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Behind the scenes – that’s how Firmenich likes it. The largest privately-owned perfume and taste company in the world is everywhere yet nowhere at the same time. Serving around 4 billion consumers across the globe every day, CEO Gilbert Ghostine lays out his game plan to keep a 125-year legacy in line with fleeting consumer trends.
“It’s like a palette of a painter,” begins Gilbert Ghostine. “The ingredients are the colours and you as a perfumer or a flavorist have to choose from these colours to do your painting. This is what we call ingredients in our industry.” So explains the CEO of Firmenich the art of his business. With 10,000 employees worldwide and annual revenues topping CHF 3.9 billion, it comes only second to its biggest rival Givaudan.
Despite this, Firmenich is rarely seen or heard. Its B2B business is masked by the global consumer giants it serves. Yet its flavours and fragrances play a critical part in our everyday lives – from the breakfast cereals we eat and the cologne we wear down to the washing detergent we use. The company’s 83 affiliates serve customers in over 140 markets around the world with North America, India and China all posting double-digit growth in the second half of 2020 alone.
Making products taste and smell good seems like a creative business at first glance. But underpinning this are decades of science. The Firmenich pie is split into three segments: fragrances (which make up the largest slice); taste and nutrition; and ingredients. The company screens and tests about 2,000 new molecules every year of which only three or four end up in the fragrance and taste database. Florals, nutmeg, mint or vanilla – this is just a tiny sample of Firmenich’s huge arsenal of ingredients. Its team of perfumers and flavorists combine the molecules until they eventually come together in a cohesive painting.
So has been the business model of Firmenich for the past 125 years. But as any company has learned in the past year, relying on a tried-and-tested model doesn’t get one far in a worldwide health crisis. “When the pandemic started, there was no playbook,” says Ghostine. “As a CEO, I’m usually focused on the long-term, meaning two to five years. During the pandemic, my visibility was a few hours.” Ghostine divided the management team into two groups: one to oversee the day-to-day operations (raw materials, factories, labs and logistics) and the other to think about the future, including consumer trends.
Firmenich’s business has taken a major hit in two areas since the start of the crisis: fine fragrances and food services. Lockdowns and travel restrictions slashed sales of perfumes and colognes on the prestige end – many of which are sold in duty-free shops at airports and on airlines. Firmenich’s savory unit was also heavily disrupted. After all, it creates the seasoning and flavoring behind some of the most recognisable food chains. And so Firmenich changed tack. The company kept its factories running at 100% capacity throughout the lockdowns but switched its focus. Suddenly, its 45 manufacturing facilities were producing 100 tonnes of hand sanitiser and Firmenich dialled up its activities in health and hygiene. “Even during a pandemic, people have to brush their teeth in the morning,” he continues. “They have to wash their hands more frequently, clean their houses, eat and drink. Firmenich is an essential business.” The company’s revenue grew by 2.8% in the year leading up to June 2020, driven in part by personal, body and home care.
Think of a painter's palette: the ingredients are the colors - the perfumer or aromatizer must choose from these colors to paint the painting.
The story of Firmenich begins in 1895 - in a shed in the garden of Charles Firmenich. It was here that Philippe Chuit (a chemist) and Martin Naef (a businessman) developed their first molecules while renting the garage. Firmenich’s son Frédéric joined the business five years in and the company officially became Firmenich & Co in 1934 after the family assumed majority control. Since then, the story has been one of continuous expansion across five generations - with the launch of a flavour division and affiliates popping up in New York, London and Sao Paulo. While the family still owns 100% of the company’s shares today, they only hold four of the nine seats on the board - with no family member on the executive committee.
Ghostine’s entry into Firmenich bucks the trend: he’s the first CEO outside the eponymous family. His predecessor Patrick Firmenich spent 12 years in the role. How does an outsider operate in a family firm? Is there conflict and tension? It’s a question the 61-year-old is often asked, and one he answers diplomatically. "I can tell you that at Firmenich, we combine the best of both worlds. The rigour and accountability of publicly listed companies, and the passion and the long-term vision of private companies.”
Born into a Catholic family in Beirut, Lebanon, Ghostine’s adolescent years seem a world away from the comforts of the Geneva headquarters where our conversation takes place. He grew up during the Lebanese Civil War that took place from 1975 to 1990. “I was 15 when the war started in Lebanon and suddenly our life went upside down,” he recalls. "Things were not easy because the basic things in life became extremely complex, accessing water, electricity. Even going to university, you had to dodge the bullets of snipers.” The toolkit he assembled from his childhood has been put to use throughout his international career: resilience, crisis management, and a sense of optimism. Prior to Firmenich, Ghostine spent 21 years with leading spirits company Diageo (behind brands such as Smirnoff and Guinness), where he oversaw the Asia Pacific region.
The Firmenich headquarters lie just outside of Geneva’s city centre in Satigny, one of the country’s biggest wine districts. A fitting place as the canton is often referred to as the Silicon Valley of tastes and scents (the industry generates 12% of Geneva’s exports). “Firmenich is a company that has almost 4,000 active patents,” says Ghostine. “We have 450 scientists and six major centres of research in the world - the biggest of them is in Geneva. ” Every year, the company invests 10% of its turnover into research and development. In 2018, Firmenich linked up with leading Swiss research university École Polytechnique Fédérale de Lausanne (EPFL) to open a digital lab. By 2020, they had created the world’s first flavour using artificial intelligence (AI): a lightly grilled beef taste for plant-based meat alternatives. Its largest competitor Givaudan also announced plans to acquire French AI startup Myrissi in February for an undisclosed amount. But what does the advent of AI in the industry mean for the hundreds of flavorists and perfumers who have spent years perfecting their craft? “Our AI algorithms can create up to 80% of the base of a perfume, but 20% always remains the unique signature of our perfumers,” explains Ghostine.
...holds a master's degree in business administration from St. Joseph University in Beirut and has held positions at the Diageo spirits group, among others, as president for Asia/Pacific. In 2014, he joined Firmenich as CEO.
Firmenich’s growth philosophy can be summarised in one word: organic. “We grew organically over the past 7 years by 5%,” says Ghostine. "Organic growth is our priority, but as a company, we will always look at acquisitions and inorganic growth to complement our current footprint.” Since 2016, Firmenich has made 13 acquisitions, the largest being DRT which specialises in plant chemistry and has an annual turnover of € 550 million. “We have the ambition now with our new strategic plan that is called Transform 25 to maintain mid-single-digit growth.”
How Firmenich plans to achieve this goal will require a closer look at lessons from the past year. The crisis has pushed everything to do with health, nutrition and well-being to the forefront of consumers’ minds. “The biggest opportunity is going to be around plant-based products,” says Ghostine who has been sampling plant-based burgers for the past five years. He is aware the biggest challenge ahead is staying abreast of consumer trends before it’s too late. “We see our sugar reduction business going through the roof, because everyone wants to replace sugar with natural molecules while maintaining the same taste.” Ghostine looks at ease in his role. “I was lucky enough to define my purpose very early when I was 19 during the Lebanese war. It was very clear to me that my purpose was making a positive contribution for people and society, and this is what I will keep doing.”
Text: Olivia Chang
Fotos: Alex Teuscher
The article was published in our March issue „Künstliche Intelligenz“.