Very happy to have Frank Clyburn, IFF's CEO, with us today. So Frank, thanks again for joining us, another year up here. It's good to have the opportunity to sit and chat like this. I'm gonna jump right in, as you know, I tend to do. So destocking has been the topic kind of front and center across the specialty ingredient space, right? And everyone has been talking about it, but it does seem like over the last three quarters, on average, that IFF has seen greater declines in volumes versus the peers. So just can we take a step back and just hear how you assess the degree of underperformance versus peers? You know, is it how much is destocking? How much is maybe market share? That'd be great to just start there. Yeah, and I think you're, you're correct, Lauren, with regards to clearly destocking has impacted the special ingredients market as well as some of the chemical space as well. Specifically to IFF, though, I want to highlight a couple of things, Lauren, to your question. If I look at the majority of our business, and I would say approximately 75% of our business, and that would be our Scent business, our flavors business that sits within Nourish, our systems business that sits also in Nourish, our overall Health & Biosciences business. I'll talk a little bit more about that in a minute, and our pharma business. You know, in a tough macro environment, those businesses performed pretty much on expectations. There has not been any market share loss per se, in those businesses, and we feel really good about 75% of our portfolio. The challenge that we have had, which is if you look at our overall volume decline, if we were to look at Functional Ingredients, that's where we've seen significant destocking as well as some market share pressures, in particular in our emulsifier and sweetener business, and then also in our Texturants lines of business. When I take a step back, and if you were to exclude Functional Ingredients, Lauren, we would be down pretty much half year, mid-single digits from a volume perspective, primarily driven by destocking, which is impacting the industry. So 60% of our volume declines really is within that functional ingredient business, and in particular in some of those business lines I mentioned. But overall, 75%, we feel really good about. No market share loss that we can see, when we look at those businesses, and we feel really good about the future of those businesses as well. In addition to that, that's why we really wanted to highlight, we put in place a plan to improve our Functional Ingredients performance, which we may talk a little bit more about. Right. Okay, great. Okay. So I guess how much visibility, just on the destocking piece, how much visibility do you have into customer inventory levels? And kind of what gives you confidence that this will be over by the end of the calendar year? Yes. So visibility, we, we spent a lot of time in discussions with both our local and regional customers and obviously our global customers. We don't have complete visibility, though, Lauren, into their specific inventory positions. And what we have assumed as we go forward, we think that destocking will continue, and we've assumed that it will continue through the second half of the year, very similar to what we have seen in the first half of the year. As we've talked to customers, it is different by customers. Some customers are saying that they believe destocking will come to an end as we kind of come through the third and fourth quarter. Some are saying it will be towards the end of the year. We've made the decision to just assume that the first half of the year looks like the second half of the year. We think that's the prudent thing to do for us from an overall guidance perspective, as well as how it helps us to run our company from a cost productivity perspective. So that's what we've assumed as we go forward. Okay. So, you know, a big topic this week has been CPG industry volume recovery, right? When, how much, et cetera, as pricing rolls off. So, you know, in the ingredient, specialty ingredient industry, how should we think about volume recovery relative to what the customers see? You know, is there a lag? Is there a kind of big bounce back, like a restocking, or is it just simply, you know, kind of gradual build back over time? Yeah, I would think of much more, from my view, a kind of a build back over time, Lauren. What I think it will also be, remember, it depends on the customer, it depends on the end markets they serve. I think that the resiliency that you'll see as things come back in food and beverage will, I think, likely come back a little bit sooner, I think, as we look at kind of the recovery. I would not, I think it's too hard to tell at this point in time, any major bounce back or any rebuild. In the past, we have seen some of that when we've gone through periods like this, but right now I think it's too hard for us to tell until we start to see some more data as we go forward in the rest of the year. Okay, so food and beverage, you said sooner- I think- What about HPC? HPC, I think you could also see that come back as well. Those are really resilient categories for those CPG customers we serve and then also for us as well. Okay, and does it usually come back with a lag? So that, let's say, the industry volume inflected up in the fourth quarter, when do you start to see any- We're usually, because we're down, yeah, we're usually. It's hard to say, 'cause it varies by business and by business line, but there is some lag there of a period of time. Okay. Yeah. Okay. Let's talk a bit about inflation or lack thereof. Can you just give us an update on your assumptions for raw materials and energy and transportation costs for this year and into 2024? Sure. So a couple of things, Lauren. I think it's one important to note that we're living in unprecedented times. So recall in 2022, we had dollar cost recovery inflation of somewhere in the order of about $1 billion, Lauren, just last year in 2022. As we went into 2023, we're still seeing inflationary pressures, especially with the number of some of our raw materials, energy and logistics. We made the assumption this year we're about 5% inflation for this year, and obviously, we've been working with our customers on energy and some of the surcharges and giving back those as we go through 2023. Remember that for us, though, as we look at any impact to our overall business, because of the inflationary impact to our inventory, it typically takes three-four months, Lauren, to have any impact. So you won't likely see the impact for us until you get towards the end of this year, beginning of 2024. I think it's too early to speak to what's going to happen in 2024, but we've assumed approximately 5%, this year, and that's, you know, been updated, and that's what we're seeing. In particular, we're still seeing that in our raw materials. You saw we're seeing some benefit in energy costs we talked about and also logistic costs coming down. I think that is a good sign, but like I said, it's going to take some time for that to materialize, and we'll likely see some benefit as you get into 2024. Okay. Okay. Aside from the energy surcharges that you mentioned, or you're working with your customers to roll those back, I'm just curious if you could talk about scope for pricing adjustments in the context of the sort of, you know, the dynamic pricing model that the company, you know, aimed to put in place in early 2022. Mm-hmm. Like, yeah. Yeah. So what we have done, Lauren, is, and we've learned a lot over the last, I would say 18 months from a pricing perspective, a couple of things that we have now put in place. Number one, and I had mentioned last year, we formed a Center of Excellence, our Commercial Excellence team, that has worked with an outside partner to really build strong analytical tools for us from a pricing perspective. We have now the ability down into, not only geographically, but down into, our local and regional customers, to really look analytically at price, volume, margin trade-offs. So we have a dynamic pricing approach that we're really evaluating our overall pricing as we go forward. So that's number one. Number two, if you think about, though, Lauren, I think it's important that our pricing overall has really been focused on recovering inflationary costs. The business model, as you look out over the next several years, pricing is not a big part of our growth equation. We need to be very good at that capability, which is what we have built. We are making sure that in parts of our portfolio, that we're going to be very surgical, in particular, if there is any price giveback needed to drive greater volume. But that's going to be on a very surgical basis in some of our more competitive marketplaces. But we really don't compete holistically on price. We compete much more around the capabilities that we'll bring, and we'll talk about, and much more around our technology innovation platforms. Just know that we've built strong capabilities over the last year, and we've got our Center of Excellence working with our commercial teams to really identify what is the right price, volume, margin trade-off in our businesses. Okay. I guess part of my question was coming from the idea of having a dynamic pricing strategy would be that if it becomes less about con-- brief phase, right, and these long time frames between reset on pricing, that it happens as costs change. If we move into deflation, do the customers not agitate and say, "Well, you said it was flexible on the way up, shouldn't it be flexible on the way down?" Because that's the energy surplus. That's sort of what I wanted to push on a little bit. Maybe that's not the way it plays out, but I'm just curious why not, if, if that's the case. It does. It will be discussions that we'll have with our customers, clearly, and that is the dynamic of what I mentioned, is that we will work with our customers on, as energy, as raw materials and logistics start to ease. That is something that we clearly will work with our customers on, and we constantly will work with them in looking at, like I said, that price-volume trade-off as things come down. So yes, that's a part of our dynamic pricing, and that's a part of the analytic model and message, the model that we have built to be able to look at that. Okay. Okay? Do you think, is your understanding that others in the industry have also moved to this more dynamic pricing model or less so? I think that we have really strong capabilities. I can't speak to where everyone else is. I think we are clearly because we were early on looking at price, I think we're at kind of the forefront of this dynamic pricing model. I assume others are also doing it as well. Okay. Okay. So just going back to earnings last month, there were some really interesting and positive strategic developments you discussed related to improving commercial and R&D capabilities. So I'd love if you could elaborate a little bit more on this and discuss maybe what inning you are in terms of progress to nine months past the Investor Day. You know, the tumultuous that you've had certainly been working to implement some of the things you talked about. Yeah, and this is probably the most exciting part for me, Lauren, and oftentimes maybe not the most visible today as we're, you know, navigating some challenging macro times, especially when it comes to destocking. But a couple things I wanted to highlight. Number one is that we have done a really great job across the organization of rebuilding our customer service, our supply chain. If you recall, nine months ago, Lauren, I was talking about we had some challenges with regards to our supply chain and customer service on-time performance. That is now 95% plus. Very strong, very good across the entire portfolio. So that's number one. Number two is, I would say, innovation, innovation, innovation in our pipeline, Lauren. I feel really good, and we highlighted this on the call to what you mentioned. We have seen over the last six months a very nice step up in our pipeline. And our pipeline has been growing, especially when you compare it to the first half of 2022. To me, that is really exciting for us because it, one, says that our customers are looking to get back into really discussing innovation. And two, they're looking at a company like IFF that has tremendous capabilities, and I'll give you a couple of examples of where we think we can really bring differentiated, essential, and innovative solutions. So that's number two, and I'll come back to that. Number three is that we are making continued good progress on the productivity front. We saw $150 million in productivity savings the first half of the year, and that will continue. So we're driving very strong productivity for the company. So back to the innovation front and what we were highlighting in our pipeline. We right now. I'm just coming back from Europe and talking with one of our large customers. The biotechnology capabilities and platforms that IFF has are very strong and very much, I think, a differentiator for us. We can go from lab scale to full-scale rollouts. Not many companies can do that with regards to biotechnology capabilities. We have the ability not only within Health & Bioscience, but in food and beverage. Customers are looking for sugar reduction. We have, through our enzyme technology and capability that we didn't have previous to the combination, to be able to bring enzymes to help customers with that. Clean label is very important. The sustainability importance now, and obviously there's a lot of discussions on the regulatory front with the Green Deal in Europe. IFF, through its capabilities, now can help address customers from a sustainability and biotechnology capability perspective. The flavor modulation capabilities that we have are still extremely strong and a differentiator. So why I'm so excited is that we're navigating the short- term, clearly, but I do feel really good about the early pipeline builds that we're seeing, Lauren, and also the continued productivity that we're seeing across the company. Okay, great. Let me go back. Just one more thing on this sort of near, near term, is that as you're rebuilding commercial innovation resources, and you're thinking about the way to win back lost business, you mentioned it's surgical, you know, very much on pricing. One thing that just came in my mind is guardrails that may be in place to make sure that you're winning back business in the right way, because I have a long history of covering IFF, right? And IFF was actually before I launched coverage, but in the late 1990s and early 2000s, I know that, again, well before your time. But in this sort of the company had gone through a period of very poor customer service, right? Fill rates were low, and there was an element of, "We got to get back on the list, we got to get back in." And ultimately what happened was there was a lot of chasing of not great business, right? And then there was a period of unwind and so on. So what type of guardrails do you have in place among your commercial team to make sure that this, "Let's win this back and rebuild the book and go after, you know, super opportunities," that there isn't a risk that the, we fall back into that maybe very old but historic pattern? Yeah. So let me make sure I'm very clear on that front. So, so guardrails are in place, clearly, and that's why I mentioned that we now have with our Commercial Excellence team, with our regional business leaders and our B.U. presidents, obviously, are ultimately accountable, that they are looking at this on a very, very regular basis. Like I said, any givebacks are going to be much more from a surgical and targeted perspective, but they're clearly guardrails in place to make sure that we're balancing the need to drive good, strong, profitable growth going forward, but having the right controls in place. Okay. That is in place. Okay, great. Yeah. Now I realize that you and Glenn inherited some of the challenges that many of the challenges, right, that IFF had faced as the company began the integration with NMB. But now you're, you know, a year and a half in, Glenn's two years in, and it feels like in some ways, maybe I'm going too far with this, but with a little bit of an unwind of some of the key rationale for the merger in the first place, right? When there was an idea of being a one-stop shop, an integrated solution, and this is particularly in regards to some of the decisions that may be being made around, around functional. So I guess what would be your reaction to that assessment and to that external observation or question? Yeah, I would say the assessment, Lauren, I would differ a little bit in that assessment. I think what we have really come in and looked at the combination from the mergers from really two lenses, Lauren, which has taken us down maybe a certain path. We highlighted clearly we're looking at our portfolio from a return on invested capital lens. Okay, so one of the things that we wanted to do is when we came in, is to evaluate the entire portfolio from an ROIC lens. And then in addition to that, we wanted to evaluate the portfolio clearly from a strategic best owner mindset lens as well. So we wanted to really take a look and say, "Okay, in the areas that we are clearly advantaged and where we can win, we want to put more resources, more investment, more capital to drive growth. Where we are not, we really need to either optimize and improve those businesses or potentially divest those businesses." So that's really what we have put in place, and what that has resulted in is clearly, you're well aware of the divestitures that we have already have made and just most recently, Microbial Control and FSI have just transacted. That lens, though, also has had us look at future divestitures, and obviously, we've announced now the intention of LMC. So that's one that is a very good business line, but it's one that was relatively small in scale, and one that when we purchased the business back in 2015, we never really scaled that business. Very fragmented market, really strong business. We think there's a better owner for that business, and that can help us obviously invest in other businesses and obviously continuing to de-leverage, which we need to do on our balance sheet. So that's really what we've been focused on. The other part of that is we have acknowledged and see the need to improve our functional ingredient business, because that is a business that majority of that portfolio sits in that optimized ROIC bucket. That's an area where we need to put some more dedication, focus, and improve the performance in that business. But I don't think we have—we still believe very strongly in the deal thesis. I come back to what I mentioned, the capabilities that we now have across IFF to leverage legacy parts of IFF, where you had strong flavor modulation, strong scent capabilities, a leader in fine fragrance, consumer fragrance and flavors. You're leveraging that with the biotechnology capabilities that you now can bring together on behalf of customers. So I think that still is the underpinning, but you are seeing an ROIC focus as we look at our portfolio. Okay. Okay. Just sticking with the portfolio, just, you know, 20% is, it is in this optimized bucket, and that included Savory, and now you said functional is 25% of the portfolio. So just how do I put those two facts together? And are there parts of Functional Ingredients that are strategic to own over time? Because I want to make sure we're thinking about optimize the right way. Yeah. So remember, and you mentioned it well, Lauren. So the 20% underneath Functional Ingredients right now, we have Protein Solutions, Emulsifiers and Sweeteners, Texturants, and then our Cellulosics and Food Protection business lines are within Functional Ingredients. Cellulosics and Food Protection were not a part of that original 20%. So they were not, okay? So that is the difference of what you mean, the 20 and the 25. When we look at Functional Ingredients overall, we said that we are now putting in place a very strong improvement plan. We brought in, obviously, a new leader of that overall business. We put some select specific resources to improve the business. We are looking at the ingredient portfolio to really make sure that we're optimizing things from an operational perspective, et cetera. So that's really what we're focused on within that bucket. We never said the optimized bucket per se was gonna be all divest. It was gonna be either potentially divest or improve, and we're really focused on improving that Functional Ingredients portfolio. But that's the difference. It's really Cellulosics Food Protection that was not in that original ROIC. Okay, great. Yeah. Okay. On a separate note, IFF recently opened the Nourish Creative and Design Center in the U.S., and that includes a new lab solely dedicated to pet food development. Could you talk a little bit about that investment? Sure. Very excited about New Century. It is a great new creative center. It's actually our second largest creative center in North America. This is an example where we're bringing flavor capabilities and modulation capabilities, ingredients, and food design under one house. So within that creative center, very excited what we'll be able to bring the customers based on those new capabilities all combined in one house. We did also designate a pet focus or pet lab. We think that is a very important business, and what we're seeing in the pet market, and treatment market in particular, is one that is attractive, Lauren, and we do have a lab that's dedicated to that. And that's something that now we'll be able to engage with pet manufacturers or companies based on that lab that is in New Century. But overall, think about it as a lab that is combining flavor, technology, ingredients, and system design, both for obviously our core Nourish business, but also we can do that for pet opportunities as well. So we're excited about New Century. Okay, great. And just in terms of pet, I'm just curious from a rationale—I mean, it's an attractive category, obviously, but I'm just curious on the rationale for participating, because there's other ingredients players that are dominant, right? They're very strong in the category, and as part of the rationale on divesting LMC, like you just mentioned, it was hard to... Or it never really scaled, and it was fragmented. So what's the difference between the two? Yeah. So remember, if you recall, when we did the DuPont N&B merger, we do have a small business, our animal nutrition business, that is underneath our Health & Biosciences umbrella. So we are participating already there through the merger of N&B. We have enzymes that go into helping digestion around livestock, et cetera. So that business exists within H&B. That's more like livestock. That's more livestock, right? Okay. So just wanted to that, but we do see pet as a really good market opportunity, and we think we have very strong capabilities there to be able to leverage, like I said, based on what we are now building in New Century. Okay. We think it's a good opportunity for us. Okay. Just thinking back to Investor Day, last November, or December, you discussed how IFF would bridge from 2%-3% sales growth over the last few years to 4%-6% in 2024-2026. 2024-2026. And the key drivers you highlighted were focusing on high-priority growth markets, revenue synergies, and then supply chain improvements and innovation. So just thinking through each of these buckets, is there anything that warrants an adjustment, given kind of more recent developments in the marketplace? And if not, like, why is it still the right way to think about it? Yeah, I think it is. I think our growth algorithm overall is the right way to think about it, Lauren. There may be some adjustments to parts of it. Let me unpack it just a bit. So as we look at the next several years, one, clearly, we talked about, you know, our customer service being really close and being the premier partner that our customers want to work with. And we've made really good progress on our performance there with regards to our supply chain. So that's number one. Number two, innovation is gonna be at the heart and the forefront of how we drive growth. Our pipeline is improving and increasing. We've got great capabilities, as I mentioned, with regards to not only biotechnology capabilities, what we're doing with regards to our overall capabilities in scent, how we're transforming that catalog. So if you really think about what we can do from an R&D innovation perspective, just like we talked about, feel really good about that. That's gonna be a key driver of growth for us, and we're gonna continue to invest there. Number three, the emerging markets, and we do see that still, even though challenges have existed. Obviously, China's been a challenging market this year. We still believe we've got under index opportunities in certain markets, whether it's South Africa, whether it's China, whether it's India, and we're investing selectively in there, and we do think we'll see greater growth coming out of the emerging markets. Then also, we do think that the overall synergies of putting the two combination companies together, where you can now take personal care products in our portfolio, in our pipeline, and you can develop and utilize polysaccharide or enzyme polymer technology, combining that with our scent technology to come up with really creative and innovative opportunities in personal care, in body care, what we can do in dairy and bakery and coloring. So that underpinning is still there. Obviously, we have not achieved our original revenue synergies to what we had thought at the time. We've acknowledged that, but we still see synergies as we go forward. So I think the algorithm is still consistent, as we talked about last year in December. Okay, great. Let me make sure we get to capital allocation. Sure. So you announced the intention to sell Lucas Meyer. This only reduces your leverage by, let's call it, half a turn. So if you could just update on the process. I know you publicly discussed recently hiring bankers to help with that process. So any updates you can give us on the divestiture process? Yeah. So we've mentioned publicly, just going back, we've obviously mentioned the closing of FSI recently. We've mentioned Lucas Meyer as one that we think there will be a better owner, and that progress or that process is well down the path, Lauren, so we're making good progress there. And we are evaluating other options in the portfolio with the lens around ROIC, strategic mindset, and the intention of still achieving our 3x net debt to EBITDA target by the end of 2024. So that progress or that process is well underway. Okay. And on the earnings call, Glenn was, you know, really adamant that IFF intends to remain investment grade and that cutting the dividend was basically non-negotiable. So why is that the case? That's a question I've gotten from people a lot since earnings is like, you know, why? Yeah. Well, I think, one, investment grade is important to our shareholders, Lauren, so that's number one. And two, the dividend is also very important to our investors and shareholders at this time. And we have been focused, as you know, on improving Net Working Capital, improving cash flow, and we think the combination of what we're doing there, in addition to the divestitures and disposals at this time, we can meet the commitment of the dividend, and it's very important to many of our shareholders. So that's why. Okay. I want to switch gears and check my time, and just ask a more industry-specific question around scale and consolidation. So knowing, you know, you weren't at IFF when it went through the wave of M&A that, you know, then culminated with the DuPont. You're fully in the industry now, right? And you've seen competitors making comparable moves in terms of consolidation. So what's your take on the importance of, of scale, right? Scale versus sort of specification or specialization? Yeah, I think it's still gonna be important in a more normalized marketplace because you're gonna need... I think it helps with regards to the breadth and geographical breadth and then being able to meet customer needs. Also, I think the R&D investment. It's gonna be needed. Our business scale helps, and I think you continue to see the consolidation because of that. And then I do also think, though, you need to make sure that you don't lose specific capabilities as you scale. So it's not just scale for scale's sake. You do have to make sure you can still meet, if customers are looking for individual ingredients, specific asks that they have on the portfolio, you still need to be able to compete there. But overall, because of the importance of R&D and innovation and the importance of sustainability for our industry, I do think scale is gonna be continue to be important as we go forward. Okay. People have long said this is an attractive industry, but now that you've gotten to know it and you're in, is it more complex than you initially thought? It is not, Lauren, more complex. Obviously, we've had more challenges in the last 12 months based on what we've discussed around destocking and some of the inflationary pressures, but not more challenging. Actually, I would say as exciting as, and I think the opportunities when I joined the company are still there. So I don't think more, any more complex than what I was thinking when I joined. Okay. Just thinking through questions. One of the changes that you made, I thought was very, very interesting when you first took on the role, was you changed the head of HR, which is not something you often see, you know, on kind of the short list of changes. So I was just curious for an update on kind of corporate culture, morale, hiring, you know, had been a challenge, obviously, and the change you made, and so where do you stand now? Yes. So that's, you know, one, you're referring to Deb Borg, who came in and joined us. Deb is a tremendous HR leader, one of, as we were looking out and wanting to bring Deb in, I really look at culture, people, talent as the key, key aspect, especially as we become one IFF. So one of the things that we really wanted to do, and it's very important, Lauren, just to make sure that we have a good people and talent process, that Deb is helping to drive that. And that was really key because I've been through this now, Lauren, this will be number six, of bringing companies together, different industry, but still integrating and merging companies. You got to get the culture right. You have to get the people processes right, and you have to get the energy into the organization, and people all focused on clear objectives. And that's why we wanted to go get a seasoned leader like Deb and bring her into the organization. So that is something that's, one, very important, and two, we've made other talent moves too, to which you've acknowledged to me in the past, and we feel really good about the team we now have in place, Lauren, to your question. Great. So I'm going to close by asking you the same question I ended with last year, which is: What does success look like for you when we're sitting here together a year from now? If that's in your calendar, hopefully. And just kind of what are the, you know, one or two things you're most concerned about that could derail the turnaround? So, I'll take your second question first. Derailing the turnaround would be what keeps, I think, all of us up at night, is anything continuing... Obviously, it's more the macro factors in what's happening and globally around the world. As I think about next year, and I do have it in my calendar, Lauren, so that's already there. I really believe for IFF, it's one, obviously delivering on our commitments, so that starts there, and our financial commitments in particular. So that's number one. But two, is clearly continuing to build IFF to be the innovative, essential leader in our industry. And it's really seeing good progress on what I mentioned, the pipeline progression we talked about, starting to see that translate into commercial opportunities and pull that through. That's going to be really important. The number three is really setting the company up for the long-term growth profile that we've highlighted. I feel great about the company and the capabilities and what we're building, Lauren. Oftentimes, you don't see that as you're going through some challenging external macro factors, but I feel really great about what we're building in the company. I think a year from now, as we kinda turn the page, you'll really start to see that delivering, which is why I'm really excited about all the things we're doing at IFF. Okay. Sounds great. Thank you so much for being here. I look forward to that update next year. Great. So please join me in thanking Frank, and then there will be a breakout session. Thank you, guys. I guys. I appreciate it.