'Leary, CFO.
Anne Swad, General Counsel.
Good morning. Francisco Fortinet, Head of Operations.
Greg Geb, Chief Science and Standards, Officer.
Madhya Sadie, Head of Taste.
Nick Fermi, CIO.
Susanne Sarek, the HRO.
Do I have to do it? Sure. Michael Deville, IR.
Okey dokey, guys. We can get started with the Q and A. We have mics in the yes, Mark, you get started. We have
a hand in case you try to punch it.
Mic is coming. The mic, not the mic.
Omnipresent mic.
No, but you can ask. It will.
It will.
Do you have
a loud one?
It will. Okay, there
we go. Great.
So Mark Aspreycan from Stifel. Thanks for the presentations this morning. Very helpful. I guess just starting on the nearer term, so maybe give a bit of color on what specifically has led to the softer start to the Q2? And maybe if you could parse it out between the segments taste and the legacy Frutarom business?
And then maybe just a bigger picture question on Frutaram. Obviously, the growth has slowed a bit relative to the original expectations. It seems like it might be slowing a little bit more relative to the more recent expectations. What has surprised you the most since you acquired this business? And is it reasonable to think that it can get back to even a low end of mid single digit kind of growth longer term?
And I guess, are we even going to know about it because you're going to integrate it into the business? And so are you going to help us at least try to understand some benchmarks on a go forward basis?
Sure. So that's probably for the next hour I can answer. No, no, I'm not kidding. I take the strategic part and Rich can take the quarter part. So first of all, what we see, if you look at the Frutarom business, the first statement is we believe a good mid single digit growth, 5% to 6%, is very doable with the business.
And you have seen it in particularly in Yoni's presentation that the markets and the segments he is exposed to have an intrinsic higher growth than our core markets. So that's a very, very good thing. Secondly, and we see it in some of the businesses we are bringing into the Tastepoint model that the exposure to the smaller customers will help us. So we are very confident on the mid and long term that we will come back to the growth. In terms of the portfolio, we did some portfolio pruning like some of the smaller businesses in the U.
S, but then in on a global base as well, which we have discontinued. And I think that's done. There's not much more what has to be done. There's nothing material, which is good. It was certainly one reason for a bit of a slowdown.
Certainly, we had to get everything together and everything, let's say, ready for growth and ready for the integration as well. But we are now basically done because everybody knows where we are heading, what the strategy is and how we have organized sales. And remember, what we did on purpose, in particular on the Frutarom side, is that we kept the customer facing model intact because we believe that's an important growth driver for us. So that's how we see it in the mid and long term. But now I would hand over to Rich to talk about the short term.
Thanks, Andreas. To me, I think the first thing to keep in mind is this is a continuation of what we've seen really since the Q4. And so the trends aren't the fundamental drivers that we're seeing the weakness haven't really changed. Good strong performance for the scent business. We expect that to continue in Q2 after a very strong Q1.
The Taste business, the local and regional customers continue to perform well. It's really the global customers, which since again, since the Q4 of last year, we have seen really no volume growth. Now we feel good about the fact that they are peaking more towards growth and innovation, which has clearly been a step change from where they've been for the last 3 or 4 years focused on margin expansion and pricing as opposed to unit volume growth. So we think in the long term that's going to be helpful to us. I've talked about the pressures that we've seen in the Frutarom businesses between the Colors business, which is mostly a pricing issue, the Ingredients business in CitraSource and the Savory business primarily in PTI in Russia.
So the fundamental drivers haven't changed. It's a similar trend to what we saw in the Q1 in which it was a slow start to the quarter. We've seen improving trends in the second half of May. So it's still a fairly similar performance. I think our overall expectations for, as I said in my comments, for full year of 2019 haven't changed.
And we will see what the June holds because June is traditionally, before the summer break, a very strong month, and we have still 4 weeks more than 4 weeks ahead of us. So we will see how that goes and then we update you with the Q2. But I agree, a slower first half and a much stronger second half. And it's not just that we see that the business will pick up. It's also technically because we compare ourselves against a relatively weak Q3 last year.
Okay, next question. Yes, please.
I've got 2. You hit
the mic. I'm sorry for that.
I bypassed you.
That's good.
First one on Sabre Solutions. Andreas, when you presented at the CAGNY conference, you had a 6% long term growth rate on that business. And it seems that's now 4%. And what's the underlying growth rate? And what's the scope as well?
It looks like you split some of the businesses like inclusions out. So what's really driving that change? That's my first question. And the second one coming back to the short term pressures, can you comment, quantify and also talk about the phasing of some of those issues, the pricing in the colorants business, the capacity constraints, I think, were mentioned on the infat business. If you can give us some color on that, please?
Yes.
So first of all, if you look at the Sabre Solutions business, there's a split in a natural part and a not so natural part. And we have, let's say, defined the market which is more the benefit for our business. That's the reason why you see a bit of a difference here. Still with 4%, we believe it's a very, very good market. It has an above average growth of some of our traditional markets.
So that's the first piece. And then, Yoni, maybe you talk about the InFAT and the Colors business.
Sure. So on the Colors side of things, basically, we're in quite a long downward cycle on 2 of our key raw materials, which are both sourced in South America. These are very cyclical products. I believe that our peers are also reporting the same trend. So what we're seeing is that if we look at the quantity part of the Colors business, we're actually growing double digits.
Unfortunately, we're being hit pretty hard by the price over the last really the last 12 months. So I think that the fundamentals are very, very strong there. And as I said, I think that the opportunities are really great. Unfortunately, we're really in this price cycle. It really is a market where, unfortunately, the customers are also aware of what's happening in the price cycle and expect to have the savings passed on to them.
On the impact side of things, as I said, we currently all of the manufacturing is done in Sweden in our joint venture facility together with AAK. Together, we made a strategic decision to move or to expand our to expand our capacity in China, that being the key market. And really, we're just pretty simply at a situation where at this point in time, we saw very, very strong growth between 2018 2017, unfortunately, between 2019 2018. We signed the contracts for the year, and we really have we're having difficulty growing the business due to our constraints of capacity. We believe that the new plant will be up and running somewhere in Q4 or Q1.
We also, as I mentioned earlier, we have these new innovation projects, which will also really start coming through in the following year. So I think that the combination of having, A, additional capacity, B, a new product next year, I think, will really allow us to continue growing the growth.
The good thing about the new product is, first of all, demand is strong, that's good. Unfortunately, in the contract with a JV, we are responsible for R and D and for marketing and AAK is responsible for manufacturing. And they were a bit slow in building capacity, but it's good that the demand is there. Secondly, what I really like is a new product which mimics the Chinese baby milk even better than the other one, which we can and will sell with a price premium, which certainly has an impact on profitability as well. Correct.
Adam?
Thanks. Adam Samuelson, Goldman Sachs. Two questions. First, just on raw materials, which has been an issue in the second half of last year and into this year in the scent business. Just maybe any color on any visibility to that inflecting or moderating as we see lower Brent and some we get past some of these supply disruptions that have been impacting you more critically?
And then longer term, on the organic growth side, you laid out kind of 3% to 5% base, 100 basis points from cross selling and integrated solutions and then another 100 basis points from M and A. And I guess the question is the old IFF pre Frutarom, the target was 4% to 6% organic. The pipeline and innovation looks quite strong across the portfolio. And we've added in some higher growth categories with Frutarom. So why wouldn't we be targeting a higher growth ex synergies?
That's usually my question, but I come to that in a second. Nicolas, if you talk about raw mats and then we might have Francisco as well.
Yes. So I would indicated in last Q4 and Q1, we're seeing high single digit increase in input cost for the year. And over the 2 years, that's 20%. Beyond this, at this stage, there is very little visibility because we need to understand what is the end of the impact of some of the disruption to come back to more regular situation. So we're still monitoring, and we will keep you informed as we see the market progressing.
I don't know. Do you want to add anything?
I will repeat. As Nicolas presented, the impact, particularly in the same business, was around 20 percent. We see signs of stabilization, but it's very, very soon. The disruption came from Europe and China, particularly in China is structural. So we need to wait and see.
Yes. What is good and I'm very proud what the team did very well is actually working with our customers and regain and recapture some of it. And if you compare to some of our competitors, I have to give kudos to the team. They did very well. Talking about the mid- and long term growth perspectives, I agree with you.
I think there are opportunities. That's very, very clear. But I think giving ourselves, let's say, a very realistic target to achieve and look at the different segments in the marketplace, which has still some volatility, we should not forget that, Whether it is raw meds, whether it's some of the biggest CPGs have their growth issues, we saw that might be the most prudent way to come out with these numbers. But be rest assured, we're pushing wherever we can for more growth as much as we can. Yes, Lauren.
Do we have a mic for Lauren? Very good. It's coming.
Thanks. It's Lauren Lieberman from Barclays. So in the last 10 ks, you guys called out changing needs of middle market customers. And I think that one of the things that's been highlighted about a real positive in the Frutarom transaction has been increasing your access to the smaller, faster growing customers. But one of the things I was curious about then is, our middle market customers, because of all the growth becoming more powerful, becoming more like the big guys and maybe not quite as attractive as they might have seemed 2 or 3 years ago.
So if you can talk a little bit about that changes in the sort of nature of the marketplace and if in fact like anything you can share about these volume based rebates that were called out in the K?
Maybe Mike, you take the K question and I talk to the customers?
Yes. Maybe under Star with the customers or not.
Okay. Star with the customers. Okay. Very good. No, what we see is still and look, we are very, very close to these customers now through TastePoint but through the legacy Frutarom Organization as well.
We see actually not big changes in terms of leverage and in terms of how they do business because we still have to remind ourselves, they have usually not huge R and D capabilities and that's where we come in. And even now and that's the reason why we finally decided to go more into the total solution space, asking for more complete solutions from us. And that's the reason why we believe highly attractive, not much changing in terms of the dynamic, and we have the right model to deal with them. So that's what I see, but we certainly will update you if you see any changes. Even if you look that many of these smaller customers are bought by big CPG companies, Most of the time, we stay on the call list.
I think I can say maybe Matthias is killing me, but WhiteWave was acquired by unknown. And we are a very significant partner of WhiteWave and we're still a very significant partner of WhiteWave. So sometimes it's even also an opportunity to get and increase your business with some of the bigger companies if they see that you're doing some good things with these companies. Yes?
And that was the note in the 10 ks. It's really around the consolidation of when you have a big company buying a mid tier size company. There's obviously it's newer for us, so we have to manage that process.
I see. I've set it up for you. Perfect. Yes, please.
Thanks, Andreas. I guess a related question. How do you accomplish cross selling at the same time as you reduce complexity within the context of the integration specifically? And then longer term, I get you've recently acquired pockets of some very high margin attractive products, but aren't why wouldn't smaller customers be inherently less profitable over time, just given all the complexity, just the sales process and constant they're less established, they're constantly turning over, they have a shorter relationship with IFF and all the capabilities you've brought for so long. So
what we have seen now through our own history and Frutarom's history is that because of the dependency on, let's say, innovation, I think we have a good opportunity for profitability with these customers. And secondly, also the procurement process is different than with a big CPG customers. And that's the reason why we feel very, very good about the profitability. But maybe, Matthias, you might add on because you're on the forefront and I don't know maybe, Anders, you can add as well. Yes.
I mean, when you look to the integration, for example, of what we made or not integration of TastePoint on purpose, we wanted to leave it a bit separate. I mean, it did not dilute our margin profile at all. In contrary, we are in a position to make it very profitable, to make it happen. The overall development cycle is much shorter. We are working probably 2 or 3 weeks on the project and then we see a very high likelihood of commercialization.
With the larger CPGs, it may take 1.5 years. So, I would not argue that the smaller accounts are less profitable, not at all.
I think the other thing for me, John, is we as we've gotten bigger in that part of the customer base has gotten bigger, we're able to do better customer segmentation by our facilities. So we're able to optimize the manufacturing process and make up for some of that complexity.
Yes, we have one question here and then I
hope.
So thank you. So you were talking about the new high growth, high margin adjacent markets that you entered with the Frutarom deal. Can you talk about how you're going to cross sell those technologies into legacy IFF customers given that you typically work on the basis of very specific briefs? And then the second question is also can you talk about how Frutarom employees are incentivized? How does it link to your
targets?
And I also read in the proxy statement that the IFF employees have a different incentive scheme from the Frutarom ones. Why is that and how is it different?
Okay. Very good. So let's start probably with Greg and Yoni at the beginning the brief system and maybe you can talk about the presentation we have now for the big CPGs coming into your R and D facilities. And then Susanne can take the second part of the question.
Okay. The first question about Frutarom Technologies into big CPG. CVG. In big CVG, it's about brands. Right now, we sell our IFF legacy into those brands.
But now that you look at specific brands, for example, in large beverage companies, there's brands that represent sports nutrition, there's brands that represent a lot of different avenues that we generally didn't have access to from a nutrition side, which now we do in addition to the flavor. So it's more holistic service that we can provide some of those big brands as we move forward. So that's to me is a very exciting opportunity, an exciting opportunity to work at those brands that really drive the market.
And you see it actually what is important when you look towards the way to the total solution. We build for many of these customers prototypes, and now we don't have to take many of these parts from external suppliers. We put them already in our prototype. And if they work in the prototype, the let's say, the probability that our end customer will then buy it also from us, like colors, for example, it makes a lot of sense because it goes already together. But now coming to the second part of the question, and that's Susanna.
So right now, we are conducting our evaluation. We absolutely need both companies to meet their targets. So they're going to continue on the total compensation structure that they currently have. We, as I said, are doing a very thorough evaluation. 2020 will be bringing everybody under the same umbrella in 2021 executing it.
But again, meeting our targets and again, having this obsession for the customer is our number one priority right now.
And it might be also that not it's all the IFF system. We will taking probably some best practices from the sales incentive system from Frutarom as well to bring it to the other side of the legacy business. We're just taking on lending the best of both worlds.
I mean, the fundamentals are still the same. Their bonus program is still based on top line growth and profitability. And it's really that comment around keeping them separate is really 'nineteen comment. And then and now that gives us time for Suzanne and his team to complete the work and find out what the right way to optimize the overall package, but it's really focused on the 'nineteen comment.
Very good. We have a question here. We can follow-up. First to the front and then we go on the back and then we have one here on the right hand side as well. I got it.
Thank you. Faiza Alwy from Deutsche Bank. So I have a few questions. The first one is just for Andreas and Francisco. And that is, what are some of the key risks or things that you worry about as it relates to the Frutarom integration from here?
So I'd love your both of your take on that. My second question is how big can naturals be? I know it's 20% of the business at this point. Is there a risk that at some point you reach sort of a structural resource limitation? So I just love like your long term take on just the natural of the business.
The third thing is just around the fixed businesses that you talked about. What are these? Are we talking about things like colors or something else where it's where there is a structural issue where maybe you would like to exit these businesses? So just a little bit more detail around that.
Okay. Let me start with the fixed business and I give it to you and then we take it from there. So on the fixed business, for example, we have a trade and marketing business, which is very low profitability. We do it as a service in selected markets for some of our customers, but profitability is how it works is we buy stuff and ingredients for them and then give it to them with a very slim margin because we have better terms of the trade with our suppliers than they have. And because they are our customers, we are doing it.
We will reduce or, let's say, slow it down as much as we can because we don't see a great value, but we don't want to discontinue it all of a sudden because it's a service for our customer. Just to give you one example, we have others like, for example, the home care business in Ascent. And here, it's a good opportunity to fix the business because now with the new access Nicolas' team has created, we believe that we can bring it up. So, it is actually here to instill good discipline for the teams to make sure that we end up and move in terms of growth and profitability to different parts of the portfolio. The same we will certainly do with the customers.
And I had a discussion with one of your colleagues in the break many years, maybe 10 years ago. We have done this already that we have really looked at the economic profit model and worked on it. And now we have a new portfolio much bigger. If you apply the same methodology and the same thing, we can move actually profitability nicely up. It's a great opportunity for us.
Francisco, so what keeps you up at night?
So first of all, let me start. If you see the 2 savings programs, integration and things beyond the integration, most of the savings is progress improvement and procurement. So there is no risk, no risk whatsoever. The risk is associated with the network optimization and the risk is if we alter the commercial process, if we disappoint our customers. So let me talk about the risk profile there.
First of all, as I said, 80% of the revenue of Frutarom has no association whatsoever with network optimization. Of the remaining 20%, 60% is in 2 geographies where it will be absorbed by a base point model that has the same profile. Number 2, in the credit centers, in the commercial, in the front end, there is not only no changes, is improvements. We're going to improve CapEx, we're going to improve because we are going to introduce IFF technology. And number 3 is experience.
I invite you to review our manufacturing performance, the gross margin expansion to the manufacturing performance. The main reason of that is network optimization. So I believe the risk profile is low.
Okay. Thank you. Natural?
Yes. I think the question came on Naturals, Faiza. Just point of clarification, when you look from a sales perspective, it's not 20%. I think it's more like around 50% of the business is probably more focused on naturals. Hard to quantify just given the labeling definition.
2 areas that we focus on when we look at the raw material spend, and Francisco can comment on it, you can see with the acquisition of Frutarom with 70% to 75% of their business being more geared towards natural. Obviously, there's been a big shift. That trend in terms of growth Andreas highlighted on the slide is continuing. And I think when you look at the core business across Nicholas' business and Matthias' business, the new briefs from customers are still very, very high in terms of demand for natural. So I think the propensity will grow.
Obviously, you'll start to get to a conversation. I'm not sure at what time, but there will be a conversation, okay, what's feasibly acceptable and accomplishable going forward.
And we are looking, let's say, on all different alternatives. I give you one example on vanilla. It's the obvious one. Vanilla, dollars 20 per kilogram 3, 4 years ago, peak was $500,000,000 Matthias and his team were looking, can we grow this in the Netherlands in greenhouses? Unfortunately, it didn't work out so well.
But we are trying all avenues because we see the demand. At some point in time, it will come to a situation where it breaks, and then we have to come up with alternative solutions here. Yes, we have a question there, and then we come there.
Alexandra Thrum from Morgan Stanley. So this kind of continues on from that topic of raw materials in the natural side. I understand that a lot of the recent volatility has been driven by the synthetic side, particularly in scent. But when you think about your portfolio and that growing demand for Natural Ingredients and as your portfolio of Ingredients becomes more natural, when we think about medium term margins, are you concerned that, that volatility could be a little bit higher because of the nature of Natural Ingredients? And if you see that as a risk, what can you actually do to help mitigate that potential margin volatility uplift?
Maybe I give it to Yoni because you have vast experience with that.
Yes. I think that in terms of the risk mitigation, I think that this the key activities, which we've already experienced and taking care of is, 1, identifying really the mission critical crops and going into these vertical integration projects. And as I've described, we're along the way, and we'll continue this journey going forward to be able to and that's a significant part of risk mitigation because often you move from wild crops to something which is more an agricultural framework managed. That's the first part of it. And the second part of it, I think, which you see across the businesses, you see it so strongly in the said business, is really this idea of the long term partnerships.
And to me, that's a very, very critical part of what we do because the minute we build the long term partnerships, first of all, you can take margin out of the value chain. So typically, if you're working directly with the farmers, in the past, that was farmers and then perhaps a collector distributor, etcetera, etcetera. So we can take out that margin that was going through the value chain. That's number 1. And number 2, it's impossible to underestimate the importance of these long term relationship.
These people in many, many of these areas, the experience that we had, for example, in Guatemala, that they're very, very happy to come and say to us, okay, you know, for a price which we've accrued on for 3 years, 4 years, 5 years, the extent of the crop, we're willing to supply to you that product and that really takes the cyclical part of that buy out of it as we've worked closer with the farmers. So we have some really interesting projects, think, throughout the organization. And really, I think that, that has to be the path forward also from the and I want to emphasize also on the sustainability side of things, which is a very, very important aspect of this.
I would give us the opportunity to optimize the growing process. Exactly.
The growing process is the actives, the productivity, all of those
things. Francisco?
Yes. Just to highlight what Johnny said about the long term partnership, if you put the volumes of legacy Frutarom and the volumes of IFRS days, we are in many ingredients, many families of ingredients, number 1, or a very close, number 2. So having this long term partnership just got easier with this integration.
And I would even put, let's say, a tech element to the whole thing. And what Yoni is doing, and you will see it down, it's a rose marine technology for food protection. And you came up with a new seat and a seat which gives us a higher yield than a regular seat. So going really into AgTech and have the capabilities to come up with these kind of solutions is paramount here as well because that's how you can outperform from the competition. That's number 1.
And number 2 is, I think you have to have the right idea about bioscience as well because maybe some point in time if the demand is going on and the world population is even it's not for today or tomorrow, we need biotech solutions which help us to produce it in a reactor instead of producing it on a farm. It depends on the willingness, in particular, of the European population whether they accept that or not. But that's my guess here actually maybe 5 to 10 years ahead. Okay? We have a question here.
Could we get the mic?
Silke Koch with JPMorgan. I was wondering whether you can talk about what you know about Frutarom now that you didn't know before you purchased it, both positives and negatives. Secondly Just
the way that they're all nice guys.
Secondly, I was wondering whether you can talk about your purchasing power with the traditional IFF customers and compare that with your pricing power at the for drone customer base. And lastly, I was wondering whether you
think there are any pieces that
are in there that are interesting that you might want and what those are?
Okay. Good. So surprises, I would say, being as usually pretty, pretty blunt, I think we had a couple of not so good surprises with facilities, which are probably not at our standard, but I think Francisco can comment on this one. And we are fixing either we are investing or we're closing them anyway. So that's one thing.
The second thing, and that's a very positive surprise, in particular in the Newnies area, I have found or we have found some of these adjacent businesses are more attractive than I have thought. And one of them is, for example, the ice cream business, you will see, growth and profitability. I don't want to oversell, but it's really good. And I think that gives us a real nice platform to grow this business going forward and will help us. And I think in our and again, being very honest, I don't know, but we would have been courageous enough to go into a market where nobody else is in.
And I think that's a very, very, very positive surprise. So then, I don't know, Francisco, do you want to add anything?
I have visited a lot of sites in Frutarom, and I am actually quite impressed. And what I can tell you that the network optimization will take care of those sites that probably can be better from a standards perspective.
Okay. Very good. And then on the 3rd piece of the question on DuPont. We look into it what might be of interest, but we are right now focusing on the integration clearly. Certainly, there are elements in the business which are nice like the culture business.
We all know that, but that sets it for so far. And the second piece of the question, we are taking offline. That's just what Mike told me because he's
My memory wasn't good enough to keep up, sorry.
Yes. But you maybe can repeat. Yes, please. That would be great. Yes.
Yes, sure. No, no. Pricing power, traditional customer base and the new smaller customer. Maybe Matthias you can take that.
Well, as you can imagine, the pricing power of the multinationals is very different than or the purchasing leverage they have versus the smaller accounts. We feel when we talk about contracts with smaller customers, we have definitely more flexibility. We can probably work even a bit faster on smaller accounts when it comes to input cost corrections and adjustments. However, as you have seen, I think even the last 3, 4 years, we have a proven track record that we could work with our customers as well in order to pass on inflation on to them. So I think it's probably an element a bit of timing, which multinational takes a bit longer than with smaller accounts.
Okay. Very good. Any more questions? Yes, please. We go on the back and then we go on the front.
Hey, Josh Spector, UBS. Just a question around the incremental cost savings. Do you view that more the $100,000,000 as status quo cost out program? Or do you view that more incrementally going to drive higher margins kind of over the next few years? And then kind of related with that and business reinvestment, historical IFF used to spend around 8% of R and D on R and D.
Now it's more around 7%. Do you see that needing to step up to drive the innovations you're talking about? Or do you think where you're at now is the right level?
Okay. Rich takes the cost question. I take the R and D question.
Yes. I think from a cost standpoint, it's an extension of what we've been doing already. Over the last 4 years, it was about $125,000,000 So we have a strong track record in terms of being able to deliver that. I think we are going to continue to address the underlying challenges we have. I mean, Francisco talked about a big piece of that is how we address the challenges we saw in the scent business and rethink our supply chain and rethink our process.
It's an expansion of some of the things we've already done in terms of from a back office standpoint, a functional standpoint. We continue to look at how do we leverage our system. So I think it's part of the overall equation and it gives us the flexibility, as we progress through the 3 year cycle and make conscious decisions year by year in terms of how much we let flow to the bottom line and how much we will invest. But I think the biggest difference between this plan and some of the previous ones we've talked to you about is that incremental investment that we've ring fenced for R and D, for business development and IT. And I think that helps address to a certain extent, your question around R and D, yes, it's about 7%, but that excludes the ring fenced amount and target amount we have set aside for R and D.
And I think the last comment before I turn it over is, to us, it's more about the effectiveness of the spend than the amount of the spend.
Absolutely true. There's not much to add. The only thing is, if you look at the different ways how Frutarom and legacy IFF did R and D, it is IFF more towards doing everything in their own four walls, Frutarom more acquiring like Enzymoteq, as I said, 150 patents. I actually envision to have a blended approach going forward because not everything will be invented in our 4 walls. And then you have seen now with the additive advantage that we are already in Aerobel, we are bringing innovation into our company.
So it's not all just our spending. It's also buying some innovation because we get it faster into the company and then disseminate it across all different categories. Yes. And then Heidi.
I actually want to continue on R and D. So first, Greg, my question is for you. As you go through the Frutarom portfolio, I guess, first, it's a really vast portfolio. So it's still only been a handful of months. Do you feel like you've really been able to dig in?
Do you feel like you've kind of gone through everything? And I guess, I'd say, what are the most exciting and differentiated technologies you feel like you've found? The second question would just be back to the amount of spend. Because one thing I'm having trouble getting my head around is that if you're a subscale not you, but Frutarom or the acquired businesses were subscale, their percentage of sales spent on R and D should be much higher than a big company, not lower, right? And the businesses that were acquired and even just legacy Frutarom as a collection of businesses has a lower percentage of sales and R and D.
So I'm still having trouble understanding why we should be comfortable that the boatload of technologies at Frutarom really are that special differentiated, able to price drive higher growth, because it seems like IFF has a legacy, has a really great robust program, robust portfolio, as you mentioned, working on proteins and alternative proteins 4 years ago, right? So I just want to help on that.
Let's go start with Greg and then give it to Yoni because Yoni can give us his view on that. Greg?
Thanks, Warner, for the question. One, we are currently going through what we call these R and D summits with Frutarom. We had one with Natural Products Group and we have actually one tomorrow with our Savory Group. What we found out so far has been very, very exciting. 1, I think the Naturals portfolio allows us to expand not just in the Taste division, but also we're planning some great synergies in the Scent division and also in our other areas in the Nutrition business.
So we're actually cross fertilizing some of these technologies more than I ever thought we actually could do before. So that's exciting for us. Also the other exciting piece is we always want to get deeper into the nutrition area. And that's as you know, in my past, that's a passion of mine to be able to do that through multiple big brands and large companies, but also small and medium sized companies. So now it allows us to go into areas such as sports nutrition, pet nutrition and other areas that are that will be great for us in the future.
So we're very excited what we've seen so far and we look forward to what we see actually tomorrow in the Savory Summit. So I'll turn it
over to you. To Erez, I would add on the infant business, what Yoni presented. It's great not just for infants, but for elderly nutrition as well because that's there's an interesting market for that. And then maybe Yoni can talk about the algae we're getting out of Israel, which is fantastic, which one of your favorite companies you are covering is buying really a lot of.
Jonny? Just maybe a couple of words about the R and D model, I think, which is a little bit different. I think you need to take a couple of things into account. Number 1, a huge part of a significant amount of our R and D whilst it is done in Israel, which just sort of baseline, the cost is lower per headcount. Can you remember, a researcher just costs less than Israel than it does somewhere else in the world?
That's the first thing. Number 2, I think that we very successfully leveraged external funds. So government research, etcetera, etcetera. We continue to doing that. I showed you FoodNext, which is another great example of the way that you can leverage additional R and D resources, which weren't part of our spend.
And 3rd, I would say that the whole open innovation side of things, we're really in our DNA is to cooperate with third parties, which I think often can bring you innovation faster. And it also can save you a lot of cost in building those kind of cooperations that you have over the time. So for example, the LG project, which Andreas described, started as a research project that we took out of a university in Israel. And basically, we scaled up the technology. And our cost at the end of the day was really a fixed term royalty, which we had to pay the academic institution.
So that's a great example of how to be able to take those things. So I think the ability to do these things together now, I think is really interesting there. Some of the things that we've been looking at together through these R and D summits, etcetera.
Which is good for us because we learn a lot. That's the reason why we said also that we set up this FoodNext incubator because that's something we haven't done before. And here's a good of good, let's say, learning for legacy IFF, what FoodHome has done, maybe you could elaborate just for a second what the algae is doing or what are the it's used? Sure.
So we grow red algae, which is called porphyrydium. The primary use of and it'd be nice at some point in time to show. So it's really a very, very important interesting scale up from a tiny scale. And algae doubles its crop every day. We ultimately grow it outside in the desert and then go through downstream processes.
It's used as a cosmetic active, really as an antiaging, anti pollution. But there are other very interesting things. We derive color from it, so we can use it for natural color and things like lipstick. And the third thing, which we're working on now as an ingestible side of things, which we have to go through a regulatory pathway, which has some very, very interesting health indications on that side of things. Also this whole beauty from within type of thing, which again, interesting cooperation between what I do and in Nicholas's MNC business.
So again, we bring some clinical science to that. We bring some knowledge into that kind of thing and really see that we can leverage those business with some of those technologies. Okay.
ID? Do we have a mic?
A question for Rich. Do you know what the historic clean organic growth of Frutarom was given that we know there are accounting differences between the two companies?
Based on the work that I mean, we focused on the last 3 years, I would say it's between 5% 6%.
And what was it in 2018? Because we know that the second half was a little bit challenged.
It's going to it would have been, I would say, probably 3% or
4%. And then lastly, on the 5% to 6%, what was the proportion of volume and price?
Primarily volume.
Volume. Yes,
volume. And then last question
Just one thing. In terms of volume and price, despite the scent business, everything else is almost all volume just for our businesses.
So the question was on Frutarom. So the 5% to 6% is mainly volume, right, historically? Yes. Okay. And then last question.
Have you identified any other major accounting differences between the two companies?
No, I mean, the primary difference is IFRS to U. S. GAAP. But I mean, we've done an extensive amount of work, but no, nothing significant. We have slightly different useful lives, for example, on certain categories of equipment, but nothing significant.
Okay. If we have no more question right now, I think we have ample of time during the walk through and the lunch. The whole executive team will be here with you. We can go downstairs and I think everything is prepared. And I recommend you before you eat, just look at the noodles because you get something to eat there as well.
Thank you for the team. Thank you very much.