McCormick 2Q16 Earnings Call Notes

Lawrence Kurzius

Lower retail price points helping to drive sales

” retail sales grew 6% for the category and 7% for McCormick brand spices and seasonings. There are three key messages here. First, we gained category share on a unit basis. Second, the McCormick brand is helping drive the unit category increase. And third, this is evidence that certain retailers are implementing our recommendations to lower retail price points on the McCormick brand.”


” Mike brings to this role a deep knowledge of the company and experience as a finance leader in both corporate and operational roles, including those in North America and in our EMEA region and across both Consumer and Industrial segments. In each of these roles, he has been a – he has a proven track record of creating value and growth.”

We do better with millenials than boomers

“I think also, our brands are and our product – really our category is in line with the way consumers want to eat today. And as consumers cook at home more and are more ambitious about the things that they cook, our brand is a big beneficiary of that. I think that we have a bit of a natural tailwind from two sources. One is the new dietary guidelines news that came out this year. That has really encouraged consumers to make greater use of herbs and spices. That’s a positive for our category, but as the leader in the category, we are a very big beneficiary of that. And then the second thing is that we actually do better with Millennials than we do with boomers. And so as Millenials come to be a bigger part of the shopper universe, that is actually a natural tailwind for us, which is different than some of our food company peers.”

Increased use of spices as CPG companies try to create cleaner labels

” All of the CPG companies are trying to improve their portfolios with cleaner labels, healthier sounding ingredients, statements. No one wants to have a flavor in there that they have to call a flavor. And many of the – of our consumer products go to customers, we are trying to reduce sodium, reduce MSG, take out sugar. And so, that’s about 40% of our briefs globally.”

Gordon Stetz

Impact of Brexit will be on currency

“Regarding last week’s referendum outcome on Brexit, the immediate impact to our business will be currency rates. Early this week, we reevaluated our guidance and determined that a 3% impact from currency is our best estimate at this point in time. Any longer term impact on our business will depend in part on the outcome of tariff, trade and regulatory negotiations. As a point of reference, our sales in the UK were 8% of total company sales in fiscal 2015. As a final remark on our outlook, we are on track for another year of strong cash flow for fiscal year 2016 with higher adjusted net income and actions underway to improve our working capital.”