McCormick FY 1Q16 Earnings Call Notes

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Lawrence Kurzius

Made offer to buy premier foods

“I’d like to comment next on the recent news about our proposal to acquire Premier Foods. Premier Foods is just one idea in McCormick’s robust acquisition pipeline, one that would be a great addition to our business. This acquisition would be consistent with our growth strategy, adding iconic brands that complement our product portfolio, increasing our current sale and presence in the UK market and creating potential to driver growth through innovation, marketing and expanded international distribution.”

Even changing when we eat

“We’re even changing when we eat. Snacking occasions have suppressed breakfast and lunch and now rival dinner. Here is where our industrial segment steps in as a major supplier to packaged food companies, the largest being PepsiCo that are focused on building this part of their product portfolio.”

We like that premier foods is predominantly a flavor business

“as we look at the Premier business, there is – we were pretty limited on what we can say. But I can tell you that what’s attractive to us about this business is that it is predominantly a flavor business with some terrific iconic flavor brands that are much loved in the UK. ”

Going to be non-GMO

“Your second question was about GMO labeling and we announced that we were going to label our product for non-GMO. We are taking credit for what we have to a great extent. The vast majority of our products are herbs and spice products in particular, are not genetically modified in anyway and consumers are interested in transparency and that’s what led to that initiative and we are certainly well aware of the Vermont law. We don’t have any kind of particular public stance that we want to take on that other than that we are going to comply with the law. So where there are genetically modified materials in some of our products, we will need to find a way to remove them or label them as is appropriate in order to put us into compliance with that law.”

This acquisition isn’t significantly different in size to historical ones relative to our mkt cap

“While it is significantly large, if you go back in our history and you look at Ducros back in 2000, and you look at Lawry’s as recently as 2008, on a percentage of our market cap and the size of the company, it’s really not quite different from those sized transactions. So our intention, as we did in those two previous transactions, would be to lever up. Obviously, it will take our debt-to-EBITDA about where it is now, but it wouldn’t be at a level that would be unlike where we were with Lawry’s and Ducros at the time. ”

Gordon Stetz

Using targeted techniques to take price where appropriate

“In the retail side, all I would say is we lean on these tools and the techniques that we’ve developed. We will look at the elasticities and the thresholds. Back to Lawrence‘s earlier comments, I’ve been with this company a long time and I would say that the level of sophistication around the price increase just executed was the highest I’ve seen. So I have confidence in our team to go back, use their analytics to make whatever decision is necessary to deal with whatever cost issues may pop up.”