On October 1, 2024, McCormick & Company held its third-quarter 2024 earnings call, led by Faten Freiha, Vice President of Investor Relations. The accompanying slides were made available on the company’s IR website. Present at the call were Brendan Foley, President and CEO; Mike Smith, Executive Vice President and CFO; and Marcos Gabriel, Senior Vice President, Global Finance and Capital Markets, and incoming CFO.
Prepared Remarks Overview
Faten Freiha opened the call by addressing the impact of Hurricane Helene and extended thoughts to those affected. She mentioned that McCormick is monitoring the situation closely. She also provided an overview of the agenda, including discussions on the financial performance of the third quarter, insights into the consumer trends, successes, and areas for improvement. Mike Smith discussed the third-quarter financial results, while Marcos Gabriel reviewed the 2024 outlook.
Brendan Foley reported that McCormick’s third-quarter performance aligned with its expectations despite a complex consumer landscape. The company’s strategic investments in high-value areas and advantaged categories contributed to volume growth and improved unit share trends. Foley highlighted the plans to reveal McCormick’s strategic roadmap at the upcoming Investor Day.
Financial Performance
Third-quarter sales were flat in constant currency terms, taking into account flat pricing and a 1% increase in volume and product mix, alongside the canning divestiture’s impact. Total positive volume growth was achieved despite challenging conditions, particularly in the consumer and flavor solutions segments.
Regional Performance:
- Americas: Achieved solid volume improvement and 1% growth, supported by innovation, consumer trend alignment, and distribution expansion.
- EMEA: Continued positive volume growth driven by new product innovation and expanded distribution.
- Asia-Pacific (excluding China): Saw strong volume-led sales growth. The rollout of new consumer-preferred packaging and distribution gains were significant contributors. However, performance in China was weaker than anticipated.
Profitability benefited from the timing of investments shifting to the fourth quarter. Third-quarter operating income results were aligned with company expectations, with earnings per share slightly ahead due to discrete tax benefits.
Consumer Trends
Consumer Behavior:
- Consumers remain resilient but are focused on value-seeking behaviors, more frequent but smaller grocery trips, waste reduction, and budget stretching.
- Foodservice traffic remains soft, benefitting a shift to home cooking across various demographics.
- Demand for spices, seasonings, condiments, and sauces continues robustly.
Value Perspective:
- Elevated demand for larger sizes alongside trial sizes and recipe mixes indicating ongoing flavor exploration.
- Generation Z shows a preference for high-quality and premium items, often recreating restaurant-quality meals at home.
Key Areas of Success
Global Consumer Segment saw solid unit consumption growth across spices and seasonings in major markets:
- Americas: Improved competitiveness against private labels.
- Grilling Portfolio: Exceeded category growth in unit sales, displays, velocity, and distribution.
- Recipe Mixes: Strong consumption trends, market share gains.
- Hot Sauce: Underlying strength but impacted by competitor dynamics and trial sizes.
- E-commerce: Double-digit growth outpacing the market.
Flavor Solutions Segment witnessed strong growth in the Americas and solid performance in technically insulated high-margin product categories, including branded foodservice and flavors.
Areas for Improvement
Challenges included:
- Hot Sauce: Competitor dynamics impacting share trends.
- QSR Traffic: Uncertainty in traffic patterns, particularly affecting EMEA volumes.
- China: Retail environment remains challenging.
Closing and Future Outlook
Brendan Foley underscored:
- Long-term consumer interest in cooking, healthy and flavorful meals, and trusted brands.
- Confidence in McCormick’s investment plans, aiming for sustainable volume-led growth.
- Expectation for holiday season success bolstered by strong promotional and marketing activities.
Mike Smith reflected on his tenure and thanked stakeholders for their contributions. He pointed out McCormick’s strategic direction and ongoing focus on enhancing value through continued investments and growth initiatives.
Marcos Gabriel provided an overview of the 2024 financial outlook, maintaining confidence in McCormick’s targeted investment strategy and long-term objectives.
The earnings call concluded with a Q&A session, where McCormick’s leadership addressed various inquiries from analysts, elaborating on financial performance details and strategic initiatives.
For further information or questions, McCormick’s Investor Relations team remains available for contact.
