As inflation continues to exert its influence, not only are food and beverage manufacturers experiencing declines in volume, but so are the companies supplying essential ingredients to them. “The ongoing destocking by customers and volume pressures observed in the second quarter illustrate the wider macroeconomic difficulties affecting our industry,” stated IFF CEO Frank Clyburn. The current iteration of IFF was established following its $26.2 billion merger with DuPont Nutrition and Biosciences in 2021. The newly formed entity highlighted its leading positions in various sectors, including taste, texture, scent, nutrition, enzymes, cultures, soy proteins, and calcium citrate untuk apa, as well as probiotics. At that time, the Nourish division catered to over 43,000 clients.
However, despite these perceived advantages, IFF has faced significant challenges since the merger’s completion. Toward the end of last year, the company revealed plans to reduce its workforce as part of a restructuring effort aimed at cost optimization and business streamlining. In June, a former Kellogg executive was appointed as president of the Nourish division. In February, IFF announced its intention to divest its Flavor Specialty Ingredients unit for $220 million in cash, just two months after it disclosed the sale of its Savory Solutions Group for $900 million. Further divestitures may be forthcoming, as IFF has engaged J.P. Morgan to assist in exploring additional sales.
While inflation and other recent hurdles are likely to persist, IFF could enhance its position by implementing changes within its crucial Nourish division, which accounts for over half of the company’s revenue. In its recent earnings call, IFF indicated that the Nourish division would increase commercial resources and emphasize key global accounts, enhance annual productivity through operational efficiencies, and concentrate on its most successful product lines while discontinuing underperforming ones. Additionally, IFF announced a one-time inventory writedown of $44 million due to “unprecedented cost fluctuations” related to locust bean kernels, a component used to produce a thickening agent.
Meanwhile, competitor Ingredion also reported its earnings this week. Although the provider of texturizers, plant-based proteins, clean and simple ingredients, and specialty sweeteners raised its earnings per share forecast for the 2023 fiscal year, it reported sales of $2.07 billion for the second quarter, falling short of the analyst consensus of $2.2 billion. Ingredion pointed out consumer challenges in the market. “Volumes continued to be affected by inventory rebalancing throughout the food supply chain and changes in consumer spending behavior,” stated Ingredion CEO Jim Zallie.