Business model

Novozymes’ enzymatic and microbial solutions enable our customers to cut costs and lower the environmental footprint of their products and processes by reducing or substituting raw materials, conserving resources or improving product quality and effectiveness. We work closely with our customers to gain a better understanding of their needs and how our solutions can help solve the challenges facing consumers.

We see our customers as our partners, and we recognize that our products impact their production processes. That is why we work with them to identify their needs and develop solutions that enable them to enhance their impact.

As part of our Partnering for Impact strategy, we form partnerships with other influential industry players, for example Monsanto as part of The BioAg Alliance, and DSM in Animal Health & Nutrition. These partnerships benefit from our strong innovation skills and manufacturing expertise as well as from our partners’ strong skills in areas such as screening, testing, data processing and commercialization. Partnerships enable Novozymes to explore and enter new business areas faster and more efficiently.

Novozymes’ revenue comes from sales of enzymes and microorganisms. Product prices include the cost of technical services. Around 13% of our sales is reinvested in R&D, benefiting both product innovation and production economy.

Novozymes’ most significant cost drivers are direct production costs and R&D. When it comes to shareholder returns, until 2017, we had a target dividend payout ratio of 40%. As that target has now been reached, it will be proposed at the Annual Shareholders’ Meeting in March 2018 to increase the longterm payout ratio to ~50%. We also conduct regular share buyback programs to provide returns for investors.

The starting point for all our innovation is understanding the changing needs and expectations of our customers and partners. With R&D facilities in many regions and commercial teams with strong insights into the different markets, we are able to identify enzymes and microorganisms to suit global and regional needs.

More than 23% of our employees work in R&D. Every year, our researchers screen thousands of microorganisms to find the one that produces the enzyme with the exact characteristics we need for a specific product. Most of our products take 2-5 years to progress from idea to market.

To ensure that innovation takes place as close to our customers as possible, our specialized application development units are positioned in the commercial side of our organization within the Household Care, Agriculture & Bioenergy and Food & Beverages divisions. This creates a strong connection between the commercial side and R&D, and means that more impactful products enter our pipeline.

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

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

Novozymes has an efficient supplier management system to ensure that our suppliers balance the importance of reliability, quality and efficiency with our passion for sustainability and innovation.

We work closely with our suppliers to innovate and implement responsible and sustainable solutions.

Novozymes’ technical service teams help customers adopt each innovation smoothly to ensure that the expected value is achieved. Teams work with customers on site to ensure that Novozymes’ biosolutions deliver in specific production environments. The extent of a technical service team’s involvement depends on the complexity of the production process at the customer’s plant.

Our technical service teams set us apart from the competition because they optimize the use of our products and make the necessary adjustments in line with individual customers’ needs. The knowledge gained from interactions with customers also feeds back to our product pipeline and helps future innovations.

Our unique relationships with our customers allow us to anticipate and understand their needs and, consequently, deliver high-quality solutions. At Novozymes, quality is about more than just product quality. We also strive for excellence in the processes and services we provide to our customers.

Continuous monitoring and improvement are integrated into our quality system and are a cornerstone of how we advance the products and services we offer to our customers.

Distribution of Novozymes’ products differs from one industry to another. In Bioenergy and Household Care, most products go directly from Novozymes to 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.