Business model

Our business is about turning science into sustainable biological solutions in a growing world. We use enzymes and microorganisms to unlock business opportunities. From enabling farmers to feed animals more efficiently to giving ethanol producers better control over difficult production processes, our innovations are paving the way for a better tomorrow.

 

Our business model and our strategy (link to About Us?) form the framework for how we use our resources to live up to our purpose, meet our long-term goals and develop meaningful partnerships.

 

A model for sustainability

The very nature of our products means that sustainability is in our DNA as well as being a key part of both our value proposition and business model.

We believe that it is important to optimize our use of resources and minimize our footprint, which is why we set targets for reducing resource consumption and CO2 emissions, both in our own operations and through our customers applying our solutions. From the moment we enter into agreements with our suppliers and partners through to the production process and beyond, sustainability is a key priority.

And our customers appreciate this. Combining our innovative products with a strong sustainability ethos creates the kind of differentiator that our customers value.

From the moment they were established in 2015, the UN Sustainable Development Goals (SDGs) have been integral to our business. These goals guide our purpose, our mid-term targets and our long-term commitments.

Customers

Because we work so closely with our customers and know that our products often have a tremendous impact on their production processes, we see them as partners.

By using Novozymes’ enzymatic and microbial solutions, our customers can save on costs and reduce the environmental footprint of their products and processes. Our solutions have the potential to lower the need for raw materials, conserve resources and improve product quality and effectiveness.

Excellent results are achieved by working closely with our customers to gain a deeper understanding of their needs and those of their consumers. That is how we develop solutions that enable customers to enhance their impact.

Partners

We are driven to seek out and build meaningful partnerships with other influential industry players, for example Bayer in Agriculture and DSM and Adisseo in Animal Health & Nutrition.

These partnerships enable Novozymes to explore and enter new business areas faster and more efficiently by combining our strong innovation know-how and manufacturing expertise with our partners’ strong skills in areas such as screening, testing, data processing and commercialization.

Innovation

With R&D facilities in multiple regions and commercial teams with strong insights into different markets, we are able to identify enzymes and microorganisms capable of meeting global and regional needs. Every year, our researchers screen thousands of microorganisms to track down the one that produces the enzyme with the exact characteristics we need for a specific product. Most of our products take between two and five years to progress from idea to market.

We have anchored our specialized application development units in the commercial side of our organization within the Household Care & Technical Industries, Agriculture & Bioenergy and Food & Beverages divisions. This creates a strong connection between the commercial side and R&D. The result is a solid pipeline of impactful products with the characteristics our customers are looking for.

A Portfolio Board manages the R&D pipelines and prioritizes funding across Novozymes’ divisions. This board ensures that the innovations we bring to market have strategic and financial impact, and that they help us to deliver on the SDGs.

Production

In order to produce large quantities of enzymes, we use fermentation techniques that enable our microorganisms to multiply. Fermentation is a core part of our production process. After recovering enzymes or microbes from the fermentation process, we prepare them for use by our customers, either in the form of liquids or granulates. We produce our enzymes and microbes at 16 plants on four continents, and continuously endeavor to optimize and innovate our production processes to ensure that we get the most out of our production capacity. Thanks to these efforts, our capacity utilization is very high.

Suppliers

By using an efficient supplier management system, we support and encourage our suppliers to apply the same rigorous standards to their processes as we do. We work closely with them to innovate and implement responsible and sustainable solutions.

Quality

At Novozymes, we pride ourselves on our high-quality solutions, services and processes. Our close relationships with our customers allow us to anticipate and understand their needs and, consequently, deliver the quality expected of us.

Continuous monitoring and improvement are an integral part of our quality system and a cornerstone of how we advance the products and services we offer our customers.

Technical services

Our technical service teams set us apart from the competition because they optimize product use and make the necessary adjustments tailored to the needs of individual customers. This ensures that our customers realize the value they expect.

Our service does not come to an end when our teams leave the customer’s plant. The knowledge our teams gain from working closely with customers feeds back into our product pipeline and goes into improving future innovations. In this way, our relationships with customers are key to measuring our progress and helping us to rethink tomorrow.

Commercial execution

Every interaction we have with our customers is an opportunity to learn more about their needs and engage in dialogue about our solutions. We leverage this in-depth understanding of our customers’ products and production processes when selling our enzymes and microorganisms, because we know exactly how our solutions can make a difference to the customer. Take Bioenergy as an example. Here we provide tailored solutions to ethanol plants where we supplement the technology we sell with technical know-how, bringing additional value to the customer.

With facilities such as our Innovation and Technology Center in Turkey, our Detergent Design Center in India and our Customer Experience center in China, we are able to showcase to customers exactly how our products work for their specific product or industry. The close proximity to customers in these regions is also a great advantage when presenting new products to existing and new markets.

Traditionally, we market most of our products in direct interaction with customers, but digital go-to-market strategies are becoming increasingly important, and we are constantly looking to optimize how we make customers aware of the benefits of our products and services. We are available and open for dialogue through social media, at trade events and via our owned digital channels such as Novozymes.com.

Distribution

Distribution of Novozymes’ products differs from one industry to the next. In Bioenergy and Household Care, most products are dispatched directly from Novozymes to our customers. Within Agriculture & Feed, distribution is carried out by our industry partners. Food & Beverages and Technical markets are more fragmented, with a mixed distribution setup.

Monetary streams

Novozymes’ revenue comes from sales of enzymes and microorganisms. Product prices include the cost of technical services. Around 13% of our sales revenue is reinvested in R&D, benefiting both product innovation and production economy. Novozymes’ largest costs are direct production costs and R&D. When it comes to shareholder returns, we have a target dividend payout ratio of around 50%. We also conduct regular share buyback programs to provide returns for investors.

 

 

 

Macrotrends that impact our business


Novozymes’ growth and long-term success are influenced by developments around the world that translate into global macrotrends. Some of these trends present potential opportunities while others present potential risks, all of which inform and shape our innovation and operational strategies.

Transition to sustainable agriculture

Description

A growing population, shifting consumer preferences and climate change-related supply chain disruptions are putting increased pressure on global food supplies. At the same time, agriculture is in competition for land with other uses (e.g. urbanization). For these reasons, the agricultural sector is seeing growing demand for new and innovative sustainable food production solutions.


Our response to the trend

Many of Novozymes’ solutions are making a significant contribution to the transition to sustainable agriculture, and this remains a key focus area for innovation.


Energy transition

Description

Rapid urbanization and a growing population are driving up demand for electricity, heat and transportation. The global movement toward a low-carbon economy and the fight against climate change are triggering a major shift in the global energy system. The cost of renewable energy is falling, and the world is increasingly exploring low-carbon alternatives to fossil fuels.


Our response to the trend

Novozymes’ response to the global energy transition is supported by our commitment to increase the share of renewables in our energy mix as well as by our Bioenergy solutions, which address the need for low-carbon alternatives in the transportation sector, which is still heavily dependent on fossil fuels.


Shifting demographics and urbanization

Description

The global economy is currently driven by three key demographic factors: rapid urbanization, a growing middle class in emerging economies and an aging population in most developed economies. Patterns of consumption are also becoming more varied and complex, particularly with the widening socioeconomic gap. Consumer-based markets are looking for sustainable solutions that can keep pace with these shifts.


Our response to the trend

Novozymes is partnering with our customers to develop tailor-made solutions to address these changing consumer needs effectively.


Grow people

Water scarcity

Description

Global demand for clean water is expected to outstrip supply by 2030, aggravated by climate change-related weather crises and severe pollution. Several regions of the world are experiencing severe water crises. Governments are responding with stricter regulation and surveillance of water management practices, which is driving demand for solutions that reduce water consumption, increase efficiencies and improve wastewater quality.


Our response to the trend

Novozymes is exploring the feasibility of using biotechnological solutions to address key challenges within water and wastewater treatment. We already have a number of wastewater solutions in our portfolio, with more expected from our innovation pipeline.


Grow people

Digitalization of the global economy

Description

Digitalization is transforming the world we live in – from the fabric of society to markets and businesses. This disruptive technology enables companies to adopt new ways of manufacturing, boosts production efficiencies and increases the agility and customization of their products and solutions.


Our response to the trend

Novozymes is focused on meeting customer needs better, faster and in a more impactful way through industry-leading digital capabilities.