Okay, good afternoon, everyone. Thank you for joining us. Welcome to our 2022 Investor Day. It's great to see everybody in person and those that are joining the webcast. Thank you for joining. For those who don't know me, my name is Michael DeVeau, and I lead investor relations here at IFF. I'm very excited to spend the time today with the entire executive committee team to really go through the refresh strategy and the transformation of IFF into the next chapter. If it's okay, I'd like to start on the cautionary statement, so please take a moment and review our cautionary statement. Everything that we're gonna say today is based on how we see things today and contain elements of uncertainty. For the full risk factors, please look at our press release that we released this morning.
In addition, we're gonna use non-GAAP financial numbers. For those who like, you can please look at our website as well. You'll see our non-GAAP to GAAP reconciliation from a reference point. Very quickly, just to hit the agenda, we have a pretty packed afternoon. The first half of the day we're gonna spend going through formal presentations. We're gonna start with vision and strategy from our CEO, Frank Clyburn, then we're gonna go into a little bit of R&D and innovation from Gregory Yep, who leads that. We'll take a little bit of a break. We'll come back on stage. Glenn will give a financial perspective, and then we'll invite the entire executive committee up to take a formal Q&A session.
After that is complete, we will then go downstairs, and we have innovation experiences really showcasing some of the best of IFF. Please, I encourage you, if you can join, that would be fantastic. With that, I'd like to now formally introduce Frank Clyburn, our CEO.
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We got music.
Yeah. Wow. Good afternoon, everybody, and thank you for joining. Before I get started, I did wanna just echo how excited I am to be here for my first investor, opportunity and presentation for IFF, we're really excited to share our future strategy and vision. Before we get started, though, I wanted to introduce, if I could, our executive team. Now, they're all over here to my left, and I'm just gonna go real quickly. Ana Paula, if you could stand up and just say hi. Deborah Borg. Deb is our head of HR. You've already met Mike. Mike, you wanna stand up again? Ralf Finzel. Ralf. There's Ralf. Heads up our operations group. Simon. I see Simon over there. Simon is our head of H&B. Jen. I see Jen. Oh, there you go. Jen's our general counsel.
I think many of you know Glenn Richter. Glenn, our CFO. Angie, I see Angie. Oh, there she is. Angie heads up Pharma Solutions. Vic, I see Vic over there, former head of IT. Christophe, head of Scent, and then Greg is gonna be joining us here in a few minutes. He's our head of research and development. This is the executive team, and I am very happy today on behalf of this team, on behalf of our board to really talk about the future for IFF, both near term and then also how we aspire to be a leading innovative company with top-tier industry growth. We're gonna take you through our growth-oriented strategy and really unpack that to let you know how we see driving top-tier industry growth and what we're gonna be really focused on as a team.
Second, we're gonna talk about our cost productivity initiatives and really unpack that for you today and show you how we're making trade-offs across the organization. Third, you saw announced, I've made the decision in conjunction with our board to simplify our operating model, as well as for us to go much more focused towards end-market customers, and we'll walk you through that. In addition to that, we are targeting a strong financial profile. You'll hear us speak about our continued leadership in ESG. We are also announcing today that we're continuing to evolve our board of directors, and I'll share with you some additional information around that, strengthening our management talent, and then also we will speak about how we're continuing to advance our portfolio. If you start with the purpose of IFF, and honestly, this is the reason why I wanted to join this company.
I wanted to join this company because of its purpose, its purpose of applying science and creativity for a better world. There's a reason why IFF exists. Our commitment is to do more good in the world, this is something that we're rallying around as a company. I think this is honestly what differentiates us. It also attracts some of the top talent in the industry. I wanted to start today really from a position of how we see the company and our strengths because I think it's always important to really look at a company and say, "What is our foundation?" We are starting from a position of strength. We are seen by our customers as a leading partner in our industry. We have a world-class research and development pipeline aligned to end market trends.
We have 3,000 engineers and scientists, some of the best in the industry. We also have a highly diversified business that I'm gonna talk to you about here in just a bit. We also have a very expansive global network, where we have a presence around the world. In fact, 40% of our sales is in the emerging markets. Some of the chevrons and quotes you see here on the slide, I can tell you that I've had a chance to engage with many customers since I joined in February, and the two things that customers have provided me feedback on, especially from where our strengths are: one, they really can count on IFF. They love our capabilities. They love the fact that we have such a broad, strong portfolio.
Two, they've mentioned to me, they also like to learn more about our R&D capabilities and how we can co-create and create greater future opportunities for their customers. That's one of the positives that we have as a company, clearly a strong foundation. We also, as a company, have the largest research and development spend in the industry. This is a key part of our strategy. Our focus is to continue to make sure we're bringing differentiated solutions to our customers. This is one of the key underpinnings for our strategy, and we'll talk a lot about that here today. I'll share with you some thoughts as well as Greg's gonna really talk to you about our innovation portfolio and pipeline.
We also have a very strong, as you can see, expansive talent team here, and then also you can clearly see our research and creative application centers are very broad around the world. This allows us to innovate with our global customers, but also with many regional and local customers. Here is the network. As you can see here on this slide, you see a very strong presence with regards to our labs, plants, and some of our innovation sites. You can also see how our sales line up around the world. North America represents approximately 30% of our sales. Europe, Africa, and Middle East, approximately 35% of our sales. You can see Latin America at 11%, and you can see where Asia Pacific is approximately 24%. This is great from an overall diversity perspective, great from a customer perspective.
I am gonna come back to you, though, as one of our key underpinnings of our growth-oriented strategy is to expand our business in the emerging markets. We see this as a significant opportunity for us going forward. I'll come back to that in just a few minutes. We also are seen as a leader in ESG, and this is really important. Sustainability, and this is very important not only for us, but for our customers and where the world is going. We have been validated across many multiple platforms by third parties as a leader. You can see some of our ratings, our rankings, as well as we're seen as a strong partner in ESG. My message, though, is we're not resting on our laurels.
We're gonna continue to innovate, focus, improve in this area to make sure that we're doing everything we can to have a better IFF and have a better positive impact on the world. We're starting from a position of strength, a lot of great things about the company. When I came in, I wanted to do a couple of things. One, we really wanted to understand how are we gonna build a sustainable growth strategy for our company. It's in three phases. First, this year, we've been focusing on doing a diagnostic, as well as then thinking about the actions that we could put in place urgently to drive stronger performance. Second, we wanted to navigate and accelerate as we head into 23. We all know there are gonna be headwinds in 23.
We're gonna navigate some of those headwinds, especially in the near term, and we're looking to accelerate our performance as we go forward. We'll talk more about that here in a bit. 2024 and beyond is when IFF is focused on expiring and achieving, and we are shooting for very strong financial performance as a company as you move into 2024 through the 2026 timeframe. Let's take a look at the strategic assessment. We wanted to take an approach that first started with a very detailed financial assessment, and I've spoken to you in the past about using our return on invested capital framework. We also looked at market attractiveness, and I'll share with you some of the findings from that now in here in just a few minutes. I spent a lot of time.
I said, "I really wanna hear from customers." I wanted to spend time one-on-one with customers. I met with many of our CEO customers, many of our heads of R&D customers, and I've gotten some really important feedback on how IFF is seen today, but also areas where we need to improve. I'm gonna share with you that here in a few minutes. We did a deep dive into our research and development pipeline and portfolio. We've done two quarterly pipeline reviews.
This is now a part of our DNA, where we're making sure as an entire senior team, our commercial organization, R&D organizations are coming together to look at our most promising innovations and how do we bring that to market faster, as well as make sure those innovations are really connected to the end markets. We also spent some time, and we announced today, and I'll go through some accelerated productivity program. We did a deep look at our cost structure as a company. We benchmark within our industry and in other industries, and we have an opportunity to improve our cost structure, and we'll share with you a little bit more here today. In addition, I have spent time with 150 of our senior leaders around the world.
This gave me an opportunity to really understand, most importantly, our talent as well as our culture as a company, how does IFF operate. I'll speak to you some of the findings as well as where we're focusing futurally around culture. Lastly, we've had a chance to engage with many of our owners, many of the analysts, asking you feedback about IFF. What I can tell you after this strategic assessment, we are focusing on making sure IFF is very well positioned for the future to drive long-term profitable growth as we go forward. Let's talk about the portfolio. We have had the opportunity to share with many of you sort of the framework that we've used around ROIC.
We wanna spend some time today more unpacking some of that framework to show you the specifics of where many of our product lines actually map from an ROIC perspective. There's some great news here. 55% of our revenues are in the high return on invested capital bucket. 55%. 25% are in very strong, attractive ROIC categories. You think about it, 80% of our business we see as very attractive from an ROIC perspective and market attractiveness, which is a great place to start. We also see 20% of our revenues are in the underperform or optimize bucket, and I'll share with you here some of the actions we're doing around that.
If we look at specifics and how some of our products map, you clearly can see a number of our key franchise and portfolio map in the Invest in Winners: Consumer Ingredients, Fine Fragrances, Cultures and Food Enzymes, Food Design, excluding Savory Solutions. I want to give you two examples of how we're thinking about the Invest in Winner category. Flavors, high ROIC opportunity in business for us. The flavors market in total is estimated to be about $16 billion, growing approximately 3%. Within that, the beverage category is approximately $6 billion. We have an under-penetrated market opportunity in beverages. Our share is about 12%. We're going to invest in those areas that are high ROIC areas to fuel the growth, and we're counting on, for instance, in that example, flavors to drive growth above the market. I'll use health as another example.
We've had a chance to talk about some of the challenges in the probiotic North American marketplace today. As we look out over the next several years, we still believe that's a very strong market, not only in the U.S., but outside the U.S.. It's about a $4 billion market. We have a significant share opportunity in that marketplace. Very attractive from an ROIC perspective. We've really had a chance to delve in, and I'm just using those two examples to look at our portfolio. You can see in the maximize the core. You can see some very good businesses in that core, and we're gonna continue to look at how we drive selectively growth in that maximize the core segment of our business.
There are underperformers, and you can see them listed here on the slide, and we will continually look at these products in portfolio to do two things. One, we have to figure out ways to improve our performance, or these will be parts of our portfolio that we will look to divest over time if we cannot optimize or improve. Here's how we're now taking this into the company. Most importantly with this analysis is how do you operationalize this across 24,000 people? We have now established our playbook where in the invest category, you clearly can see that we are gonna provide disproportionate investment to those attractive categories, high ROIC. As a part of our growth algorithm, we're expecting to grow above the market. In fact, two times the market rate in those categories. We are making very selective choices in our portfolio.
In the maximize category, you can see here the 25%, we think will likely grow at the market, okay? This is a good return for us. We'll be selective in how we allocate resources. We'll look at mix enrichment as an example, but really good businesses there. You can see in the optimize, we're gonna ask our management team to really look at ways to improve the business, maybe through some SKU r ationalization, how we engage with certain customers, or we will look at them as non-core and look for divestitures. This becomes the framework for us strategically as a company.
This playbook then leads us to say, Okay, how is a company now going to focus its efforts to really do what matters most in the world, which is our rallying cry for IFF. We now have come down to three things as a company that I want you to think about and focus on. One, be, two, build, and three, become. Our journey is, one, to become the premier partner for our customers in the world. That's the objective. We're gonna have a laser focus on building strong customer intimacy as a company. Two, building our future, making sure we're very disciplined, driving profitable growth, reinvesting where we're getting re-good returns, expanding our margin profile. We need to build the future of this company. I'm going to talk about that here in a few minutes. Three, I've spoken a lot about become one IFF.
We have had a lot of mergers, integrations in the company. It is now all coming together under one IFF. Be, build, become, and everything that we are doing is also ESG is embedded in all of our activities. How do we think about unlocking incremental value? I think it's important, and you saw in our press release today, that our aspiration is to grow the top line in the range in 2024, 2025, and 2026 in the 4%-6% range. Think about today on average over the last couple of years that's been in the range of 2%-3%. How are we going to make that step up in our growth trajectory? We have done a very detailed assessment and looked at the levers that we feel confident we'll be able to execute against and drive growth.
One, we've had pain points in this company around our supply chain. I'm not gonna duck from that. We need to improve aspects of our supply chain, and we're making good progress, still work to be done. I'll unpack that a little bit more. We've gotten feedback from many of our customers that we have work to do there. Number two, we are laser focused on enhancing our commercial capabilities and commercial execution. You'll see some of our plans around that. Three, I'll talk specifically about geographic expansion and the opportunity that we have. This is one that I'm very excited about, and we've done a lot of work with our teams, in particular in Singapore and in Asia. Four, Greg will talk a lot about our innovation platform.
These four things we believe are the foundation and building blocks for our growth agenda to drive good top-line sales performance, and we'll unpack those. Number five, we have to, as a company, we have high aspirations. We want to have ambition, but we know we've got to make trade-offs. You'll hear us talk about our productivity agenda, and we've got specific actions that have been identified. In addition, you can see somewhat it's hard to maybe see it's not shaded on the slide, these are the strategic enablers for our growth agenda and our productivity agenda. We're moving to a new operating model. We've made the decision that the operating model we need needs to shift to be able to realize our aspiration and ambition. Two, we also are focusing on strengthening our talent and having the right culture, and we'll talk about that.
Lastly, we're gonna make an investment in making sure that we have strong digital capabilities as a company end to end that impact the entire organization. We believe this will help us both in the near term and long term. As you go forward and think about, okay, here's first thing, supply, and how do we do this? Our customers are looking for 95% on-time order fulfillment. In some parts of our portfolio, we're moving up to that direction. In other parts, we're probably in the low 80s. We have introduced a new operating system called Oflow to approximately 135 of our plants, and we're seeing really good order fulfillment improvement. I feel very confident that we will get there very quickly on behalf of what our customers are expecting.
Service levels are gonna be really important to us as we think about our growth going forward. We have left some business on the table. That's something that we're gonna focus on. We're gonna drive automation and centralization, and then we're also going to make sure that we have good processes in place to be able to meet those service levels, but also make sure that our inventory is in the right place at the right level. We need to also do improve network and capital and cash flow, and we'll talk more about that as well. This is clearly gonna be important for us. We're also making sure that we are selectively and targeting adding capacity in our key businesses. You can see in 2022, CapEx represented approximately 4% of our sales. That's what we're estimating.
2023 will be in a similar range. As we move into the 2024 to 2026 time frame, we're gonna invest a little bit more as a percent of sales in key targeted areas that are high margin, high growth opportunities for us. You can see some examples in enzymes, probiotics, cultures, and Pharma. This is where we'll be adding additional CapEx based on the demand we see, good high margin return businesses. In addition to that, we also will be spending over five years, $300 million, and I'll talk more about that, in building out our ERP system so that we have the technology digital capabilities to win in the marketplace and to build a more efficient company.
This is also key as far as adding capacity in a very targeted manner in high margin, high return business opportunities. Commercial success, we are going to wanna really transform IFF to be a very customer-centric, strong premier partner as we move forward. We are going to invest to make sure that our customer teams have everything that they need from a tool perspective, as well as we are aligning our incentives to do a couple of different things as we go into 2023. One, if you're looking for a single ingredient, an enzyme for IFF, and you're not interested in the broader opportunities to co-create or integrated solutions, we've gotta make sure we can win with the customer there. Our incentive system will align to that.
We also need to be able to realize the full potential of this company and being able to bring the breadth of our portfolio to this company, and we need to change our incentives and adjust those. That's something that we're putting in place. We're gonna have very strong key performance indicators. We also are gonna be establishing a center of excellence to help us with our customers, in particular, some of our global key customers that have mentioned to us, "We really enjoy working with IFF, but we want faster responses from you. We really wanna better understand the entire portfolio that you bring." We're gonna really look at our account management team and practices and how we show up to our key customers.
We also want for our company to be the company our customers turn to for great industry-leading market insights. That's something that also our commercial teams will be focusing in on. The KPIs are clear. We're going to look at our pipeline flow of new opportunities, our win rates. Clearly, we're going to be looking at customer acquisition, new customers, retention of customers, as well as how do our customers view us from a net promoter score. That's going to be a key part of how we continue to build towards a higher growing company. Revenue synergies is something that I know we've been discussing at IFF now for a while. Many of you have asked me what are the thoughts around revenue synergies. I wanted to make sure I did a couple things here.
We do believe that these are achievable objectives, in fact, I've had a chance to work with our team across all four of our divisions to really look at what is the opportunity. We are committing in our overall growth profile, so it's in our profile, $400 million in revenue synergies in the year of 2026. We are behind where we originally mentioned that we would be. That was due to COVID, supply chain issues, some capacity challenges. We do believe this is achievable when we look at our portfolio, but more importantly, when we engage and look at the opportunities with our customers. Many of the opportunities are within our Nourish division, in particular in dairy, in culinary. We see in bakery really good opportunities, but we also see opportunities between our human H&B division and Scent. Nourish and H&B.
As we've mapped this out and looked at the customer opportunity, this is gonna be really important. We're also building accountability and strengthening our revenue synergy opportunity, simplifying our processes, making sure we have a strong drive to action, as well as, I've mentioned, we're gonna be redesigning our incentive program to capture the opportunity. Emerging markets. If you think about as we build towards this growth profile and accelerating, we've done a deep dive into the emerging markets. On the slide, you can see here our sales are approximately 40% in these markets, Greater Asia, Africa, Latin America. The growth rates are projected growth rates over the next several years, and you can see the market overall or this business in the market is expected to be about 3%. In the emerging markets, it's projected to be double, 5%-6%.
In fact, we're seeing that this year. While we have a really expansive network and penetration in many of these markets, we're under-indexed. We've had a chance to look at that, where the market may be growing 5%, we may be growing 2% or 3%, similar to what we're doing in the developed markets. We're gonna make the decision to add sales personnel, scientists. We're gonna add some resources into the emerging markets in a very targeted way to capture the opportunities we see here. We have to do this in a targeted way because clearly you have global competitors, local competitors. We've looked at the opportunities, and I give you a couple of examples here where we're under index and we've been very focused. We now have a new creative center that we just opened up in Singapore. It houses all of IFF's innovation.
We had a number of customers from Asia come to that creative center. They were extremely excited about the capabilities that they saw there. We think that is gonna help us drive growth in Asia. We also have commercial development programs that have been identified in some of the markets that you see here on the slide, in particular in China, Korea, and India. We also see good opportunities in the Middle East and Africa for a flavors expansion. There's really good opportunities there that have been identified. In Latin America, there's a lot of interest from a health and gut health perspective, and we see that as a good opportunity for us in addition to opportunities in Mexico around flavors.
We've had a chance to look at the emerging markets. Clearly, be laser focused on our plans, and this is also a part of our growth agenda going forward. We have really identified the levers that we think are really important, and then underpinning that and surrounding all of that is innovation. We are also placing a bet as a company that we will be able to differentiate our solutions based on our strong R&D platforms. Greg's gonna go into that here in a few minutes. We're gonna expand our biotech capabilities. This is an area that we think we are differentiated and have huge capabilities to go from pilot scale all the way up to commercialization. Not many companies can do that.
We also believe that when you hear about our polysaccharide program and our microbiome program, Greg's gonna share that these are truly differentiated programs for our customers, and we think this will help drive growth in the future. We're also making sure that we look at our pipeline, and we have identified the top 50 programs that we think are gonna be the most important near-term programs to meet customer needs, and we're looking at other ways to fuel or accelerate some of those projects and programs to get them to market quicker. This is going to be key for us as well as we think about our growth agenda. Then digital tools and analytics, and we'll talk a little bit more about that here in a minute, is really gonna be key to enable our overall R&D efforts.
I also want you to know there's a lot of rigor that we're putting into making sure that our R&D teams are locked at the hip, commercial teams, to make sure that as we go from discovery or to molecular design, as we're thinking about R&D, it's always tightly linked to the customer and to the commercial opportunity. We're building that into our company as well. We've got work to do there, but I feel really good on our progress. As you think about the first four opportunities, that was really to drive and fuel our growth agenda. In addition to that, because of our ambition, we also know we have to target significant savings and make trade-offs in the company to do two things. One, to reinvest where we have good growth opportunities, but two, to improve profitability and expand margins.
You've seen some of parts of this slide as we've shown you throughout the year, and we'll spend some time here. I'll spend a little bit of time here right now around the pro-program, and then Glenn's gonna unpack it even more. I want you to think of that we are focused really in a couple of areas. The first big bar is really within our operations group. We're focusing on end-to-end productivity, how do we drive improved costs, manufacturing project, processes, digitalization. End-to-end processes led by Ralf Finzel on the operation team is a key part of our productivity agenda to improve our cost of goods and improve our overall gross margin profile. In addition to that, we are focused on our supply chain. We're also looking at our procurement activities, and we have brought in a new head of procurement into the organization.
We also are looking at demand management and indirect spend. We have opportunities to reduce our spend, especially when we look at outside services, and we're gonna have a laser focus there. We've also communicated in the past what we're doing from a global shared services, building centers of excellence for some of our key functions to help be more effective, but also to do business and transactions in a much more efficient way. Those are some of the major productivity initiatives. In addition to that, we also looked at our cost base from an administrative perspective, and we think there's an opportunity to accelerate and reduce our costs in our G&A line. When you combine those, we had previously communicated a net savings of $250 million-$300 million over the 2023, 2024, 2025 timeframe.
We are now increasing that to a range of $350 million-$400 million. That is because we are bringing forward additional cost reductions on the admin expense line. Our goal is to deliver $100 million in run rate savings. We're focused on achieving the best in class and industry admin expense profile. We are going to do it in a very tailored way, though, and this is really important. For us, the greatest lever and greatest value-creating opportunity we have is driving growth. We believe that we can do that by ring-fencing our commercial customer-facing organization, R&D organization, application groups. We're gonna be very targeted of how we reduce this cost. I firmly believe we can make it happen as we go through 2023, get on a run rate of $100 million.
I firmly believe that this is actually going to help us to increase our speed and agility in decision-making as a company. You can see some of the actions that we have here on the slide. If you think about revenue-generating activities, our productivity agenda, we then said, "What does the operating model need to look like for the future of this company to support the growth agenda. We believe that our goal really has to be with the largest, one of the largest portfolios in the company, broad platforms. We have to figure out a way to maximize the full potential of our business. When we looked at this, we felt it was time to move much more to an end market alignment, like many of our customers are aligned.
Also, we believe this will bring stronger customer centricity and engagement with our customers going forward. We need to strengthen our customer engagement. As I mentioned, there's opportunities to do that, and we're focusing on that, in particular with our key accounts. Doing this, we're gonna do this over 2023. We will minimize disruption as we go through this, so the customer will not see or experiencing this, as well as we'll maintain our technical capabilities. Then we will have our commercial excellence team making sure we're building the capabilities to help support our business units going forward. Here's graphically the from to. As I mentioned today, we're staying in our divisional construct. As of today, we are working on moving to the new operating model. We'll be updating you as we go through 2023.
We believe that this end market state gives us a greater opportunity to win and look at the business from a category perspective as our customers look at the business. They're thinking about what's gonna be required and what do consumers want in food and beverage. We're gonna align our business as well as our R&D and everyone to that end market state. Household and personal care, we think also is really important categories, and we wanna be experts in those categories in thinking about how we co-create with our customers and our partners, and then also health. More to come on this, but we are making the shift from the four divisional structure we're in today to the three business units of the future. We really believe this is gonna help us better interact and engage with our customers going forward.
Commercial excellence is also going to be a group that we are going to elevate in the company. This is an area that is a part of our company today. I'm elevating this to an executive position to really help with a couple of things. We need to build stronger sales capabilities. We need to be a leader in pricing analytics around the world with our customers and how do we have best practice sharing. We need to also make sure that we're doing everything to drive new business opportunities. The end-to-end process of really helping us better understand revenue synergies is gonna be key, and we need for a group to help us there. As well as we have a very strong agenda, working with our IT colleagues to build out analytical tools capabilities for the future.
This is something that we believe is gonna help differentiate us, really understanding our customers and having the technology and tools for our frontline organization. This will be also an important enabler of our company and our growth agenda going forward. As I look at the operating model and we think about how we're making that shift, we also know this has to be, and one of the most important things I feel very strongly about as a company, that you're only as successful as the culture you have and the talent and people you have in your company. We are laser-focused on building a very strong culture in this company, anchored in two different areas.
Number one, to build a winning culture, I believe you have to be really clear and crisp on the objectives and what it is that yo u want people to really work on and focus. We've outlined now our ROIC framework, and we've talked about prioritization, and that will help to drive both an external lens as well as how we make sure we're making good decisions in the company. We also need to ensure that people understand the importance of collaborating and winning on behalf of the customer, as well as we're gonna have strong rigor and accountability and transparency in the company. That's something that we have been focused on as a senior management team. We, in addition to that, think about we want all 24,000 IFEffers to have a very strong value proposition.
When you wake up in the morning, what is it that you do that contributes to doing more good in the world on behalf of our customers? Culture is something that we're spending a lot of time on, and we're making really good progress of building a winner culture. Our incentives are going to be aligned very clearly to our overall objectives. As I mentioned, we're gonna change some of our commercial incentive plans, but we also have aligned, and I've communicated this, I think in certain forms with our senior management team, two metrics for our long-term incentive program, return on invested capital and total shareholder return. We think that aligns to our owners and to our investors, and we think those are the two metrics we want to drive behavior going forward from an incentive perspective.
We think this allows us to drive a culture of excellence. As we move forward. The last thing I just wanted to just come back and highlight of is the importance of technology in a digital transformation, of how that impacts the entire operation and organization. We have a very talented IT team that is working on our digital transformation journey. We have made the decision to invest over five years, $300 million. It is going to enable our growth and productivity while enhancing our R&D efforts, our commercial efforts that we've spoken about. Operations is gonna be key of how do we automate and bring tools and what we need in the plant for to drive greater productivity, our finance organization with regards to reporting, and then also our HR teams and organization.
Technology in this digital transformation, think of it as a key enabler for us to drive our growth and productivity agenda going forward. Lastly, portfolio optimization. We've also announced this morning that we are continuing to look at how do we unlock incremental shareholder value based off of our portfolio analysis. We have previously announced that we have completed the divestitures of Microbial Control and fruit preparation. We have also announced today that we expect to announce three additional non-core divestitures by the end of the Q1 of 2023. Most importantly is we're gonna continuously evaluate our portfolio, which really is gonna be based on our strategic as well as financial lens to identify incremental opportunities to unlock shareholder value.
We are committed to taking the proceeds to delever our balance sheet below the three times net debt to credit-adjusted EBITDA objective that we have communicated in 2024. How does this all shape up? We announced this in our press release, our aspirations for growth in the 2024-2026 time frame. I do wanna mention 2023. As we know, there are a number of moving pieces in 2023 with regards to inflation and what we're seeing, the volatility in energy, and we're looking at our volume currently. With that, our preliminary view on 2023, we've highlighted, is mid-single-digit profit growth for 2023. Glenn will spend a little bit more time on that here in just a few minutes, and then we will come back to you in our normal cadence in February to give you specific guidance for 2023.
We'll spend a little bit more time here today, official guidance for 2023 in February. When we look at a more normal marketing coming out of 2023, we are committing to the following financial profile over the 2024, 2025, 2026 time frame average growth rates. 4%-6% top line growth from a currency neutral sales perspective. We think this puts us really well positioned in the industry, and like I said, we've got to walk through those initiatives to be able to go from that 2%-3% range today to 4%-6%. This is what we're really focused on based on the initiatives I mentioned. I've also communicated in the past, we want strong leverage in our P&L. We are committing to, in that time frame, a currency neutral adjusted operating EBITDA growth of 8%-10%.
You can see here of greater than $1.5 billion annually. I've already communicated our net debt to credit-adjusted EBITDA objective in 2024. Lastly, I don't wanna lose sight with a lot of things going on in IFF, but we also are not gonna lose sight of what we've committed to from an ESG plus perspective in 2030. Our focus and objectives around climate and planetary health, equity and well-being, transparency and accountability, as well as sustainable solutions. These objectives are still in place, and this is very important, especially as we look at what's happening in Europe and where they're going, as well as our customers are constantly asking us about this. We are committed to continuing our leadership in ESG and our 2030 goals.
Shifting gears to the last couple of points I would like to make is in addition to the activity that I just highlighted and where we are laser focused as a company, there's also been a lot of discussions with our board of directors. Today, on behalf of our board of directors and as a member of the board, I want to announce just a couple of things. One, our board is committed to evolving in line with best-in-class governance standards. We intend to move from a board size today of 14 to a target size of 10 as we head to the May 2023 annual meeting.
We also are looking at the skills needed for our board and the composition of our board to make sure that we have senior executives that would have strong, relevant skills and tools and business knowledges that are really going to help us at IFF. With that, I am very pleased today to announce that we will be appointing Mark Costa. Mark is the Chairman and CEO of Eastman. Mark will be joining our board of directors in January of 2023. I know I've had a chance to interact with Mark several times, as well as the rest of our board, and we're really looking forward to having Mark join our board in January.
Key takeaways. Hopefully in summary, this is I know, Ben, you know, a lot of information coming out today, but I want you to think of a couple of things and hopefully a couple of key takeaways from my perspective. One, we have a great business at IFF. Industry-leading innovations and strong positions in many categories. Great place to start. We have also identified where we need to get better and improve. We have now identified a very clear strategy of how we're gonna accelerate growth going forward. I am very confident in that strategy and that growth plan. We're gonna be very disciplined from a resource perspective. We will drive cost reductions, as been highlighted here today, to do two things. One, to make sure we can reinvest where we see good growth opportunities. Two, to be able to expand our margins.
The detailed operating plans are in place as a company. Now it is all about execution at IFF. I have really enjoyed my first 9 months in this company. It has a tremendous future. I am very excited that each one of you have had a chance to come today, and hopefully you're energized and excited about what you've heard here. I also want to now shift things over to Dr. Greg Yep, who will be heading up and leading our investor day presentation from an R&D and innovation perspective. Thank you. Greg, please welcome to the stage. Appreciate it.
Thanks, Frank. Super excited to be up here to talk about IFF R&D and our IFF innovation plans over the next couple years. Something exciting happened in R&D over a year ago. We had the merger of two iconic R&D organizations. We had a IFF R&D merged with DuPont Nutrition & Biosciences R&D. IFF R&D gave us the creativity of the flavors, perfumers, scent designers, scientists, and engineers. DuPont Nutrition & Biosciences R&D gave us the core values in science in the areas of chemistry, biology, and material science. Really excited about that. One thing it also led, it gave us the leadership capability in biotechnology. With the mergers of two organizations, we had a vision, and the vision was to unlock the power of science and creativity to deliver first to market sustainable solutions that transform consumers' lives and expectations.
This is important 'cause now we have a leadership position in all these categories, in food and beverage, in health, and in home and personal care. As Frank mentioned earlier, it also gave us the largest spend in R&D in the industry. Driving greater differentiation through the sustained R&D investment allows us to take a leadership position in the categories that I'll talk about later in this presentation. A couple things are noted here. It allows us to, one, look at broader categories and go deep in these categories. It also allows us to go deeper in some of the challenges in the industry and turn these critical challenges into opportunities that we can win. It also allows us to scale. Scaling technology is important. It's important to do things in the lab, but if you can't scale it's not gonna be good for a customer.
It allows us to scale globally around the world as you can see some of the efforts that we're gonna have there. Frank had a heat map of all the labs that we had around the world. These labs are strategically located next to our innovation sites, but more importantly, they're located next to our production sites. This is for a reason, so that we can scale and execute that technology ongoing. It also allows us to learn a lot from the customer and also deliver and execute from those briefs moving forward. I talked about the breadth of capability. We believe this establishes a strong competitive position in the marketplace with our R&D organization. As you can see from left to right, we play in all these different categories.
Not only do we play in these categories, we're leading these categories in these specific areas. This is because of the investment we placed in the merger of two R&D organizations. If you look to the left in flavors, soy proteins and texturants really give us a leadership position in emulsifiers, modulation systems, and inclusions. In the middle, we have our health portfolio, really taking the lead in microbiome, a leadership position in probiotics, home and personal care, animal nutrition, and grain processing. In our fragrance line, really taking a leadership position in consumer fragrances, Fine Fragrances, and then fragrance ingredients and cosmetic actives. Also in our Pharma Solutions, preparing for the future of pharma and delivery of drugs and excipients.
As you can see here, by far, not too many companies can say that they can play in these category positions, but also lead in these category positions as you see on this slide. Let me talk about the R&D. This is our world-class R&D toolkit, and this is how R&D is set up. We believe we have the strongest innovation platform in the industry. The way we're set up is we're set up with R&D platforms and capabilities to actually fuel these platforms for the future. Why are the platforms important? Because the platforms actually allow differentiation technology into applications. Those applications for the biggest brands that you see on the supermarket shelf today and in department stores today. Let me go over some of these platforms from left to right. One in delivery systems. Why are delivery systems important?
One, they allow us to deliver that flavor, fragrance, or that active to that application. Did you ever wonder why your clothes smell so fresh on going over the week? Well, it's because of delivery systems. Did you ever wonder why that flavor substantially stays in that chewing gum, what we call our Gobstoppers approach? It's because of delivery systems. The way why that active can stay in that gummy bear for so long, it's because of delivery systems. Really spending a lot of time in those specific areas, but actually taking it to the next generation. What happens if I tell you we take those delivery systems and do non-microplastic delivery systems that are better actually for you and better for the environment? Spending a lot of time in those specific areas.
Then in our health and wellness area, really looking and taking a leadership position in probiotics, but also in the microbiome. Why is microbiome important? Because it's good bacteria in your gut, but also in your skin. Taking a leadership position there and also looking at probiotics and how it can help that microbiome on that great bacteria or those microbes on your body to give your overall health and wellness. Then in modulation. What is actually modulation? It's a fancy term to say I'm lowering salt, fat, and sugar in products and making them taste great. Did you ever wonder why we have such low-calorie foods right now in beverages and in snacks? It's because of modulation. We're also moving to an area called scent modulation, you'll see this downstairs. Can actually Scent do more than actually help smell great?
Can it increase your cognition? Can it bring back memory? Can it help you sleep? You'll see a demo downstairs that actually can help you sleep, and hopefully, I don't make you sleep right now, but hopefully, you'll see that downstairs, and you'll be able to experience how Scent is such a powerful tool that we have. In taste ingredients. We've been a pioneer in ingredients for so long in taste, scent, and cosmetic actives. When you think of these ingredients, this is the palette that our flavors and our perfumers work to create the greatest iconic perfumes that you see in the market today, but also the flavors that you see in the biggest brands on the earth today. What happens if I say we're gonna take these ingredients and generate a new palette? It's like new colors for an artist.
We're really generating a new palette that's biodegradable, renewable, and regenerable. We think this is exciting, we believe this is the future of actually how we're actually gonna make our products. We look at functional food ingredients and preservation. What is it actually doing there? The texture and the mouthfeel. Actually, why do we need artificial preservatives? We really don't. We're working to make those natural in a way that we can deliver that extensive shelf life on those products. That's why our ice cream tastes so great today, because of the functional food cultures and probiotics and actives that we have in those food systems. Let's look at bio-based actives, enzymes, and polymers. Why this is so exciting? Because we can use our biotechnology platform to actually generate cleaning enzymes and cleaning polymers.
That's why your dishes are so clean today. That's why you can clean your clothes in cold water in short time. It's because of these cleaning enzymes and polymers out there. You'll have a demo downstairs that actually shows the differentiation of these polymers and how we actually tune them to actually the cleaning enzyme into the polymer for that application. Then our protein solutions. This is an exciting area for us, but it's not a new area for us. We have 30 plus years of experience in our Solae days in St. Louis to really drive differentiation on alternative proteins. We can apply this knowledge with other alternative proteins out there. You'll see demos downstairs that show the sensory attributes and flavor of these alternative proteins. This is super exciting for us to go in these specific areas.
It's good to talk about platforms. What about our enabling capabilities? You really can't have these platforms without the enabling capabilities behind that. That's from the 3,000 scientists, engineers, and developers that we have that I'm very, very proud of in R&D and in IFF to really drive these platforms. We're talking about experience here. Some 20, 30, I was at a service award over a month ago, 50 years experience in these applications and these expertise. Most of them have a PhD or postdoc in specific areas. Really driving this dis-differentiation, these capabilities to drive these platforms. Let's talk about a couple of these capabilities, natural and product and crop science.
Really understanding what nature actually gives you and really understanding how can actually use waste from food or nature to give you upcycled ingredients and upcycled natural products and flavors. Sensory and consumer science. We're really not just studying flavor, taste, and scent anymore, but the overall well-being of that consumer, and that's gonna be important. On the bottom, we see some of our capabilities in biotechnology, protein pathway engineering, process engineering, molecular biology and genomics, and applied microbiology. This is super exciting for us because it brings us back to really leveraging biotech and multiple capabilities in multiple areas and applications, including our CRISPR-Cas technology that we utilize in many of our products. In the analytical sciences area, we can really look at products in a molecular way right now that we couldn't even do two years ago.
Really studying the 350 molecules and atoms in vanilla and other natural products, and really deciding what we're gonna do and how they interact with other molecules in that application. The area of material science and application science, really studying the interactions of molecules, the interactions of ingredients together, but also making these materials biodegradable and renewable. Data science and automation. Frank mentioned that, and that we're really gonna accelerate R&D through this data science and innovation through AI, robotics, and data gathering. This is all grounded in sustainability. How do we actually design our products with sustainability in mind? It's not just a nice-to-have, it's a must, and this is how we approach almost every project in R&D with sustainability. We're also grounded in our regulatory and our safety protocols, and also grounded in intellectual property protection.
Let's look at biotechnology, our leadership in the biosciences. This really came with the merger of DuPont Nutrition & Biosciences R&D into our organization. Did you know one in every three probiotics is an IFF probiotic? I know a lot of you out there are gonna like this. 20% of our global beer out there is brewed with an IFF enzyme. 50% of cold water laundry detergent is an IFF cleaning enzyme. One out of every five baked goods is an IFF baking enzyme. One out of every three yogurts has an IFF culture in there. To actually make those claims and really say that, you really have to reach a massive market, you really have to actually scale in a way that Frank had talked about.
That large scale goes across the globe actually allows us to scale this technology to meet one billion consumers plus a day. We have 30 manufacturing sites dedicated just to biotechnology. 600 scientists out of the 3,000 scientists and engineers that we have dedicated to biotechnology with 10 R&D centers. Really strong innovation in manufacturing sites, but state-of-the-art large manufacturers of biotechnology with also pilot plant scaling. We really can look at biotechnology in several ways, in several lenses. First, we try to get the customer feedback. What is the customer actually telling us? Is biotechnology the right tool to do that?
If it is, we look at what nature has actually given us, or what's the hints nature gives us with the microbes and enzymes, then we can sequence the micros and microbes and enzymes and the genetic code of those, and really look at protein engineering to then use what we call synthetic biology or using cells to be our cell factories to make our products. Of course, we use other tools such as high throughput assay screening, strain testing, and clinical trials to prove out this technology. This is several ways we approach looking at making enzymes, cultures, and probiotics. Really state-of-the-art discovery screening process to protein engineering for our enzymes, to best-in-class cell factories, to probiotic clinical trials and of course, state-of-the-art industrial capabilities. Our ability to scale is unparalleled.
One, we can go from one liter all the way to 300,000 liter. That's impressive. Not too many companies can actually say that, and probably only a handful can say that we can scale at that large. With the steel in the ground globally around the world, we're getting better. We're gonna scale and we're gonna scale more in the future. We know not too many companies can do this 'cause we are often asked to scale their biotechnology with our steel in the ground and with our assets. This is an impressive, unparalleled approach to the way we're approaching this in the future, but also how we're gonna look at making products in the future with this technology. Let's look at the rest of the end-to-end innovation process. R&D is a key partner to the business.
We don't work in silo. We work closely with the business and the customer to really gain those consumer insights in the beginning. These insights, I'll talk about a little bit later, can form from multiple different ways. We also look at foresight-driven insights and market trends. We develop the growth accelerators. This can be growth accelerators from the division, sustainability-led growth accelerators, looking at areas of CapEx and strain improvement and digital transformation to deliver these advantage ingredients, new products and new processes, but also more importantly, taking these technology to a total other addressable markets. For example, can we take Scent to the metaverse and to gaming, to high growth areas? Also given the industry-leading performance, accelerated growth rates, improved margins, and of course, as Glenn, our CFO, liked this strong return on that capital that we have in R&D.
Really, we also have a disciplined approach in looking at the portfolio. We just did a top 50 view of our, of our enterprise-wide IFF projects out there in R&D. It's just as important to take a project off that list than actually put it on the list. We have this, we have this fail-fast mentality, really taking things off and putting projects on to really accelerate and align with that business. Then really using data. We probably have more data than any function at IFF, but also in the industry of taking that data and making better decisions on that data to accelerate innovation as we move forward. If we say we're gonna deliver it in 2025, I challenge the organization, can we do it in 2024 or 2023?
This is going to happen with data analytics and data-driven choices with AI, robotics, and data gathering. We progressively de-risk that project as we move forward to commercialization. I'm often asked with these great capabilities, how are we actually going to win? Well, we're going to win through delivering growth through innovation and technology. We're going to continue the leadership in flavor and ingredient technologies, scent innovation, Health & Biosciences and pharma, but also double down and focus on some of these key accounts, what I call ready now technology. Can we sell to new customers? Can we sell this ready now technology, this pipeline, to other areas and other total addressable markets? We'll also build strength. We'll build strength in the biotechnology area. We'll continue that in our application science area.
As the applications gets more sophisticated with our customers, we have spent a lot of time in application science. We'll use acceleration of R&D with AI, robotics, and data. We'll invest for growth. What is the lab of the future actually look like in our digital transformation? How far are we gonna take microbiome and crop biologicals? Really transform the palette with catalog transformation, which will change the industry. That's how we're gonna win. We're gonna win through sustainable solutions, material science and delivery, bioorganic synthesis, and of course, our biotechnology platform. This will pay dividends. For example, in the Scent area, really looking at catalog transformation to differentiate ourselves with our Fine Fragrances and commercial fragrances. Also utilizing Scent to increase your wellness, to bring back your memory, to increase cognition, and also to help you sleep.
Also in the probiotics line in health, really taking a leadership position there, but also taking a leadership in the microbiome. Also looking at cleaning enzymes and cleaning polymers, such as our polysaccharide program, to really increase that cleaning in laundry and dish. In better for you nutrition, really take giving our consumers choices in nutrition and also in alternative proteins and making these taste great to have culinary effect. In preparing for the future of pharma, biologicals and biological enable excipients will be key for us. I'm often asked also, how do you decide in your short, mid, and long-term pipeline? This can come from several insights approaches. One, from the customer. Really listening to the customer, what they really want, what they really need, and how we're actually gonna deliver that for them.
We work with the divisions, really the divisional insights. What are the market trends out there to help us decide on that priority? We will look at foresight approach, what we call a panoptic approach, looking at some of the foresight thinking in R&D, and of course, working with our external partners, startup companies that we invested in, partners, academia, to really look at some of the external drivers. Last but not least, the consumer. The consumer is really gonna drive what we do in R&D, so we're gonna drive what we actually do in the future. This is how we actually look at our consumer trends and insights in short, medium, and long term.
This actually leads to global macro trends, and we believe we're set up well to align with these global macro trends, such as improving home and personal care, to empowering wellbeing and healthy lives, to transforming food systems and accelerating climate solutions. We believe we're well prepared for this because of our capabilities that you see on the bottom with the biosciences, chemistry, material science, and data science and application science in there. Let's take a closer look at our pipeline. When we look at our pipeline and our innovation to drive future growth, we take the macro trends on the left that I just mentioned, and we're well aligned with the platforms I mentioned earlier. From there, we yield a strong pipeline of products to really differentiate ourselves with the consumer and with the customer. Let's take an example here.
Improving home and personal care, well lined up with our bio-based actives, enzymes, and polymers platform. That yields a pipeline of renewable engineered polysaccharides or cleaning polymers or cleaning enzymes. If we go to the bottom here, accelerating climate solutions, that's our delivery system platform, and then our next generation biodegradable, renewable, non-microplastic delivery systems we utilize to achieve those specific areas. Also want to note we're accelerating R&D. We're moving the pipeline across the finish line. Greater than 50% of our resources and pipeline will be commercialized in 2023 and 2024. This is exciting for us because it allows us to get products across the finish line and then build the pipeline strong in the beginning. Let me talk about a couple projects that we believe are iconic or will change the industry.
One is what we call these natural bio-based biodegradable polymers that will have transformational impact. I understand we have a new name for this. I think it's designed enzymatic biomaterials, or DEB is what we call it. Imagine all the polymers out there that we have that are synthetic, that play a role in home care, food and pharma, personal care, and new applications. Now I can say I can make these polymers biodegradable and renewable and versatile by starting with just simple sugar. Imagine that. Starting with simple sugar to make a biodegradable renewable polymer that's high performing, that beats what we have. It's not only better for you, it's better for the environment and better performance for our categories.
This will impact what you see on the shelves today in laundry and dish and food and pharma and in other new applications, and we believe this is the future. The other area is in alternative protein. What we learned from Solae in St. Louis over 30-plus years of alternative protein, we can apply to other alternative proteins, really get to closer to meat, closer to milk protein. You'll see a lot of those examples downstairs in our innovation station. A new food system is evolving. We believe we're gonna be part of that and take the leadership position in those specific areas. It's not just for flexitarians, it's for all consumers, because we know we can make it taste great. We know we can actually make it taste well in all applications moving forward.
In the other area, consumers are seeking foods that improve their health and wellness. We continue to work on this, and we continue to add cultures, enzymes, and work on modulation, the next generation of modulation, for this large pipeline for clean label for their food systems. This is gonna be important because people are gonna look for nutrition from foods and the wellness from the food area. Really providing natural building blocks for healthier and functional foods. Then the microbiome-based probiotics and live biotherapeutics. Again, the future of what we're doing. It's taking a leadership position of probiotics to balance your health and wellness, but also looking at the microbiome in the gut, but also in the skin. This is gonna affect several factors in the gut, brain health, metabolic health, skin health, and also infant health.
Again, we're taking a leadership position here moving forward. More to come of what we're gonna produce and strategic focus on our R&D efforts in these areas. Last but not least, our IFF, what we call EcoCAS, expanding the leadership position in delivery. We've already been a pioneer over 20 years in delivery systems. Now we're gonna make this biodegradable and renewable and really deliver the performance that we need in multiple different applications of scent, food, and actives. We can also digitally print these delivery systems on multiple formats with our digital technology and delivery systems. More to come on this, but you'll see some examples downstairs in the innovation center of our leadership in these delivery systems as we move forward. Hopefully, I gave you a snapshot of what R&D and innovation's all about at IFF.
Really driving greater differentiation through R&D innovation and the investment that we have. As you saw, the broad capability that we have with the categories that we're gonna approach. We're also gonna accelerate innovation through AI, harmonization, data, and robotics. We're taking a leadership position in biotechnology and also taking a leadership position on scaling that biotechnology moving forward. In a strong R&D pipeline, we believe it's strongest in the industry. We also have a disciplined approach on that return and invested capital. Excited to be here and talk about IFF innovation. Be happy to answer any questions in our Q&A session. Make sure you go downstairs and experience the innovation firsthand. Now I'll turn it over to Mike. I believe we have a break coming up.
Thank you. That concludes the first portion. We're gonna pause the webcast. If I can ask everybody to come back, 2:40 P.M., that'd be fantastic. We'll get in our seats, and then we'll go into the financial perspective. We're on break now to 2:40 P.M. Thank you.
Ladies and gentlemen, please find your seats and silence your cell phones. The program will resume in five minutes.
I wa nna add my welcome to Frank and to Greg's. I appreciate everybody joining us today, whether virtual or live. It's great to see many of you live. In my year and a quarter, I have not met a lot of you live. I know a lot of you are thinking the same thing. Richter's a lot shorter but better looking than Zoom, so I appreciate that. I'd also like to thank Mike and Mike for this is a really nice venue. Hopefully, have some time for the downstairs. I guarantee you, if I were to do this, we would be in Newark at the Holiday Inn and eating plant-based weenies. That'll be the next show. I have 30 minutes up here. My objective is in 30 minutes to go through roughly 15 slides.
What I'm gonna do is connect what Frank and Greg talked about relative to the numbers. The strategy and how that translates into our commitments in terms of our numbers. I'm gonna do that by talking briefly about us and our sector, give you a little bit more perspective, dive into 2023 outlooks, since that's a unique situation given the economic environment. I'm gonna spend the bulk of the presentation talking about 2024 through 2026, and we will systematically peel through revenues, productivity, and then capital structure from the standpoint. Before I do that, I wanna actually start with sort of three messages. As Frank had mentioned. The core of this is based on a very detailed assessment of where we are.
It's a very fact-based view in terms of what our future and what we can deliver, combination of understanding our business benchmarking, and very importantly, our key initiatives to get there. Secondarily, 2023, because of the economic backdrop, is somewhat of a transition year. That means more modest top-line growth, which puts pressure on the financial delivery, but does not mean that it's a kitchen sink year. We are very aggressive in terms of execution. We are moving fast in terms of investment and making sure we realize our long-term objectives. The third thing, building on that, as Frank had mentioned, a lot of our strategy is not just the math behind how to get there, but it's the execution and the incentive systems behind that to make that happen. With that as a backdrop, let me move to the first slide.
I wanted to remind us in terms of kind of when you're in essence, making an investment in IFF, you're not only making an investment in a great company, and Frank did a very nice job on the right side of this chart, articulating the strengths of our franchise and the potential in terms of our breadth, depth, R&D capabilities and scales, but you're also making a bet on a very attractive sector. Within our space, we have a lot of natural dynamics that are driving top line. As Greg had mentioned, inherently, the consumer dynamics in terms of pursuit of health, wellness, sustainability, et cetera, is driving natural tailwinds to growth. If you add on top of that our customers are continually seeking innovation, and that innovation is driving more complex formulations in terms of what they're doing.
The dollar content relative to the finished product from the consumer product is also increasing. That not only provides very good top-line dynamics, it also provides a very sticky and robust set of relationships with our customers. That lends to great margin resiliency as well. In addition, we are in a sector that has great resiliency relative to economic cycles. Traditionally, in a recessionary environment, our space will have about a 2% decline in terms of volumes, and generally within 12 months, it basically rebounds. It's very different than other sectors from the standpoint. The third item is around scale. This is an industry that will continue to benefit from scale.
The ability to have a global supply chain, to invest in the scale that Greg described around R&D capabilities, the ability to build a true world-class ESG platform, those are important for winning in the market going forward. Lastly, all of that lends itself to a strong, stable cash flows and a high return on invested capital for the business. You get, in some sense, a double benefit from being both investing in a great company as well as in a great sector that has a lot of natural tailwinds over the coming years. Now let me talk a little bit about setting up 2023. This chart is not new to any of us. We are still in a very volatile environment.
We are facing a number of headwinds in terms of what's happening on a macroeconomic environment standpoint. We're clearly seeing a dampening of consumer demand. We clearly still have some level of inflationary pressures, although dampening. Supply chain globally, while better, still has its level of uncertainty and risk. Lastly, labor markets are still relatively tight, which is compromising both quality as well as the cost of that. I would say that that picture is evolving, as we'll talk about in the next slides on 2023, is that number one, we are seeing improvement on inflation. We are seeing now a deceleration of the growth. We have more modest expectations for next year. We are clearly seeing better performance in the global supply chain. Certainly, recent announcements out of China have been beneficial relative to that.
However, the inverse is on the demand side. As we spoke about at our last call, we are seeing a combination of slowing consumer demand and then destocking from customers. That creates a very difficult environment for us to operate and one that we're cautious in as we think about 2023. On the next slide, basically, we really wanna talk about two planning horizons. Recognizing that the short term, 2023 is more volatile, we have a different set of expectations versus the longer term. We're expecting more modest demand in the marketplace. We're expecting some level of inflation needs to be offset. We're still expecting to have to be cautious on the supply chain. That translates into more modest expectations on the bottom line.
As mentioned, we are still going very fast and with a sense of urgency on execution against our strategy. The second time frame, which basically was focused on by Frank, is 2024 to 2026. We are assuming we will enter a more stable economic environment, normalized growth, an industry of about 3% growth per year. We're expecting to be in also a more normalized, lower inflationary environment at that point, call it circle 1%, which is legacy pre-COVID in terms of our industry. We're also at that point, expecting to begin to turbocharge and ramp up our execution. While we're moving fast, full realization of the benefits relative to our strategy are much more expected in the second horizon here, 2024 through 2026.
We want to spend one more page talking about 2023, our expectations at this point. In addition to that, some of the trade-offs that we're looking at relative to managing next year. I would caution, these are still preliminary outlooks at this point. We have not finalized the plan. There's a lot of moving parts, particularly in this type of environment. That said, our volume expectations are fairly modest, as we mentioned on the last call. Our outlook is circle 1% in terms of volumes, much more back half of the year versus first half of the year. We are expecting at this point likely to be planning down in terms of the first half of the year. Secondarily, in terms of the price equation, mid-single digit in terms of our overall outlook in terms of pricing next year.
That is roughly two-thirds associated with Rawls and about one-third energy. Much of our pricing on energy is now via surcharges or variable pricing, that will go up and down with the energy environments. The energy environment has shown some relief recently, that'll factor through. That translates into revenue guidance directionally about mid-single digit in terms of the performance next year. Productivity is key for next year. As Frank mentioned, not only are we accelerating the in-flight initiatives that we have shared with you in the past, but we're also moving on additional $100 million run rate cost reduction. Think about that as a $50 million impact next year, full realization of the run rate of $100 million in the first half of 2024. That's how we're thinking about the equation. That top line about 1% basically price equal to inflation.
We are expecting an offset equal as we did this year. In productivity, we expect to get us on a like for like basis of mid-single digit EBITDA growth. Like for like currency neutral and addition reflects the first half of the year loss of Microbial Control. As a reminder, we sold that business at the end of the Q2 . It's roughly $35 million of EBITDA when you normalize this year for the full year, basically exit of Microbial Control. On the right, I wanna spend a couple of minutes talking about how we're thinking about managing the year. Next year, we are intensifying our focus on cash flow. In light of what's happened this year with the inventory builds, we're being extremely aggressive in managing our working capital and being thoughtful on CapEx spend in a way to generate as much cash.
Being, of course, very focused on maintaining service levels with our customers, being thoughtful. As we monitor and manage through the demand market, there is potential for us to even slow more production, i.e., to correct inventories that may have some additional pressure on the P&L. That being said, we think it's the right answer for basically driving cash flow for the year and helping our deleverage goals as well. Pricing, needless to say, is still a variable for next year. It's about a half what we had this year in terms of overall pricing, more surgical in terms of differentiation between energy and raw materials. In addition, we've been very careful in terms of implementation of pricing by business unit, by region to reflect a balance between volumes and price for next year as well.
I will tell you that our pricing teams are in market now, and they are actually executing quite well. I'd say at this point, we do feel optimistic that we will be able to offset 2023 inflation via price. As Frank mentioned, we also need to very carefully navigate top line versus productivity. As Frank had mentioned, we are ring-fencing the customer-facing resources. Think about that as the roughly 1,500 account managers, our frontline folks that work in our R&D and creative centers, our product specialists, et cetera. They're not in scope relative to our incremental cost reductions. To make sure that we're focused on folks that are affecting revenue and keeping them out of the equation.
We also, as I mentioned, we wanna start taking some of that productivity and funding basically, some of our major growth initiatives. We will begin to ramp up, and that guidance is an assumption that we will begin to basically launch on our productivity. Lastly, as Frank had mentioned, is completing the current in-flight divestitures we expect to have them done next year as well. That's it for 2023. What I'd like to do actually now is move to the second half with the majority of this presentation and talk about our objectives for 2024 through 2026. The right side of this page is what Frank showed at the end of his presentation. Let me drill down a little bit more underneath the numbers.
We are basically targeting to achieve a 4%-6% currency neutral sales each and every year through the 2024 through 2026 cycle on average. Think about that as about 1% we're assuming is basically price slash inflation. I would say again, the a legacy environment that was typically normal. We are saying three to five points of volume and relatively small in terms of the inflationary impact within that. And I'll come back to unpacking how we think we get to a 3%-4% annualized growth and volume from our current run rate. Second thing is productivity. As Frank had mentioned, we are targeting between $350 million and $400 million of net productivity by 2005, not 2006. This is a three-year program.
We mentioned this at our previous investor calls in terms of that. I would emphasize the following. One, that is a net number, so that's net of investments. We are planning to invest $150 million, that's an annual expense, and I'll come back to the detail. That expense will be invested in R&D, our commercial capabilities, sales, marketing, et cetera, and in technology. An annual increase in our technology spend in addition to capital. That's also off the base of 2022. Think about the forecast this year in terms of our cost base and basically off that, and I'll come back in more detail on the productivity numbers. Importantly, that math drives an 8%-10% CAGR in this horizon in terms of EBITDA on a currency neutral basis.
It drives a little over 250 basis points in margin, and it will generate over the next 4 years on average $1.5 billion of adjusted free cash flow. As Frank had mentioned, in terms of our capital structure, we are targeting to get to three times or less, just basically net debt to credit-adjusted EBITDA in 2024. We are targeting to spend roughly 5% in terms of sales on CapEx. Within this horizon, about a half a point that is related to ERP investment, and I'll come back to that. You know, overall, again, this is the financial equation that we have for this duration.
What I wanna do now is really begin to talk about how we develop the plan, and then very importantly, begin to talk about the drivers of revenue, productivity, and basically, our capital objectives. Frank had mentioned this early on is, we have spent quite a few months throughout this year basically dissecting our business and then turning that into a plan. There's three sets of inputs in terms of the development of those numbers. It started with a very detailed diagnostic of the current state of the business. We tore apart our sales drivers and performance metrics. We took a look at our innovation processes, our pipeline, as Greg had pointed out in his presentation. We looked at every detail behind our cost structure as well as our productivity programs in flight.
Working capital also, we tore apart in terms of diagnostic, but how we're performing and where we are versus peers. The middle, we also did a lot of benchmarking. We basically did a bottom up. We also did a top-down in terms of looking at the diagnostic in terms of benchmarking. Where are we versus our best-in-class peers and thinking about our objectives? Most importantly, we actually spent months with the businesses and the functions in developing very discreet plans. Regionally and from business unit, how are we gonna drive growth? What were the investments required to do that? How do we think about productivity delivery in terms of where within the business system, from a standpoint, again, every aspect in terms of working capital improvements as well.
A combination of an understanding of what's working, not working, looking at benchmarking from an outside in, then third, validating through our own internal plans of basically getting there.
That was basically resulted in the following. One, we used the ROIC framework to inform how we would apply specific drivers, financial performance drivers, across each of the businesses. Then we've identified basically four buckets, if you will, of performance drivers. The most important is at the top, and we'll talk about this in more details, basically accelerating our sales trajectory. There are four components relative to our current run rate in driving that. They are, number one, continuing to enhance our supply chain. That's a combination of capacity, inventories, and continuing to do better in meeting service levels and demand.
Secondarily, accelerating the revenue synergies, which I'll talk a little bit about, but achieving that $400 million of revenue synergies in year by 2026. Third is basically leveraging innovation. It's the pipeline that Greg talked about, but part of our investment is actually to add more into R&D and both bring more of our current pipeline to market, but also to invest in a bigger pipeline for the future as well. Lastly, as Frank had mentioned, it's very targeted investments to drive outsized growth in a combination of our higher return businesses and more attractive growth markets such as Asia. Second is productivity. Productivity is both a source and a use.
It's a source of margin enhancement, you know, relative to driving that 250 basis points, but it's a use, as I mentioned, that $150 million investment back to the top line. Cash flow and CapEx, as I mentioned, really focusing on achieving top-tier performance in terms of our working capital metrics, being disciplined in setting capital targets, CapEx targets by business, consistent with the ROIC framework, and being very thoughtful in terms of making sure that we generate as much cash as we can to help deleverage. That is in concert with the portfolio decision. The cash flow from operations and completing our divestitures in place has been very important as well. Now let's actually talk a little bit about how that framework applies.
It's very important to make sure that you understand that one size does not fit all in terms of how we're trying to apply the framework. These are the three baskets. The three baskets of market attractiveness and returns on the business. As a reminder from Frank's presentation, we have the top group, Invest in Winners, that includes essentially all of our Scent business, Cultures & Food Enzymes, our more attractive, higher return businesses. That's 55% of our revenues, but it's north of 30% return on invested capital as a basket. Our goal is to drive outsized growth twice the market relative to those. The Maximize the Core is about a quarter of our revenue, and on average, is a little bit north of 15% return on invested capital. Our bottom basket is Optimized Underperformers. It's about 20%.
It has a lower return on capital of around 8% as a group. Our goal is basically to probably have it slightly below in terms of growth. Down below, we're trying to illustrate, though, the application of the different financial drivers will vary. As an example, supply chain fixes apply across the entire portfolio. We were very focused over the last year plus on making sure we get to the right customer service levels, that we basically de-bottleneck the system and able to meet those needs. In addition, productivity to some degree also is relevant for all businesses, although more highly skewed to the right. Beyond that, basically, we have highly tailored our investments and how we think about our capital.
Our growth investments are highly distorted towards the winners, although some is being invested in the middle basket as well, so it's not all just in one. In addition, I would say the capital intensity in terms of managing our working capital and being thoughtful on investments, more disciplined on the right side of this chart. Our playbook is extremely surgical business by business in terms of what we're trying to do. Let me talk about revenue. This, in some sense, may be the most important slide in this presentation, because at the end of the day, achieving our economic objectives, financial objectives, will be largely driven by success on the top line.
As mentioned, that top line in part is fueled by productivity, but you fundamentally have to believe that we have to add around two to three incremental points of growth, which is volume in terms of the market. As I mentioned, we spent a lot of time dissecting the business. If you look at the last three years and you normalize inflation, our volume growth has been a little over 2% on average for the last. Think about the full cycle starting from 2019 and basically running through the forecast for this year. Historically, there's been about a 1% level of inflation, i.e., price within the market. 2%-3% is sort of a normalized rate. Our goal, as Frank had mentioned, is to drive it up to 4%-6% in terms of the growth.
It will be driven by four different activities or initiatives within the enterprise. First is fixing supply chain. It probably has cost us about 75 basis on average per year over the cycle of a combination of low inventories and capital constraints in terms of our ability to actually meet demand in the marketplace. Those have largely been fixed, what I mean by that is we've invested higher CapEx. We went from less than $400 million two years ago, $400 million last year, we'll be at $530 million this year. Our more attractive businesses, the enzymes, cultures business, et cetera, we've invested in CapEx basically to allow them to grow. Our inventory levels are much higher. Our service levels, as Frank had pointed out, we're much closer to the standards in terms of where we need.
We have to do some work to win back some business as a byproduct, but I would say that first bar is in good shape to delivery. The second bar is revenue synergies. We realized $10 million of revenue synergies last year. We expect to realize around $80 million this year. $90 million over two years against our $400 million goal. As Frank had mentioned, we are behind the original designs that were communicated last year in terms of our realization. However, after almost two years, quite frankly, our confidence level of how we get there and the ability to get there is much, much higher. We've maintained the same objective of $400 million of revenue synergies in the year 2026.
That adds an additional leg in terms of the incremental growth from our run rate in terms of where our business is at this point in time. The third is innovation. Those investments I mentioned in R&D, we are planning on targeting a 50 basis point increase in our R&D spend over the next three years. Think about us investing at a level to get to another half a point in R&D. A combination of that investment and just getting more out of the current portfolio. Lastly, there's a big block, which is basically driving against our higher growth markets, and very importantly, our highest return businesses.
The flavors, the Scent businesses that have very high returns, that's where we're concentrating not only our innovation budgets, but our commercial budgets and our technology budgets to make sure that we enable those teams. If we actually looked at each of these pieces, they mathematically would add more than that 200 basis plus in our math. We, to some extent, obviously want a haircut because there's overlap in terms of what those numbers are as well. There will be a ramp up. We are investing now to basically begin to accelerate. We've done and have achieved some improvements, particularly in supply chain, but it will take us, you know, 12 to 18 months to get to a build relative to the execution. The next page basically talks about the nature of investments. There's really two buckets.
We are increasing our CapEx, as I mentioned, we're going from roughly a little less than 4% two years ago to targeting around 5% of CapEx. That includes a half a point in ERP. We will be spending $300 million over the next five years in aggregate to implement an upgrade of our ERP systems, a combination of upgrade and integrate SAP. That's within it. That will help from a technology standpoint, also help from an efficiency standpoint as well. We are investing about $150 million or ramping up $150 million of investment. That basically is in commercial. Think about that as sales, think about those product specialists, think about that also as marketing folks.
As Frank had mentioned, relative to organizational change, we're investing more in a centralized commercial excellence. That will be important to helping drive and capture the revenue synergies, as well as providing market intelligence and discipline relative to the sales execution as well, and very importantly, analytics. Digital analytics, including CRM, is very important for that. The second bucket is innovation, as I mentioned, so it's a major thrust in terms of our ramp up, in terms of our investment, and then technology. Technology is not only capital, but of an ongoing expense increase to basically make sure that as an enabler to basically driving a combination of top line and productivity. This results in about a $150 million increase in terms of our expense structure in the next three years.
The second chart here, or maybe the second most important, item, you sort of have to believe in the math, is productivity. We have talked about our productivity objectives in past calls. Our total goal that we'd mentioned previously was basically $250 million-$300 million. We have an incremental $100 million basically target at this point that gets us to a cumulative $350 million-$400 million. Again, that's off this year's cost base. Think about that as basically three years out in 2025, a reduction off this year's cost base. Again, it's net of the $150 million of investment I mentioned. To put that in context globally, including our raw materials, we're about a $10 billion cost structure. This is about a 2% productivity per year.
If you exclude raw materials, because obviously it's more difficult in some sense or said differently, often those are just priced through in terms of productivity, it's a 3% productivity per year. It's not a massive number relative to productivity. I can promise you relative to the homework that's been done from operations to procurement to sourcing and supply chain, and now to our shared service and administrative functions, there's a very clear line and path to basically achieving these numbers over the coming years. These items are very much in flight in terms of our achievability of the numbers. Turning to the next page, now I wanted to move to capital. This page should look very familiar. It's consistent with what we had presented in the past regarding our capital priorities.
Just moving around the boxes from the upper left, debt repayment is a principal objective and a primary focus at this point in time. We want to get from our four times basically down to three times, and that will be accomplished through a combination of deploying cash flow from operations, particularly in acceleration next year, and the proceeds from divestitures that we are currently have in flight. Secondarily, from a dividend policy, we are committed to continuing to grow the dividend. We have to balance that over time with the dividend versus share repurchase, so that over time will be a consideration for us. Three is portfolio optimization. As Frank had mentioned, we began early this year and mentioned we had three to four different businesses we were planning to take to market. We have taken three of those to market.
They are all actually in late stage at this point. We believe and estimate that we will achieve $1.2 billion of gross proceeds from those three transactions, as Frank mentioned, by the end of the Q1. We should be in a position to have them announced. They should be closed by the end of next year. We still have one additional transaction that we've not proceeded on this point. Part of that has been we've just had a lot on our plate, so we focused on the three that were sort of more manageable at this point in time. Part of it's the market has been choppy, but as mentioned, we will be taking a closer look at the portfolio in the first half of next year from a standpoint. Fourth is share buyback.
We basically, we plan on reauthorizing our buyback program once we get to the appropriate leverage. Our goal is three times or less in 2024 in terms of our net debt to credit-adjusted EBITDA at that point in time. We will continue to use this framework as we presented in the past in terms of our priorities. Deleveraged from cash flow and also from portfolio optimization is key for the next two years in terms of getting to that three times or less. Relative to cash flow, this has not been a good year. At $600 million of delivery, we have had the impact from a high growth in the inventories.
Those high growth in inventories have been a function of two things: inflation basically running themselves through our cost structure, and then secondarily, the demand has fallen versus expectations. We are aggressively working with our businesses and our operations team to address that. This will be a big factor that we will focus on in February, regarding 2023 guidance at this standpoint. A combination of that as well as growing our earnings, being very disciplined in terms of the capital management, that's a combination of CapEx as well as working capital. We do believe that $1.5 billion is easily achievable on average per year over the period 2023 to 2026. That's the other item regarding capital.
And then lastly, before I close, it's very important as I began the discussion to talk a little bit about execution. The numbers, one can say, they hang together based on what we know about the business, what we know about the market, our benchmarking, and our specific initiatives to drive. What's very important is that's complemented with a series of activities, series of initiatives, and body of work, if you will, to make sure that we execute against these numbers. On the right side, we outlined some of those initiatives. Very importantly, if we think about net sales realization, we are doing a ton to accelerate the execution on the top line in terms of our volume results.
The establishment of the commercial excellence team, actually having much more disciplined rigor in terms of analytics, CRM, et cetera, and making sure that our sales incentive programs, as Frank had mentioned, are extremely aligned. We still are doing a lot of work in the arena of pricing. Pricing is not over from the standpoint. In the last now 18 months, there's been big investments in tools, process, training, et cetera, to enable our sales force to be more effective and to be more targeted relative to pricing. In a deflationary environment, those tools are gonna be just as important if we manage the way down the curve as well. Those are very important in terms of net sales realization. Productivity, we are off and running, but have more to do.
Maintaining a very strong control tower mentality in terms of people have specific targets, dates to deliver them, accountability, and tracking against that's extremely important. By the way, continuing to mine additional opportunities. We have to get out of just programs into a continuous improvement environment around management as well. Dedicated ERP execution team. A big effort for us in the next five years is the $300 million investment in basically integrating and up-updating our ERP. That has to be accomplished with a dedicated team to basically provide oversight. The same in working capital. We now have a team dedicated across the businesses, obviously the operations, the finance team. They're setting not only very discrete targets by business, we're also folding in a charge in terms of capital against the businesses relative to that to encourage them to basically drive behavior.
Lastly, senior leadership. As Frank had mentioned in his presentation, really the leadership is tied directly to your outcomes. Total shareholder value or return, in addition ROIC. Total shareholder value return is very tied to basically two variables as you know, top line growth and ROIC. In fact, in effect, the senior management team is tied to exactly the same things as our investors are. With that, let me close. To remind you're not only making an investment in a great company, but you're also making an investment in a great sector, in a great industry with lots of natural tailwinds. We are very intently focused. Hopefully, you take that away from today, of fully realizing the potential of IFF and in turn, delivering significant shareholder value.
That value basically is through a very detailed plan that starts with understanding the return potential of our business and the market attractiveness and making sure we align our capital and resources against that. Priority one is top line, making sure we go from our current run rate to a higher growth rate. In addition, productivity behind that, in part to support the top line, in part to actually enhance our margin as well. A very clear set of capital objectives in terms of our spend, our working capital goals and our cash flow. Lastly, as I mentioned on the previous page, it's all about making sure we are able to deliver those by tightly managing the execution across the enterprise. With that, I'm actually gonna turn this back to Mike.
Thank you. Thank you. We're gonna turn to the Q&A session. We have over 30 minutes for Q&A. If I can have the EC join on stage, that'd be great. If someone who's not mic-ed can grab a mic or two, that'd be great. Yeah, that'd be great. That's a karaoke, yeah. If you can hold it, that would be fantastic. There's another seat up here. Right here. Yep, that's good. Can we dim the lights coming at us a little bit or lift that light? That'd be great. Okay, great. I think I can see most of you. I see Gunther right away off the top. Maybe I'll pass to the middle. I'll make it as difficult as we can get to start. Oh, that's great. Yeah, please. Thank you.
Hi, good afternoon. Gunther Zechmann from Bernstein. Firstly, could you just confirm that all the targets are organic? In particular, is the $1.5 billion free cash flow target subject to change for any bowled off divestments? Tied in with that, how much EBITDA would leave the company with the $1.2 billion of proceeds that you're looking to announce by the end of Q1, please? Lastly, what would be your ROIC if the optimized underperformers, that bucket of 20% of sales that you highlighted, was either fixed or divested, please?
Number one is the numbers we presented are, include the divestiture of Microbial Control. There's a half year we lose next year. We've not assumed or taken out the other divestitures which are not finalized. We wanted to state the business as is at this point in time. Gunther, we'll have to come back and basically present sort of the economics of kind of post-departure for reasons of, you know, we're in flight at this point in time. We don't wanna disclose a lot about the economics of those businesses at this point in time. Once we're in a position of having them announced, we'll provide better clarity, you know, relative to the overall economics of that.
We'll also be able to talk a little bit about the ROC implications because those businesses fall to the right side of that chart as you would expect, so.
Great. Thank you. Maybe if we can go to Lauren right in the middle here, that'd be great.
Thanks very much. Frank, one thing I was surprised about was to see the revenue synergies, you know, featured so prominently in the presentation and also in the algorithm. Because when I think about the way that you're planning to restructure the operating model of the company.
Mm-hmm.
Being one company, revenue synergies should be irrelevant, right? There should be no such thing. I was just curious on how you would respond to my reaction, right, on why this is a part of the conversation. Why isn't it all just, "Let's go out and get the growth," and there's no more, what's the synergy versus what's not?
Yeah, Lauren, I'll start, and I'll also maybe ask some of our BU leaders who have been working this as well. I tend to agree with you, Lauren, is that, you know, our overall objective is in that range of 4%-6%. Start there. You're right. However, as we've looked at it, and it's probably been through more of the current lens that we're in. Obviously within the Nourish division, we see opportunities, we also see opportunities between Nourish and Health & Biosciences, also Health & Biosciences and Scent. When we looked at our algorithm, Lauren, we kind of took it from that lens and said, we do see and Glenn mentioned this year, we're making progress.
We do see the opportunity, if you looked at it kind of in that construct today, that we can get to that $400 million based off of engagement with customers, a targeted effort, changing incentives, accountability, and everything else. As you start to move to the new model, so we've kind of looked at it through the old one, it is going to be about driving top-tier growth in that range of 4%-6%. At some point in time, we may have revenue synergies potentially go away. That was kind of the work. We're confident that as we've looked at it now and have learned a lot based on the work that we've done, we think this is a key part of that
-acceleration that we talked about to be able to get from 2%-3% into that 4%-6% range. I don't know if any of the BU leaders-
Yeah, Simon, do you have a mic?
Simon, I don't know if you wanna maybe add something.
Can you hear me? Yeah.
Yeah.
Sure. I think it's a very simple representation of the new pools of value that we think we can generate through the integrated company. You really look at how we bring these technologies together to drive, primarily yield improvement for our customers and/or to create better products for them. When we look at it, I think you should. In many ways, revenue synergies are synonymous with those new pools of value that we think we can drive. It's an important construct internally, which is sort of testing us against our, the value that we can develop as a company. I fully agree with you. One day, we will not be speaking about revenue synergies because the value will be fully integrated, so.
Great. Lauren, if you still have your mic. Josh, I think he's right next to you then. That'd be great.
Yeah, thanks. Joshua Spector with UBS. Just in some of the underperformers that you highlighted, a lot of that was the DuPont, basically ingredients part of the portfolio. When you talk about some of the revenue synergies or where there's the opportunity, plant-based meat is always kind of the first one that's shown. Are those must fixes for you? If you can't fix them because of price or whatever it is, and you divest those, does that change the thesis on the combined organization and ability to kinda solution sell into some of those markets?
I'll maybe get started. I'll let some others add. When we look at the portfolio, and as we mentioned, we will look clearly, and you mentioned in that right bucket some of the ingredients. If it's strategic, if it's helping us to drive greater all growth, that's sort of that optimize where we are gonna look at ways to improve the performance there. If it helps us overall strategic, that will be a part of the discussion. With that said, though, we are going to be really disciplined around that, right? We really need to see, are there portions of that portfolio that help overall IFF or with the customer? We'll take a look at it.
There are also aspects of that portfolio, and we're just kinda highlighting big, but underneath that, there's, you know, specialty proteins, there's a lot in that bucket. We're gonna be laser-focused, and yeah, where it helps us, clearly that may continue to be a part of our portfolio, and we'll push SKU rationalization, trying to drive a better ROIC, but it can help us with customers. We'll look at it from that lens. There are parts of it, though, where clearly, as we mentioned, it's gonna maybe be hard that we're the best owner for some of those assets, and then obviously we'll take a look at what else we may need to do, including divestitures. I don't know if anyone wants to add anything.
Yeah, I'd just add one comment is, Josh, great question. You should not walk out of the room saying bucket three is gone.
Yeah.
Your point, and then hence my comment about being very tailored is to your point, a lot of the revenue synergies sit in bucket one and bucket three, right? How we think about that. But we think about other levers, working capital, CapEx intensity, how we think about pricing strategies regionally, et cetera. We're being very thoughtful relative to how we basically tackle that as well. Don't think about that as bucket three as the divesture. I would say honestly that there may be things in bucket two, in the middle of that actually may have a higher return profile in another, someone else's business or other opportunities as well.
Great. Maybe we can come over here. Mark Astrachan.
Yeah, thanks, Mark Astrachan from Stifel. Building on Lauren's question and maybe thinking about it a different way. Your larger competitors or your large competitors, I should say, don't have the same revenue synergies in their long-term algorithm as you do, but they're putting up or they're talking about similar long-term sales growth algorithm. If you think about the premise of the acquisition of the Nutrition & Biosciences, part of it was offering a suite of products that others didn't have with the idea that one plus one simplistically equals more than two. If you take a step back and think about the premise of the deal, is that still the case?
Are you now trying to kinda fix a whole bunch of integration-related issues or things that you found within the N&B business that were maybe underperforming to kinda get to a different level of growth, meaning in line with peers, you know, kinda looking at it inclusive or exclusive of the revenue synergies? That's one. Just sneaking in a second question. I'm curious about the decision on the board that you made in the press release today. You know, you've got 14 members on the board, I think today, eight joined in the last year. Often times, I think boards tend to be kind of rubber stamped, so why are you doing this, and why is it gonna be different? You know, what sort of levels of accountability are you looking for?
You know, Frank, you're on the board, but you're not the chairman of the board. Does this signify some sort of change in oversight that you're looking at from higher levels looking back down on the organization? Thanks.
Yeah. Maybe I'll let Jen, maybe I'll let you comment a little bit on the board and what we're focused on. I'll maybe add a comment, and then we'll come to your second question as well, or your first question, I should say, Mark.
Jen, if we could turn the mic on here, that'd be great.
Yeah.
When it comes to the board, we are looking at a refresh. As you know, we have a lot of legacy directors from the IFF side. We had some directors that DuPont appointed. The board is really taking the opportunity now to match the skills and expertise that we need to deliver the strategy that you just heard about today. We have added Mark Costa, who is a sitting CEO, who will be fantastic in helping Frank and the management team address the issues that are unprecedented that we are all facing right now. We don't have the final slate for the May 23 Annual Shareholder Meeting. We are going through the proxy contest right now, not contest, proxy prep right now. We are hoping that we will continue to build out the board to the exact strategy that we have right now.
Yeah. I'll add to that, Mark. The board construct today and what we've been discussing is that we have 14 members. I think the S&P 500 probably benchmarks around 10. Okay, we start there, and we're focused on saying that we should have a board based on the company of our size of approximately 10 board members. In addition to that, while we are now making that transition from the 14 to 10, the other thing that we said is it is a great time to make sure that we have the relevant skill sets on the board as we're moving from 14 to 10. We wanna make sure not only are the skill sets relevant.
As you can see with Mark coming on board, we're really excited to have someone that is a sitting CEO and chairman that's dealing with a lot of the issues that we've been talking about today. That is really the process that we have underway. We'll be sharing more of our plans as we head into proxy season, ultimately, the goal is, by the time we get to our shareholder meeting in May, to kinda have the reconstituted board, Mark. That's the discussion. That's what we're trying to accomplish. Remind me the first question. I'm sorry.
Dave, do you wanna repeat the first question?
Synergy. Revenue synergies.
Oh. You wanna start, Glenn?
Yeah. I, you know, I had mentioned Mark is, you know, we're kind of on a curve here from, I'll call it 2% volumes on our way to something substantially higher. You're right. Mathematically, if I added up all those bars in terms of what we think we get to, it's going to be a bigger number. We're trying to be, you know, realistic relative to, you know, degree of achievement, complexity, double counting, those sort of things. I intuitively think that having spent a lot of time on our work in revenue synergies, it is incremental, that the business historically would not have been able to deliver, you know, that incremental growth standpoint. We just wanna call that out as one of the components as part of our build.
I honestly believe that it will give us an advantage in the market at the end of the day.
You know, I wanna add on to that for Mark. From a technical point of view, the premise of the deal does make sense because it allows us to actually study the one plus one equals 10 interaction of those ingredients. For example, if I'm a pharma and I'm going to OTC, then I'm gonna add a flavor to that, and then I can study both of those, put the application science in, and drive a new opportunity. Those are opportunities that we always had in our mind before the deal, during the deal, and after the deal, that we're gonna leverage that to create greater differentiation and basically more products in the marketplace because of that.
Mark, if you can hand it forward to Adam. Oh, I'm sorry.
Yeah, Adam Samuelson, Goldman Sachs. Two questions. Maybe continue on the growth discussion, maybe in a different light. The 2%-3% volumes in the last few years would be below what you would look at as most of the peers in these categories, and I'd love to hear any reflection on maybe some of the areas where you think the company has lagged and reasons for why or specific sources of underperformance. The second question would be the ROIC framework, and just make sure we're clear on how the company's actually defining ROIC. There's a very different asset base assigned to some of the acquired businesses versus some of the legacy businesses.
Just wanna be clear about how the company's prioritizing or thinking about the capital charge that you're putting against the operating units, because those are decisions they weren't responsible for, but there's a lot of intangible assets on this balance sheet that company, your management team or operating executives have no control over.
Yeah. Perhaps I can answer the second part.
I'll go to first.
If we included the goodwill intangibles, those numbers would be a lot lower. We stripped them out for that reason exactly, is that We're looking at like for like, so really, what's the dedicated capital against each of those business from the standpoint? We're not sort of burdening them for the acquisition costs associated with the deals. Frank, if you wanna talk.
On the first part of your question, I think you, as you mentioned, and we tried to highlight some of the near term, I would say, the last couple of year challenges. One, we clearly have identified that customer service supply chain needs to improve. That hurt us. That cost us. I think you quoted some basis points, but that was one. Number two, there were businesses where we hadn't invested earlier to have the capacity needed to meet demand. That also hurt us, and now that has been addressed and fixed. Then three, I would say, is that while we have done some really good work with some of our key customers, key accounts, we have won Supplier of the Year from one of our key customers recently.
Anytime you go through an integration or merger, some distraction, and we probably lost some momentum, which is why I'm really staring into ramping up our commercial capabilities. I think when you combine all of those, that's probably why you get to that 2%-3%, which is a little bit lower than where we probably should have been. That's now most importantly, as we've said, that's been identified. We're acting with a sense of urgency, and that is something that we feel really good about, that we're gonna address it, which allows us to give us confidence in getting to that 4%-6% growth range that we're communicating.
Maybe, Adam, if you can go forward there. Oh, there you go, David.
Hey, thanks. David Begleiter, Deutsche Bank. Frank, first, on the 2%-3% incremental volume growth, whom do you expect to gain share from, or whom do you think will grow below market trend going forward? Just on the R&D spend, today you spend more than your peers, but you don't grow faster than your peers. What about rather than spending more, optimize what you spend today before increasing the R&D resources that you're spending on the additional spend? Thank you.
Yeah. From a share perspective, I'm not gonna speak to specific competitors or who we think we may or may not take share from. What we are focused on is overall, and I mentioned some of our KPIs around pipeline flow, win rates. We need to tick up our win rate a little bit. That could come from either larger competitors or even smaller local competitors, okay? That's something that we are clearly looking at. The growth also, we anticipate, will come from new customers and new acquisition, and that's a part of the emerging market discussion that we're having. To put in context, in many of those markets I highlighted, if they're growing 5% and we're growing, let's say, 3%, some of this is footprint expansion. We're putting some additional resources. We think we can just capture additional business based on our capabilities.
That is what we're focused on. On the R&D spend overall, we feel as though it is in the right range. If we do increase resources like we talked about, I wanna make sure everyone knows it's gonna be done in a very disciplined way. It will have line of sight to clear customer opportunities, demand. We are really putting rigor into our R&D reviews and operations. As I mentioned, Greg can add to this, since I've come on board and I've got some experience in this area, we are laser-focused every quarter looking at our portfolio, our pipeline. We do see opportunities to even accelerate some of our programs that could bring things to market quicker. We also are gonna kill things that we don't see are gonna have a commercial benefit.
My message overall, a lot of rigor, a lot of oversight into our R&D spend. Most importantly, we do believe that the technologies that Greg highlighted are going to be a true differentiator for us and drive the growth that we're, that we're planning to achieve.
Great. Maybe we can go up. I'm losing line of sight. Yeah, that's perfect, Adam.
Thanks, everyone. Matthew DeYoe from Bank of America. I guess the, you know, be it 2025 or 2026, right? Like, what % of your revenues do you expect will be in this invest in winners bucket? Is 65% possible? Is 70% possible? Obviously, with divestitures, maybe you can move the bucket a bit, but what is the right number there? Just trying to kinda balance some of the message here, there's obviously the inventory shortfalls causing 75 basis points of headwind or shortfall to revenue. Conversely, inventories are way too high. We've gotta, you know, cut inventories massively. Is that just a signal that procurement has been a massive issue over the last year or two years and you have a new global procurement officer or what are we looking at there?
Greg, why don't you wanna start?
Yeah. Let me start with the second question.
You wanna start?
I'll start. The 75 basis points I cited relative to volume lost, it's really a compounded effect, highly, to some extent, concentrated in last year and then earlier this year. As you may recall, when the N&B transaction was finalized, we inherited relatively low levels of inventory, and we also in some key product capabilities are higher growth, we didn't have capacity. We were unable to meet customers' demand. In some cases, we had to consciously select to actually walk away from customers and basically move to customers that had higher profit or had higher demand and stickier and had to make some tough choices from a standpoint. That hit us a lot last year. It's tailed into this year. We have been fixing the inventories, and we've been investing more in CapEx.
Today, our system has the capability to meet demand, i.e., we can produce or we have inventories in place. The problem with the inventories this year really is confluence of basically the demand drop. We're about roughly, you know, we're about 138 days versus 125 days is what's our target, and it's simply in the last six months, the demand has slowed much more significantly than we had thought. That's the difference from that standpoint.
Yeah. Just to add to that, and that's what we've highlighted in particular, we did see some challenges from a demand perspective, really in two areas. We've highlighted the protein solutions and then also, I was at a conference earlier in the year, we did see, and this is basically a market phenomenon. We did see a significant demand pullback and drop, especially in market demand in probiotics in North America. That's a part of actually what has been a little bit of a challenge from an inventory demand perspective.
Great. If we can go right behind Matt, that'd be great.
Awesome. Thank you so much. Christopher Parkinson, Mizuho. You had an interesting comment regarding your conviction level on the cost/synergy side despite being behind. Do you just mind elaborating a little bit on that comment and just what underscores your conviction over the next two to three years, you know, just based on what you've seen over the last, let's say, six to nine, since that's been the trend? Thank you so much.
Is that, you or me?
It's Glenn's conviction or Frank's conviction?
Both.
Both.
Yeah. Yeah. Well, I can speak to it personally because I'll rewind the tape a little bit. We had basically cited $300 million of expense synergies as our objective starting last year with the deal. We realized about $150 million. By the way, of that 300, roughly half was procurement. A lot of that was direct. That didn't materialize. In that type of environment we've operated, never materialized. The rest, well, about $150 million was largely captured. Those synergies largely were, I have two Glenns. I don't need two Glenns. One of the Glenns goes, right? It was very targeted from that standpoint. Some indirect purchases, et cetera.
We, as you may recall, began early this year to take a holistic, much more holistic view as opposed to just focus on integration, is what's going on with our cost profile. Through benchmarking, a ton of outside support, basically dissecting our operations supply chain, our indirect spend, we have basically been standing up individually these programs. There's one on operations. There's a couple on procurement. There's a kind of a, there's a direct and indirect. There's a demand management initiative. There's a set of supply chain initiatives, shared service build-out, then lastly is the administrative. I'm confident because I personally am involved in those teams. We have very discreet targets against those teams. The timing's associated with it. We have dedicated people. We have finance individuals basically providing oversight to those numbers. They're concrete in terms of the actions from the standpoint.
I have to be honest with you, that the place, since it's really a combination of a bunch of small businesses, it's rife full of opportunity from a productivity. Is historically, as is, the scale doesn't exist. As the company is brought together, everywhere we go, there are opportunities from a productivity. To be candid with you, the changes that have been made functionally from HR operations, procurement, we just announced a new head of GSS, very experienced executive. Those are also gonna turbocharge our action. As you can tell, I'm very passionate. I'm also very confident.
Yeah. I'll add my confidence. Maybe, I don't know, Ralf, who has joined us, Ralf Finzel's our new Head of Operations. Ralf, I don't know if you have any comment at all. Ralf has joined us from Honeywell. I'm gonna have Ralf make a comment. 'Cause a lot of this sits within operations. Ralf, you wanna give a view?
Yeah. I can give a lot of comments. Maybe one comment about the inventory, for example. It's not sourcing and the capacity. It's really planning, SOP process. That was maybe to the previous questions. On the productivity side, I would say, you have volume productivity and you have cost productivity, and you have to work on both. I would say that's exactly what we are driving and how we drive that. Use lean tools in what Glenn said with the two Glenns, and you put one away. That's one. It could be also when you have 10 people, okay, how you do this with 9 people? This is lean.
The on the other side is also when the chemical plants, when you look to that, it's OEE, it's Six Sigma, it's process capability, it's yields, it's change over times and things like that. I would say we have good opportunities, and we will, I would say, put these tools in place, and then we drive the culture, so you need every employee. That's also a part. It's not that this is driven by management only. You need every employee. There's a lot of ideas. They know exactly where they're waste of time. When we drive this culture, I'm pretty sure that I think we will achieve the numbers what were presented.
I would also note that when I said one Glenn went away, all my colleagues perked up immediately. Of note.
Yeah. The only thing I would add on the confidence, and you can see now with, the team that we're assembling around this, and I've had a chance to go through many different mergers and integrations. We do have the opportunity, and I highlighted in the administrative expense line, there's duplication, there's efforts, and honestly, there's things we should have probably gotten after a little bit sooner than what we have. We're very confident in the productivity numbers that we're putting forward. I think you can see here, we believe that, not only, are we laser focused on it, we'll deliver on those expectations.
Jeff.
Jeffrey Zekauskas from J.P. Morgan. Two questions, one for Frank and one for Glenn. Nicolas Mirzayantz is leaving the company, and I think, Frank, you're taking over the Nourish business as the temporary head. You know, it feels like the head coach is also going to be the offensive coordinator. You know, it, you know, that is you're taking on two jobs. Why did you choose to do that rather than give it to someone in your organization? For Glenn, in listening to your presentation, there's $350-$400 in productivity improvements, and it sounded like the $150 million that you wanted to invest was recurring. Is there also a non-recurring element that ties to that $350-$400?
Maybe I'll get started with the first part of your question, Jeff, on Nicolas. One, I do wanna acknowledge and, publicly thank Nicolas for 34 great years at our company and all of what he has done to help us moving forward. When we had the decision where Nicolas was leaving the company, I had a chance to really spend a lot of time, and have been spending a lot of time, as you can imagine, with the Nourish leadership team because it's our largest division, and we've got a really strong team. I will be spending time and actually leaning in and learning and really diving in for a period of time, Jeff. I think it will help us.
I feel really confident in the leaders underneath Nicolas, the leader of our flavors business, our ingredients business, and our Food Design business, very seasoned, strong leaders. I feel like I can help them in the near term. Obviously, I'm thinking through options of what's now next best for the company. That's the Nicolas question.
Yeah, great question, Jeff. I meant to mention that is, the good news is the majority of our cost reductions are basically stop doing things. It's yield improvements, it's digital application, demand management, not spending money on the outside. There is some level of obviously headcount that's associated with it and to some extent, some either redundancy as we build shared service and move stuff or a slight impact relative to facilities. That's about $150 million in cash, which we expect it largely be spent over the next two years, call that 2023 and 2024 to basically implement.
Thank you.
Thank you.
Maybe we'll swing back over here. John Feeney. Guy right there. There you go.
Thanks very much. If you go back about 12 years ago, there was a lot, some very similar themes to what IFF Management was trying to accomplish with a different group of businesses at the time. One thing that stuck out to me was the ROIC discipline inside the units. At the time, they talked about prioritizing the most profitable briefs. There had been a lot of time and energy spent on tiny things. I mean, inherently, this is a creative people and customer-driven business. It's very easy to get off that ROIC track. Would you say something like that is true today, just with the newly acquired businesses, and that's part of the opportunity here?
Yeah, I'll start. 12 years ago, I wasn't here, so I'll start there. I've heard about it because people have mentioned it. I think you always wanna still have, and we talked about our purpose around creativity and how we wanna utilize creativity work on our customers. We don't wanna necessarily lose that. However, we do believe we can accomplish both. We feel as though with the leadership and management team, as well as the processes and systems we're gonna put in place, we can really drive the type of culture that is disciplined, really looking at a return on invested capital lens, market attractiveness, but not lose the creativity and what really differentiates us as well. I feel as though overall, this is a good place to be.
What is encouraging, probably the most encouraging aspect, like I said, the discussions we've been having in the organization has been very encouraging because people have embraced it. They've now seen the opportunity, that's what we're rallying the company around, which is why I speak to some of the cultural elements around one IFF, high accountability, high collaboration. I feel like we can have a little bit of best of both worlds here and execute on what we just discussed.
There's definitely work to do to drill down that ROIC mindset to the day-to-day operations. One are the playbooks, so we've been working with these businesses relative to the archetype and how they think about their priorities, so capital versus growth as an example. Secondarily, in our cadences and process. Now relative to our CapEx budgets, we're thinking very discreetly where the capital goes, working capital objectives as an example relative to that. Tools, so costing models as it relates to RFP, making sure we bake in the right margin objectives relative to that. Finally, incentives. As I mentioned, having P&Ls actually have a charge for cost to capital is important and making sure that people are incentivized, you know, relative to their goals.
It does take the mechanics, to your point, to be embedded in terms of the organization to make sure that those actually become real.
Which is now the incentive program as well.
Yeah. Yep.
Clear. Okay.
I'm gonna try to sneak in two more.
Okay.
if we can. Michael Sison.
Sure.
Right there.
Just in terms of the, you know, the high return on capital, the 30%-plus, you don't see a lot of businesses or product lines with after-tax returns that high. Have they been that high for a long time? For a couple years? What keeps them so high, I guess, is the question. You know, I just wonder if folks see this presentation like, "Oh my gosh, I need to compete against these businesses." I just... Maybe a little bit of color on why they're so good and how sustainable they are going forward.
Yeah. Maybe why don't we, Christophe or anyone that has, some of those businesses. Maybe you wanna give a little, shed a little light on some of those.
Thank you. Maybe I will talk about the Fine Fragrances business. As you know, it's a business that have grown high double digits since the last two years, but it was a very resilient business since the last 10 years. It's high margin, we see that our customer putting more and more value in this business. You have seen since the COVID that this business has grown in every in every regions. There's a lot of opportunity in in some new area like China, Japan. We see the segmentation. We're going more and more and more premium. Even we go to luxury now. In fact, the value of the fragrance is increasing, we benefit from this value as well.
That's one of the category that really will continue to drive value for IFF.
I think, Mike, you also have to think about that we are a very small fraction of the end product and high value add, so that's part of the equation, right? Very few things we can do can add tremendous value downstream. Secondary, it's a very complex business to replicate, so you just can't come off the street because of the uniqueness of formulations, proprietary technologies, intimacy with the customer, co-creation process. To some extent, that sort of reinforces the return economics in this business.
Great. Maybe one last more. Visham, if we can get in the middle right here, that'd be great.
Thank you. Ghansham Panjabi, Baird. First of all, thanks again for hosting us here. On the last conference call, you talked about Q4 being off to a relatively slower start in terms of volume weakness. I think you mentioned destocking certain categories were weaker. Maybe just give us an update relative to that baseline. Second, it looks like your base volume growth assumption for 2023 is 1%, second half weighted versus first half. In the scenario that volumes are more unfavorable, let's say, relative to the assumption, what are some of the contingency plans you have in place to protect against margin deleveraging and also ensure that you hit your free cash flow commitments?
Yeah, maybe I'll take those. First I will hold, and Glenn kind of gave you a preliminary view of 2023. Lot of moving pieces. We're gonna come back and unpack that in specific terms as we get here in a couple of months in February when we report out. More to come on 23. We're trying to give you an overall view with the moving pieces, but we'll come back. With regards to Q4, we do see some continued volume pressures as we've discussed, but at this point in time, we're holding to our current Q4 and full year guidance. If you recall, we had guided in that range of, from an EBITDA perspective, $2.5 billion-$2.6 billion. We're still holding towards the bottom end of that range. That's where is kinda the latest as far as Q4 goes.
I would add that, as I mentioned, it is murky, the outlook. You know, we're trying to discern what's consumer base versus customer from a destocking standpoint. As I mentioned, we'll provide obviously a lot more perspective in February, if we get to the point that we feel that we want to reduce further production, that is a good answer for us because that will actually make sure that we maintain our discipline on reducing inventories and cash flow. That may have a temporary impact, basically, on manufacturers who may have some negative absorption, that's just a correction of the inventory, it's sort of transitory from that standpoint. We'll have, I hope, a lot more clarity when we talk to you in February, so.
We will.
Yeah.
Great. I think that concludes Q&A. I'll turn it back over-
I just wanna, first of all, thank everyone for coming out in person. It was great to see everybody in person. Thank you for your interest in IFF as a company. I hope you walk away with the excitement and energy that our team has about the future of this great company. We are laser-focused as a team, and not just this team here, but the 24,000 people around the world on now executing against the plan that you saw today. I also hope that many of you have some time, please, to join us downstairs. We're gonna highlight some of what Greg was speaking about. We're very excited about the innovation that we're bringing to the market, and I think, Mike, it is out and around and downstairs. We would ask, if you could, please stop by.
All of us will be rotating through so we can have some further discussions. Thank you for interest in the company, and we really appreciate it. We look forward to seeing you soon.
Thank you.