638: The Path to Being Cost Smart | Jim Gray, CFO, Ingredion

Listen to the Episode Below (00:47:04)

It’s the type of business restructuring capable of striking envy in the hearts of many a company board member—and particularly those known to favor one oft-repeated bit of business wisdom: Never waste a recession.

At food ingredient maker Ingredion, where the recession’s bite is directly linked to the eating habits of consumers, a 2-year-old restructuring strategy dubbed “Cost Smart” has begun to deliver on its cost savings promises.

In fact, last month, the maker of sweeteners and starches announced plans to increase its Cost Smart run-rate savings target from $150M annually to $170M—a $20M uptick that led certain analysts to believe now might be the right time for the food giant to step on Cost Smart’s accelerator.

Not so fast, says Ingredion CFO Jim Gray, who reports that he already likes what he’s seeing in Ingredion’s rearview mirror.

“The opportunity around remote work environments and online collaboration has accelerated toward us,” observes Gray, who over the past 2 years has replaced the dated architecture of Ingredion’s finance function with a new shared services model and a mandate for greater online collaboration.

The restructuring involved the relocation of 107 finance and accounting employees to shared services location in Tulsa, Oklahoma, and Guadalajara, Mexico. The movement of this part of Ingredion’s workforce is expected to be followed by that of a number of other functional areas within the company.

“This was not about lowering head count—it is about holistically redesigning processes to have a lasting impact on cost,” says Gray, who last month—along with Ingredion CEO Jim Zallie—briefed investors and analysts on COVID-19’s impact on the business. After having experienced a significant drop in demand for different ingredients in April and May, advised Zallie, the company had seen “sequential improvements” in June and July as shelter-in-place restrictions had eased.

These improvements were more than likely first detected by a member of Gray’s finance team, which had been working to better expose how the pandemic is altering the buying patterns of Ingredion customers.

“With the pandemic, there has been a change in consumer behavior that’s impacting the pull of our customer products. Then you also have the effects of a recession, in which there is less personal income, so this changes how they shop in grocery stores and how often they dine out,” comments Gray, who credits the company’s widening use of technology for helping to track and monitor customer activities.

Read the complete article on Forbes.com

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Guest: Jim Gray

Company: Ingredion

Contact: www.ingredion.com

Headquarters: Westchester, Illinois

Does your sales team know where the company’s profit dollars are?

CFOTL: Is there a business dynamic that you are seeking to better measure, expose and alert others to in order to improve the company’s performance?

Gray: Our business is global and the cost of our underlying raw materials fluctuates and we’re also impacted by changing currencies versus the US dollar. So my finance team really works towards exposing that sales growth and the drivers of net sales growth more clearly. And we’ve recently updated our external reporting to highlight constant currency top-line growth alongside our reported. But I like to tie net sales and gross profit growth together. And in particular, in our business, when I’m looking at gross profit growth, and I think this exists in a lot of businesses, that you need to separate the average, and you have some products that are going to be maybe lower price per ton and lower margin. And you have other products that are much higher sales price per ton and a higher profit dollars.

And you have to be able to de-average and be able to say, “Wow, if I just sell a little bit more of this higher value product, I get so many more profit dollars.” And so, therefore, you have to be able to figure out and help the team see that, and be able to focus the growth on what we call our specialties business. And so we brought the financial benefits, the financial reward, of driving the growth in that specialty business into the really crisp focus. And the result being that we’ve achieved to kind of mid to high single digit net sales growth. For that part of the portfolio, it’s over $1.7 billion and it has a higher gross profit dollar per ton contribution to our overall P&L and continues to be well-differentiated and, therefore, well supported with the resources that we need to continue to drive that growth.