MKC - Earnings call transcript Q1 2020 | McCormick & Company, Incorporated

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Kasey Jenkins

Good morning. This is Kasey Jenkins, Vice President of McCormick Investor Relations. Thank you for joining today’s First Quarter Earnings Call. To accompany this call, we posted a set of slides at ir.mccormick.com.

Currently, all participants are in listen-only mode.

will question-and-answer we remarks, our begin session. a Following remarks Kurzius, Smith, Chairman, Instructions] Vice We’ll and Lawrence with begin Mike [Operator President from CEO, and CFO. President Executive and

we morning’s to currency, as of exclude this as financial included remarks, release During rate certain income income, the the special well slides. are refer per and in information constant include impact adjusted adjusted non-GAAP earnings our GAAP and in results measures. will press adjusted These Reconciliations tax operating charges. to that share

our certain our In comments, Please percentages refer presentation are to rounded. information. for complete

events as contains undertakes statements, statements, from forward-looking reminder, revise will obligation be COVID-XX related addition, of In differ projected. new factors. these pandemic. because those other note, a or today’s forward-looking to impact no projections information, It and materially any could results shared which include presentation important whether expectations assumptions the statements to other company future The update or to as the and is publicly of

As could slide including COVID-XX on of information the results. impact statement risk that forward-looking seen also two, our factors financial on affect provides our

It Lawrence. my over is discussion to pleasure to turn now the

Lawrence Kurzius

by deepest us. Kasey. crisis. to impact behalf on everyone. people safe morning, you, for start, and sympathies who at this McCormick, evolving those COVID-XX Thanks everyone affected comment through thank first of Thank like our I’d all of to to the joining express continually Good and working On extraordinary to To global COVID-XX. like are keep I’d those

communities. committed markets all critical supporting McCormick our our to supply across maintaining is food and

that made goals, our the while us strategies so through today, and working keeping are focus on We of successful. the long-term have values challenges

priorities period and navigating while of We volatility this three have uncertainty. through

health our to and quality integrity employees and of of the product. safety ensure our and the First,

strength our our keep our maintain and and of business. to the supply brands brands customers and financial Second,

come emerges to priority third will from It event. is an Our strong this end. to ensure McCormick

strength. company by responding driving behavior on better changing consumer out capitalizing come will and to relative strategies our a We long-term our from opportunities

operate customers. We’re and to our business taking safely supply steps our

We significant without chain continue to operate our supply disruption.

have where possible. We working contingency employees most with implemented remotely planning

have in travel social and visitor place, rapidly actions. teams would risk situation And the restrictions, as evolving recommending We implemented you distancing mitigation protocols regional and continually we’ve expect. practices, global crisis monitoring and

We’ve also recently to recognize support critical running on-site locations keeping globally. announced and our incentives operations who to employees further in work

maintain while for We and are increase and we further extend leave the family part will our suspended. essential sick show communities. wages, doing of salaries our to betterment public operations employees, to hourly appreciation support It’s support that health if members our to

And five, seeing the a moving slide impact. we’re and on conditions potential few to the current points highlight to

in First, mentioned disruption as consumption our in at significant we China’s impacted quarter results. CAGNY, first the the

the China quarter of second in events half extraordinary. the during The were

pattern a While our total typically China. first the is with quarter lightest, quarter seasonal follow peak in McCormick generally first the sales the season

This developed made DaQiao Wuhan. lockdown half pantries with lockdown Hubei, consumers Additionally, their to for province a the founded business Hubei extended impact. the one to And an opportunity consumption. China due stock of away-from-home be over China in to made and being our significant highly most brand relates our no to regions is with in coupled

lockdown company well the China for the the we percentages results as differences as opportunities, pantry We of rest to the and business dynamics due in believe durations, cannot use each of impact different foodservice to extrapolate overall the region. stocking other to related

respectively. X% company segment reduction in a sales X% in reduced total disruption total China first resulted our and sales quarter solutions X%, consumer and The in flavor and

markets traditional component, segment share Consumer in consumer packaging the trade products a common channel, products reminder, format includes in China. because smaller the foodservice foodservice distribution a and same particularly in other branded those use as and As our in China, the

The a share seeing both in we during earnings XX%. of home both adjusted operating income consumer operating the China in through Currently, as impacted and increased per e-commerce and demand, caterers well surge reopen income cooking adjusted China, growth restaurants in consumer as in recovery lower by recovery and are the in company’s a total stores, builds. as early and the from stages most retail at gradually confidence foodservice and of start

recover expect gradually. impacted continued April. March recently as in is announced in the quarter, Hubei begins market results the be second to as through and The lifted to We significantly as China’s well in lockdown expected be to

total from China COVID-XX cannot we China year, of the our the growth the already COVID-XX I be the COVID-XX mentioned, expect we by X%. And believe in reduce impact to sales for extrapolated as rest impact will For overall net impact company. the sales lower currently to X%

as the to of us unfold, markets COVID-XX to action. afforded early China in of of the how Turning our presence current our well scenarios can major status take outside China, seeing as insight

been plans Our effect have since in continuity supply chain January. business

for impacted continuity assessed have implemented been activated. impact To-date, our continued have no continuity We there plans plans on provide customers of material sourced to most supply been and materials with has supply. and for those

partnering our changes with respond monitor are consumer customers We to to in and demand.

packaged e-commerce, as from increased solutions flavor including through as companies orders, our seeing consumption our data consumer both well We’re scanner through food in customer segment. those and

elevated term continue. home, real at short to we While home some and that for pantry closed, demand consumption. are expect cooking are by Schools level of staying incremental at impacted home contributes this is at people increase to stocking,

We our also sales we during recessionary know benefit eating consumers performance from from home. periods, at

was in XXXX organic respectively. segment currency X% constant Our consumer and XXXX growth total X% and sales

which in carry approximately from have hand, total demand seeing COVID-XX away-from-home sales, represents our our of customers the our limited foodservice company services reduced delivery-only. eliminated segment, and part restaurants as are we dine-in of now solutions to flavor XX% out our in other the measures On

stay a performance, away-from-home at We people limited. EMEA expect on more options have our and term negative home as significant this will remain in near impact our particularly region,

our to of or pace replacement time, To planning ERP maximize we’ve enterprise the moderate this program. resource decided flexibility during uncertain

given we remain challenges initiative current three global the excited on we and transformation COVID-XX to I by to more as this focus While the priorities believe the is posed previously our of about we re-phase that prudent that initiative, timing committed described. situation it

first results, drivers Now on to and our to and highlights from growth the like flavor focus relation quarter our in our consumer I’d solutions current segment environment. finally,

employees. otherwise the execution impact In of income investments. adjusted China, the Turning our share seven. transformation on and sales, our offset in business operating by delivered, of slide while adjusted also making and strategy solid from growth earnings quarter, operating successful just results lower first the I the driven mentioned, per COVID-XX This we engagement

business. growth and drove meet We our our flavor which sales broad the global portfolio, for the particularly and position Europe, advantaged flavor to have flavor and Americas continues Middle grow in region, solutions a and first strong our us world demand quarter. East we in Africa EMEA portfolio, Across to the or around

sales demand to be our growth. underlying continue may sales In - are consumer. both experience parts both portfolio our of our region, the segments and across of reach growth. business, Asia continue a disruptions that our first of China of with greater our to Pacific growth breadth disruption we Overall, underpin across consumer the our in affected And temporary in long-term will we the confident for confident while segments quarter foundation significantly impact we’re will that

the Starting our the cover sales for X%, rest X% quarter as from first of me quarter contributed offset pricing. partly year currency highlights business, the let a driven product unfavorable and of well volumes our by impact ago X% by first with growth topline declined mix, and the performance. a the from by including higher unfavorable impact period, China, as Now versus total X%

Adjusted down offsetting operating improvement sales unfavorable this a by comprehensive growth impact from was X%, of the led business minimal and with results. impact and included Partly income China program, CCI. our from continuous across was rest XX% savings the currency impact the

also During per from marketing includes line, headwind and and ERP brand lower of higher to unfavorable prior rate. adjusted X%. was to last decline China than $X.XX share earnings had the replacement $X.XX X% decline we a investments compared or the adjusted This the bottom XX% due year. in operating period a program first quarter impact quarter, At our higher of tax a

year-end COVID-XX to our committed and February, strategies in CAGNY on our notwithstanding objectives. at we confidence we in As growth impact, we January our the underlying our remain call and in said long-term foundation and have earnings strong, is

an Now, minutes declined unfavorable with let currency including few eight China X% on the on me spend a our updates. slide impact. Constant business our quarter, X% first in segment. Starting sales consumer

the Americas this constant currency in undershipped inventory XXXX. We to for We normal quarter. America the negative the sales versus resulted seasonal reductions The believe a trade due consumer levels of some estimate building to inventory substantially impact consumption X% in we quarter declined first growth X%.

for it’s hard impact This has sales our is comprehend Today, year, the expected first in which with world changed quarter, is consistent to trade in also with the performance. much. retailers line so our were the inventory historical net reducing there inventory that to

In maintaining achieved the year. we share last we US stabilization spices seasonings, and are

outpaced seasoning growth sales slightly e-commerce. straight branded continued dry our the for growth believe grew data Our particularly branded in strong spices with we category in scanner channels, for the unmeasured IRI indicates in McCormick We US and line and branded McCormick momentum, seasonings XXth delivering McCormick mixes, channels, the combined growth. recipe share and In the growth we spices quarter. category had

In quarter of we accelerating our product growth included consumption total, well our growing X%, performance quarter portfolio. grew lines. as many first share sequential consumption Our as condiment sixth our of in across

Manasive partially its had promotion continued Sauce and McCormick programs. driven French’s by marketing grew Stubb’s and share performance Bowl Super again, double-digits, and growth Barbecue RedHot momentum. and Mustard Frank’s consumption strong effective

are to category support initiatives, management momentum. expanded new contributing driving distribution category and Our our and products merchandising leadership our and effective marketing execution, all

our our long-term trajectory. to in We’re initiatives confident continue underway growth

seeing moment. In quarter [ph] March, first and single-digit and our at customers in worst the I’ll we’re surge discussing in about this related demand we’re from the say an results more a to consumers changes unprecedented

driven the Now had growth France, brand region. EMEA in turning We UK partially marketing and new by products and support. to

such Pan of leading New have to mix also as recipe not line, One mix contributed UK only position. the our us the dry gaining quarter, in but launch the products, to recipe share

Asia, the continued in we other e-commerce. region, the to constant by as of currency Pacific the region, our gain as significant I with impact driven declined, In brand parts well effective as promotions, momentum mentioned. through and previously sales marketing In China,

remain business consumer strong. our in fundamentals Our

nine Asia, slide to in partially by Flavor and in was the with regions, the constant X%, of excellent, sales performance currency decline by our segment, offset region. growth the EMEA Solutions Pacific driven Americas Turning our

currency and business food products new by we quick customer to base Americas, service both packaged X%. both growth perspective. and had our constant product Strong drove In sales portfolio, our broad-based driven companies through was We growth across of category restaurants growth and growth.

Hot Bay and Sauce, robust branded activity with momentum Our new with distribution. products growth, such operators promotional Old foodservice in by continued driven as expanded

addition to also driving continue top we line to our to In categories. migrate growth, value-added portfolio more

the into Our EMEA in X% built have we sales region was quarter. first in growth the currency outstanding, strong constant as this momentum continued in

We activities quick winning packaged our products, food and distribution. their expanded are new through with service restaurant both and customers companies promotional

region, Asia, service declined, constant impact In of our other sales to the sales Pacific restaurants parts the drove in growth. of the quick by currency China, region, driven significant

the Turning in environment. drivers to slide XX to talk about growth our current

at Just to ago six build to XXXX aligned you long-term shareholders. CAGNY, we our for our value shared designed growth with weeks our strategy plan

the operating were to be and environment ever to responding a and agile changing in and CAGNY now need and current behaviors. and more before changing the in are rapidly dynamics dynamic possibly consumer We at

and not have through to opportunity the been in this although and to capitalize plans on balance execute and and enable year time. even growth of overall some challenging the Our our to help strengthened times to effectively these us the changed, consumers customers adjusted our difficult have

focused recipe herbs, segments, convenience, and a integrity The across for First, and priority. is brands rice customer [ph] seasoning critical snack mixes, providing categories products, for and on the we our strong are dry demand and product and solutions, of mixes, continuity including stocks offering feeding our seasonings. in quality supply, condiments, items of flavor blends particularly broth frozen demand, our and both key currently brands keeping spices meeting

and our to drive includes markets and further segment, specifically our leadership our as accelerate as undisputed XXXX global platform, spice Turning and well emerging platform. seasonings, an our to condiment fuel on-trend, consumer growth our plan fast-growing channels, in at

consumer social especially which Simply today e-commerce consumers media with We’re strengthening plans digital, and are our looking today consumer, they portfolio the outreach, relevant more more with and for home more than at even connection our important and is put, were before. solutions. with even

consumer incredible packaged We from are home, consumers their and in seeing our an companies. other surge cooking as at pantries stocking demand

for sales all with For portfolio the March XXth, categories example, up scanner or XX%, ended digits. total double the week grew triple McCormick for US branded major

do an in continue sustained consumers consumption While extraordinary home. at cooking from this will growth not expect at we level, expect we increase

marketing a COVID-XX Now, marketing in in us a excellence the pivot taking look and as speed with our is our investments driver at of agility developments. quickly we our growth plans. Brand and increasing key planned. adjust organization deeper light to our and of gained enabled has XXXX The messaging we’re sales

For our home campaign family than brand the Gonna Be on in is to focus US relevant which ago, A the It’s going times testing launched Great, at is instance, strongest content new current tagline; we we’ve history. weeks changed environment. with McCormick our which few advertising campaign consumer more the

the in build is relevant campaign at home. all kitchen, focused consumer This to education as more is today on cook consumers confidence and and how TV on more which what make, prepare, to the digital

plans their early physical by digital have deeper our since create this Our even experiences bridging to underway year. consumers with and been connections

and We to develop our and flavor journey. opportunities as go best-in-class even consumers their our an on continue These with and for to are now brand their flavor beyond journey. partner increased connect us content opportunities have indispensable strengthening

in stream as Consumer and a asking. YouTube, increased of visits solutions spent. content has McCormick steady our have real-time double-digits and channels are we to on in And new social mccormick.com, consumers properties, engagement questions weeks, with that such time focused both the is high our recent

scented kids up US window or painted XXth. course, example, the is kid-friendly Here shown to to clings, are seeing cookies at sugar some weekend sales Of consumption vanilla examples. product. for occupy and scanner from related slime How recipes increased we’re of home? the in March with in XX%

health and wellness, as with recipes as to and spices and products increased recipes, and work our recipes promote well we’re and example, our have for soup continuing of help and benefits While the bone turmeric health content herbs. on broth,

up U up XXX% XX% same consumption was and Our growth and broth the S turmeric on our period. stocks during

to flavor, that and content XXX% want to have more solutions as add mixes. flavorful we consumption searches, meals with these create convenient more. items eggs pasta and to to and How create dry recent stockpiled? evidenced have U.S. to items recipe will add and Cantuna frequent been are growth flavor in Consumers continue by

respond our products. can finally, our now channel, tips, where consumers real-time recipes And McCormick with on use social newly tricks, ask added and we feature

to these there now are times. help through We with whatever need them consumers

and shopping have not only off. investments growth, shoppable prepared. well driven which The which points touch in is we the positioned is we’ve Consumer we’re us by are e-commerce all acceleration, but made changing for for what making behavior opportunities and we’re are paying experiencing activating

times, the to China, fivefold and platform the sales increasing digits, since our growth triple increased driving seeing has In we’re increased In beginning year. four traffic direct-to-consumer US, of well. as the up sales traffic

true sales is EMEA, direct-to-consumer and also as pure-play well. in This recent direct-to-consumer Our have weeks. with sales tripling in tripled

support. increased to with products consumers our discoverable making We’re more even

half flavor demands experimentation. convenience, exciting as exploration consumers and product new Our for transparency, and as health with well first launches, align

leadership We our spices and enthusiastic category to and initiative seasoning. about our the experience to continue US, the in reinvent and drive for underway in-store committed

introducing had the By merchandising elements, favorable and new strong reaction earlier this rollout we customer began have year.

be more a partner expected cooking rollout trend, stock longer we exciting retailers some becomes business relevant. increased delay at shelves continuity, With this As to we with will our initiative plan. maintain in home and have term even to and

Solution Now, to Flavor turning our segment.

Our the is volatility seeing segment. responding focus the on immediate we’re to across

customers and wide restaurants reminder, a manufacturers, across range a solutions, we channels, distributors. and flavor As operate in consumer of

primarily currently categories, as from strong food these are consumption we sold portfolio the are Over experiencing in as they consumer and in companies. packaged same increase to is XX% ingredient solutions of customers product segment. are are our Demand flavors our flavor

a In negative products of experiencing these for contrast, related closed. customers. short and many reduction and restaurants from expecting our significant pain eating with are demand restaurant sharp the term and shopping traveling, are our dining we distributor and the locations on away-from-home out, customers Consequently, impact people to

duration in conditions return almost the this we’re of this similar China, crisis expect is changing across uncertain to once given recovery current we the stages beginning While passes, seeing of of the world demand reduced the COVID-XX demand to period daily.

with through solutions as as work managed under is priority of to our current months. Our surges, well those seeing customers, demand the all flavor pressure, those coming

service We a and we as have that partnerships navigate needed as our which to possible. robust companies, differentiated strong top food the customers, as collaboration XX restaurant confidence best enables top and the built food have beverage XX well the this situation with through includes chains as

few our comments it and as eating, desire the like environmentally and summary At of healthy buy quality turning of and I’d and for the demand over the provide socially companies. slide Mike. Now global growth and before as to source XX great transparency seen is brands consumer around on growing a the to ingredients well sales as responsible taste foundation to from

be to health the are all we advantaged convenience, continues for as consumers through channels markets across and an global all with practices. business flavor demand exploration inspire aligned and minded category Flavor sustainably taste,

alignment Our products demand, these trends, well breadth through execution our our consumer drive strategies effective and positions both our of to and sales and and our long-term meet products increased growth. reach, customers through with us

will when drinking, No it or following are by remain current people believe McCormick. crisis. intact where We flavored matter likely long-term is what, eating the or behaviors these

lowering balanced to growth continuing our and costs focus expand We’re to growth. realize earnings sales sustainably on margins with drive long-term long-term

be growth. an relevant dynamic on ensuring solid a we sustainable continues focused have and are to long-term foundation environment agile, fast-paced We and and that remain we

opportunities. to changes Our shareholders executing designed are accordingly and value our which and for experienced reacting on build to employees on capitalizing strategies, are while leaders long-term

our will future we’re Excluding we results, are strategies quarter confident solid the drive effective COVID-XX first growth. delivered and proving impact, again, China they

be year balance an confident strong. uncertain by of the will impacted our the and know we performance remains underlying foundation environment, we’re While

success I world their around for new efforts, environment want and for driving to and McCormick thank employees engagement for during momentum and volatile them the time. recognize this this our to adapting

As communities. industry, who many employees designated and McCormick food supply are and day to their support I rallying are to the products protect food our critical food to have hard want been thank particularly and every working to

to Thank is my it you over turn now And it for your to pleasure Mike. attention.

Michael Smith

discuss Thanks, and providing Lawrence. some for now expectations the by first year. quarter our And of additional everyone. I’ll comments begin then of on good our morning, some the balance performance

Starting sales impact in first which the currency, constant China, by the slide quarter declined negative driven XX, a the effect on constant company. primarily had X% on total during COVID-XX in currency X%

the as Excluding primarily well favorable base currency, segment impact sales The new Asia, the of Pacific and and driven China, pricing product growth. region. business X% volume from drove in sales by as products, constant mix consumer declined

On the Americas segment XXXX. in in constant the X% XX, versus first of consumer slide declined sales quarter currency

trade by taking As earlier, reductions, were decline driven Lawrence first offset a the during late with from described inventory pricing was the which actions partial quarter.

driven consumer trade In XX% in in X% were strong by rest to Asia constant related sales region. year primarily EMEA, declined timing constant currency disruption. of the the across pricing, from Pacific the China by was activities. Consumer promotional of ago, sales the up a Growth currency, driven

snack due and in X%, slide driven Americas sales increased products base business sales quarter the regions. Flavor strength grew Turning constant currency of segment the constant and seasonings branded volume we growth Solutions by to new service. In growth, food X% Americas, with our first particular EMEA XX, on and to solutions flavor strong currency

Additionally, pricing to also the across portfolio. contributed growth

companies, X% Pacific by growth X% in by packaged In service driven decline currency. well driven of flavor in both to region sales as In increased region, flavor sales parts the the constant China. growth. solutions base products EMEA, Sales the solutions declined quick as currency, the Other volume new food on constant and restaurants Asia, pricing. we and business, grew in drove

from period declined are the first minimal segments in seen to with impact charges, the both income, operating adjusted slide currency. XX, Across on quarter year excludes which special versus ago X%

which increase, income currency. income segment, Flavor $XXX million, with the Adjusted million, currency In segment constant $XX in in operating rose operating from XX% decline. declined to an minimal adjusted XX% to Solutions consumer was impact XX% a to the

negatively XX% our Both well segment, cost compensation. was the to skewed total as the as more segments partial investments which incremental with lower were related to the impacted China ERP to disruption, CCI-led and consumer offsets incentive-based replacement by a impact program, savings from company and was

an consumer by income Additionally, favorably operating impacted in product and marketing solutions segment’s brand the flavor was impacted mix. unfavorably was expenses adjusted by increase

versus savings. basis profit expanded cost driven Gross period, margin points quarter by XX the first in the CCI-led year-ago

We points, XX have compression just the I basis factors mentioned. margin adjusted driven operating of by

to on XX. taxes income Turning slide

related income year. a adjusted by quarter entity rate was was to more first in XX.X% primarily as adjusted tax rate impact structure, effective Fourth impacted year-ago which favorably items, compared period. refinements Our tax to discrete XX.X%, the had significant quarter’s to our last

in Income quarter operations first At first XX, bottom year-ago slide XXXX $X.XX million for was the line, both period. compared years. $XX from share to unconsolidated of shown quarter per was as as the the on $X.XX, adjusted earnings

income tax from The income was higher and by adjusted and offsets interest expense. adjusted excluding decline operating a disruption the year, with last partial China, China from driven higher rate lower impact growth, primarily

balance On slide the we flow for cash summarize end quarter sheet. highlights XX, and

first decrease employee to cash was quarter capital, driven associated provided with Our and the million million This first payments. of the XXXX compared working as $XX benefit of from in as by well XXXX. was in $XXX incentive quarter flow operations timing

year We We three and finishing fiscal dividends shareholders returned $XX quarter cash cycle, continue days, versus in through expenditures first see to end. for cash capital this days the our million of $XX our period. conversion improvements down at million XX used to

to access lines have adequate operating, meet liquidity that and commercial our our bank operating believe investing needs paper. well financial as to flows, We through cash as and we our

unutilized been markets period paper recent currently $X revolver. and billion under during commercial access of as have to capacity the needed volatility able corporate our We have market

we have XXXX, maturities and our expect debt We capital no until no material material allocation. change to

rates. position underlying if interest determine an given to to further the there market the bolster evaluate to our continue is We low opportunity

our the Let’s of outlook balance XX. a seen for on our about slide of and to as the year, move some now expectations discussion

does reminder, discussed from any As a impact in COVID-XX. include issued CAGNY guidance January the we at and not

to We to which fluid And of the are situation related well the the both assess duration and uncertainty the COVID-XX environment. affected financial of evolving, on high economy. global and ability the as impact is consumer extent the operating demand all business is in speed on at our a of as degree our channels impact the very by in

are typically to, issued outlook those We also our fiscal remaining, early our call. three are highlight therefore our on financial would in with that year, additional like ones. January expectations. still We largest quarters including earnings perspective previously are I however, withdrawing XXXX some our provide discussed current to

our First, quarter mentioned, to significant from there in was impact disruption COVID-XX as a quarter. China second and we continuing China project the already we results, into have first

our the to lower the impact for extrapolated cannot the We from We to sales believe be Lawrence growth of impact impact X% in China sales will total due global earlier. the overall by expect reduce company the mentioned the for COVID-XX rest the net China reasons to X% the year. already

Differences related pantry percentages opportunities, and durations to and of in other each different lockdown business the as foodservice as well stocking region. dynamics

initial the expect stocking impacted will with segment We by continue an consumer preference home. increased at for pantry positively in followed shift consumer our consumption and by cooking

food packaged increased demand segment. consumer segment, similar In our we from expect Solutions to our our Flavor customers

sales, company in in of our and represents other customers. flavor our portfolio, foodservice demand solutions total we part sharp However, declines our expect away-from-home restaurants of approximately from the which XX%

are closely we movements exchange impact following anticipating in the economic are current full on the Given rates a our results. environment, year financial negative foreign and

mentioned, finally, the we of moderating are And our Lawrence replacement as pace program. ERP

our this be are XXXX operating in projecting of to to result XXXX. comparable we decision, a expenses As program

monitor during our of guidance closely we end quarter should the We continue know June, to expect and the to at more. resume second call earnings situation when

a We multiple growth. for have business and of through have years cycles consistent history XXX managed

are generation, access well liquidity our positioned, stable mitigation plans. appropriate asset implemented to financial We strength, and rapidly have given cash

trajectory. long-term continue We and on the term growth manage are volatility confident period we our through of short will

I’d now move additional remarks, it like some Lawrence before to to questions. back turn to for your we

Lawrence Kurzius

Thank you, Mike.

on solid and takeaways shared year has outlook COVID-XX delivered China results, will first seen detail, broader quarter environment. impacted and impact recap that as the the We of in the the key Now Mike to challenging results be our like recognize more XX. I’d financial on by balance a slide excluding

We’re our in effectively foundation. our underlying executing confident are strategies and

and our values to through today, goals, keeping working on and while the focus the We of that challenges are agility made responding strategies have us with COVID-XX long-term successful. developments so

a and have positive period growth to long-term history continue in on consistent volatility We place very fundamentals growth this trajectory. of of term short our through and manage

objectives long-term Our financial our has to commitment changed. not

for will positioned sustainably are and We deliver growth to continue differentiated results.

turn let’s Now, to your questions.

Operator

Thank We’ll you. Instructions] now session. be conducting Thank a [Operator question-and-answer you.

Our Goldman first question comes from JPMorgan. the line Ken of with

Ken Goldman

and sound Hi. hope And, everyone your safe everyone. families I times. Good morning, are obviously, and in crazy

Lawrence Kurzius

Right. Thank you, Ken.

You too, Ken.

Ken Goldman

performance rough that even basis? in us on of challenges world a on clarity quarter-to-date your segments, areas of I if both a maybe wanted are two, some from you obviously, to do you the And of little just quickly products can your some the give more ask, now. experiencing right one, secure just

bit of walk you’re to bit, chain a you. your far, secure that your sort be through Can you a what supply little just told Maybe secure little would beyond so us doing maybe, helpful. what Thank inputs? us you’ve

Lawrence Kurzius

Ken. Sure, in the the the first through early company, Great. seeing new Well, experiencing all EMEA in we’re the of China in as recovery US. of a the all of that epicenters phases all, crisis and we’re coronavirus phases from

outlook China, we said given the remarks. recovery quantify we a the of well and we - early some We that. can prepared on pretty in and in that stages we’ve are got seeing path We’ve see as forward there,

it especially - Americas EMEA, on as the our strong seeing products, of very others, consumer-oriented of - retail e-commerce. and we’re the in In especially channels retail our sales across and the cuts all strong product, in Americas, the

even fresh data say. week’s ago moment for. we that than stronger had that company a got actually data as most I’d morning, it’s recent XX% up were just We this scanner scanner week a about for mentioned I just information, we got XX%, total We in It’s nearly last the ourselves. and that. the a through

So company consumer little through company, total in over sorry, for - U.S. total total it’s the the XX% US, a there.

So behavior. you probably frame. And on really that same the think all driven by roughly consumer I that consistent got That pantry with be strong performance time would data side, that stocking covers that. the Nielsen

should unmeasured the And measured that the same stronger channels, again. - expect - to are and be to that you typically, channels be I than our would can expect

solutions is XX% business flavor XX% demand. strong portion the an over over our equally surge the seeing that of little of a In that’s portion business, services CPG - manufacturers other our that’s in the

are those we’re same chain, we’re the of having As their supply offtake and customers retail that. experiencing so part

of portion of in give remarks on in our tried additional the than the we’ve color the goes to these service food past. business other foodservice some size we’ve business given way. The And the

think is. I exposure quantified really So we’ve don’t total how away-from-home our big previously consumption

and and and over little distribution the rolled Between a of common it’s it’s that solutions branded XX%. foodservice way. channels, goes common up the service quick runs share packs, restaurant they in that China India, Most through that in industry, flavor segment because through consumer

month, strong. a We But slowed sharp a into significantly. and - in But service food that came in gone seeing the the food slowdown. month service, seeing through as the we’ve we’re QSR, has we’re

and the countries US the pickup have through drive restaurants. most case in in whole saying a EMEA, portion the has The customers between remained most not as closed Europe a the of of to major has Specifically as in in the the That’s and difference halt, their near come Europe. QSR our open. US the - completely

part business of that going And strong impact. to the a have is so

and you about asked supply chain. Oh,

second part So of let me the take that.

China had started has and need that the to we contingency We allowed to to an pretty organization very really us that global planning. sourcing do early on. experience see been advantage going for were us. early we in Our - that We

We local the people have on working we from, in the actual sort ground has restrictions. authorities helpful local really with that closures been in and which countries and

the from working XX,XXX materials XX logistics, in transportation in source we And particular, over over raw and out world. countries,

- a for really been has I’d area this, say have advantage this and we’re We for real prepared that, us. of well

chilli our some had at or a for a due material really product. talk the particular I mean, to level. currently granular is items. we’re anthel about mean, shape think And constrained packaging on spec I minor a I standpoint. its We’ve supply [ph] Hispanic of here about We’re could production not with cost that raw needed business you shortage. of chain good tracking it that we’re US, worth from that in in $X,XXX I any

Ken Goldman

Very comprehensive. much. very Thank you

Operator

line Our of proceed Lazar with Andrew Please the with your next is question question. from Barclays.

Andrew Lazar

Good morning, everybody.

Lawrence Kurzius

Andrew. morning, Good

Andrew Lazar

there. Hi,

food the quarter. to ones it the the two still take too buckets, that of packaged thus and those a dynamic of three listening, to big In if part it’s that solutions to then flavor will fluid pure simply and portions of your far, of side? service consumer Just manufacturers sort if I quick goes the bit comments me, Is could. through the piece, various Laurence, for food you around business sort the

probably that’s for I full the a out. thus guess through quarter maybe those might thinking is realize balance it exercise. the even suggest year, tougher I to far too early much how things

thinking Or some directionally, is Even clarity? there in the But that outweigh ends do some the through got level just numbers second I not quarter, way we have negative? of a the the sort of the of sort spectrum. say to really follow-up. just of a And the of both on of that of magnitude just positives then, still given two even

Lawrence Kurzius

given year, so quarter are in to tended how uncertainty there’s - is course, we the for have I companies their that of fourth on guidance. much Yeah, unfold. already. some to know others going Those this be have

whole So We’ve is us. quarter. a of of for you first our the they This giving ahead end got just weeks. the next are guidance year basically six

and We’re couple dramatic the less changes even comfortable just not I over that now. give of been we’re the and right have think that so doing even quarterly last month shifts guidance, so be weeks don’t And comfortable QX. one we’d we into - normally

for and in uncertainty give meaningful world business. that the really too There right are still open now that are areas the of reopen. the know don’t much to industry there’s areas We us of on that think that. we extent impact the closed guidance And for on the There could that particular. duration restaurant you are are credible

areas, that a say going industry this though consumer the in second drag will Again, be it’s some even expect will in minority that business to - is side of hard particular think the in of that be quarter. heavy the impact I the would restaurants closure to quarter. the I complete overcoming pretty it’s restaurant see our I

Andrew Lazar

understood. year. Yeah, Thank last then just said of on as you I for just about year, same amount incremental spend quickly you that. And the ERP this think the spend,

if there year. I I’m year million think ERP spend to and it million be going mistaken, incremental I this was not $XX was $XX initially, - of an think So last

saying this very million? year incremental instead there’s So now an basically, of $XX Thank you $XX we’re million much.

Michael Smith

It’s Mike. Andrew. Hey,

we’re year You’re XXXX. spend around correct. XXXX, last this in million around We $XX $XX and in going year spent to million

incremental. not It’s as between at it’s the the fiscal same years. comparable So

Lawrence Kurzius

I it. just on elaborate to want

view we program. are we company, as committed We a program, And are ERP success. of pausing the our but long-term take our to long-term a

So now. right we’re employees our investing behind

to and We’re the it’s continuing continue our to invest in intent marketing brand program. ERP

on have continue work and the go-lives planning that to out the going back. and were So that are slide we through to year that XX would team or we will - it do be we a expect so months to

reality. two just there postpone to the now, right And are One is, decision it. a for executional drivers

one pilots for matter has do Our that in as in system also and Italy, example, to impossible the the pilot was there, pilot go-lives. it restrictions, takes become pilots other an executional training no And actually area for to just bring - is pilots no our do it it where possible to up. travel and because that the an wasn’t work of of and with

standpoint, us push an sheer required program And to so the from out. practicality executional

brands maintaining that the right keeping the And changing program needs going spent supply and in were customers have our to resources and brands then secondly, into we supply as rapidly business requirements. prioritized urgent the better we’re our the continuity and on adapting now

Andrew Lazar

well, Thank Stay you. everybody.

Lawrence Kurzius

Andrew. Thanks,

Operator

Alwy The the your next with of with Please proceed is Bank. from Faiza question. Deutsche line question

Faiza Alwy

morning. Good hi. Yes,

segment. little consumer So in bit initiatives your the a talk commercial about I wanted to

You had talked at about how CAGNY. there have been some changes. I know we were resets talking about shelf

So happening of more especially just just US? those in how get are color wanted changing, what’s COVID, because to the around given

Lawrence Kurzius

You bet.

the the we’ve had have of brand deliver advantage we and change messaging the our vehicles and of marketing the that to, - Faiza, to all, we’re in-house the content This able planned to change that changed first marketing we’ve organization, of shifted. excellence continued some rapidly. we’re So using content is new of but part having well, very - produce

our And made a has that relevant. good in remarks. so bit examples a think had And the we some I more gave I prepared impact. message

consumers where much somewhat area consumers. real-time a write and an in questions. answers to their it’s but up get resourced can We’ve appreciated people-intensive very by thing, That’s been

launched. The largely being new products that were we talked about CAGNY already at

more on And of lot so items already. core on keep have scrambled focused shelf a and on retailers lot a while of their stock. had they those placement to as items acceptance items have those We

second And our on our we new about teams didn’t R&D talk continued items have to CAGNY, although work it. half at

second Our teams year have should of those. reasonable commercial well. on expect pipeline half a see in to of teams - the commercialization the would to work new - continued And you as I expect products

that reset talked we already shelf The was also underway. about

an of example, retail store. installation. for but It it an kind that I actual was not picture, a CAGNY the in lab, store so was used at was And actual some

number We them of have up. a

immediate return and and in to we things have in year, Right would people the to that shelter-in-place get and now at the all retail the expect hopefully installations half demand the those But extra normal rules remain. of trying these second because on as of lifted minimize stop, store. to everybody so

how quantify We stores. have. didn’t said would We we many

than I have that still we would at at CAGNY. thousands expect to have though. thought we fewer but have I said CAGNY of would think them We thousands,

Faiza Alwy

Great. Thank you.

Operator

your question with is Howard question. next line proceed from Bernstein. Alexia the The Please of with

Alexia Howard

Good morning, everyone.

Lawrence Kurzius

Hi, Alexia. Good morning.

Alexia Howard

changes channel show Do seeing? you? from at cooking people have behavioral how You Hi. data home more. more you’re about Can cooking have any meals you what talked people to out that I versus eating are scratch many ask about or the

by it a is quick follow-up. how And change driven - obviously versus some you days there. for the trying channel how that on e-commerce on have sign-ups, side, new data of many And then that for any similarly on the lift Do profitable have of very people behavioral how much growth And first consumers? existing is those you? I time then these impressive

Lawrence Kurzius

real-time sure the we are And doing the panel but not behavioral we’re I we’re I - tracking. rather than consumer data, do have own that questions - thinking seeing to I’m exact the get Okay. actually that that you’re changes that know we significant. consumer answers of actually asking, our

same comfort trends trends so more bit is own There magnified - cooking online, interest shopping are foods, home we we just the actually do are an little shows or more of unfolding. at have data some And or adventurous that - that previously so that definitely behaviors add. have around a our of kind around Mike, how some the accelerated, want you talked cooking. to about in

Michael Smith

- Yeah, a employees. we’re even with research, lot and doing I think of our our

there. the employees had more are One are snacks the home questions right we of at snacking comments because they’re back lot - and working of from a home one the

lift They’re sales use in lot their exotic seen a very too. what’s and being them, of we’ve of jazz food huge trying and up a it pantry, pushing flavoring. people cooking So to spices both activities in adventures and everything strong is bit, a

Alexia Howard

follow-up. a quick then And as

service to quite down, consumer flexibility be in Or the the channel production food of on business? maybe of a the make sales the side are the challenging have is On retail period it to manufacturing, is sustained going restaurant be more your re-tooled up? to the where

to is sustaining fairly Are pantry Is that, level switch? growth of, sort a having you maybe loading level easy that pass I’ll manage? Thank challenge you. not on. finishes, kind that worried you kind the of but of or of that not growth, of it for this - or this after

Lawrence Kurzius

question. it’s Alexia, facilities make products both for business. great Yeah, of our a of Most segments our

facilities. can we within resources move so those And

as repurposed are foodservice of well. the store channel Some to right being items now the club

And the able to people that. we’re to move to were manufacturing so even able on the our in right do beyond focus area. And we facilities,

have we that. on a lot So flexibility of

that. service But demand We repurpose exceptions. manufacturing the and there, we’ve is are a There the heavily speaking, in around generally do slow QSR of got one to have it’s And difficult to for dedicated couple XXX industry. is facilities very Europe very, and that world. sauces facility food

able to current the We are to operate, meet demand. all have shift production XX plants. volume They around able to we’re and

Alexia Howard

Thank to Great Great. everyone. and with you. stay you much, safe very work

Lawrence Kurzius

you, Thank Alexia.

Operator

the Steve is proceed line Strycula with UBS. from question question. Please your The of next with

Steve Strycula

good has taken and here, its McCormick so and stakeholders hear employees much times, long not care taking Hi, great view the morning. appreciated. it’s volatile that to of these And surprising during

two question. question - So part

where you’re First are right pantry they to point one are cooking behaviorally going keen one, more, be more. at consumers maybe consumer well phase would out ultimately, be we’re people Lawrence, through question. home behavioral that a now should but loading,

the to investors would on us So through you by to we curve? oversimplified walk as pantry piece through and better de-load a or level? that moderates just can If growth asking, just could maybe it period the you migrate next consumer are over followed be do through how go subsequent load a then that’s baseline spike big understand help model few what expect you us months? the Some we

Lawrence Kurzius

- This stocking voluntarily are consumption school. are the isn’t by are kids trying in lean The to latter either happening. order. People pantry we incremental one-time real obviously, stay close towards behavior, that home, government is or from surge there Actually, that’s few. to sustainable. But a is staying

new cooking And people, learning behaviors. are are used the cooking at a as result to and of getting idea home

all prepare. absolutely We’re think demand questions that net is - benefit our a cooking, going And more recipes a in getting been what to for prepare on at for of response time home past videos and to about to sustained through has cooking period The is we our shift how and to us. which and there the a be how we’re the is real-time kind digital properties to our for tips of to roof.

cutting the do well bit home. reward a period the foods Historically, consume the we’ve recessionary performed thing plays situation I after at followed during of tend out, well. little want more - it’s period. other And they they’re COVID-XX recessionary tend going to that the other to in don’t with at kind by to miss Consumers themselves is a back as we’re they however, that likely The home. areas, to cook be

positive our business. historical our been track time the ‘XX strong And company. we’ve XXXX, period, at the us XXXX and growth record, in for consumer a That’s as overall just looking back a had

Steve Strycula

that. very… appreciate myself with is And Old Sauce, Bay which of rewarding I’m some as Marylander, I Hot

Lawrence Kurzius

it’s Great, awesome.

Steve Strycula

and a Mike, spend, postpone I’ll Lazar’s along. appreciate for with ERP rates question question might follow-up priority To given upgrade. pass right quick SAP then now I to that as the it and the servicing customers One Andrew on the the implementation

fiscal into we incrementality, fiscal therefore XXXX. shifting into shifts million of and of should $XX ‘XX that But about fiscal kind think what XXXX earmarked of was for kind

series over year. goes the basically, by whole So Wave a

be I would any be know it’s difficult would Thank level to now, comment high appreciated. commentary but you. on right

Michael Smith

XXXX Steve, giving No, second project, We re-plan not and we’re of shift. this too be some guidance, to early. ‘XX. XXXX like it’s there quarter things work to We or just - type busy like just that. I mean, seasons we’re guidance our need will around going not give manufacturing really or

I I really give any you there. can’t So but yeah, guidance hesitate,

Lawrence Kurzius

there’s this year, has contributes it expense to and some And also. done been which work

different. will So the shape of be it likely

Steve Strycula

Thank Understood. you.

Lawrence Kurzius

Thanks.

Operator

Robert line the from Moskow Credit is questions. question proceed your Suisse. Please Next with with of

Robert Moskow

the any that, negatives offset can that of us runs, production there positives think I walk trying producing are that if in the of way costs. me long cost know, Hi, labor. manufacturing the SKUs you through higher people would of nets these to though, and that? that cost the A execute increases are really all and pros - for and here through popular the ask of what’s to thanks would you you’d Is the question. and capacity, labor of for benefit or mean, lot I negatives higher net argue

then And need price still to does in promotional retail mean, points secondly, price McCormick have promotional discounts. this I environment? at

Michael Smith

XXX% out. not and on don’t want those and - that that balance fast - uncertainty not they’re of give time. answer can how goes guidance we’re I at Part know we sure to to and puts this the not is changing Yeah. enough to we’re that there hard makes takes so that that And are us give

facilities. lot time, By a There at to to just definitely. that of that’s way core who - announced taken. to extra well are that We expediting we related manufacturing are costs our the wages is point Your come a paying over a efficient items very people over time to longer also run more premium work. run,

we’re temperature talked haven’t I about at to entrances cost. a doing, the which scans but all We has it, facilities, think,

And so sort balance we’re now, through. - about uncertainty right some I’d going to out that will those how we say are that there’s

into that handle day-by-day. it, two weeks changing on more have things a these If we are it, we were but literally maybe are better

at transportation, are But shipping like rates up too. things the fuel down, you are pump. So, see some that gas rates

at So we’re this just point. early too

Robert Moskow

Okay.

Easter? Easter, to follow-up, typically for go you Or lot shifting a happen? that merchandising away retailers have market of still Easter. Is from going a that Ask into seasonals are

Lawrence Kurzius

and kind of promotions, so this about to that. asked goes You

are running fewer we So promotions.

frankly, might that’s a I that we comments really in in collaboration prepared hard - have who, think with our customers and are against had prepared my having those. our executing time

now. impact going Easter, lost to probably is impact shuffle surge think That’s be whatever going some because but Easter, in there on on that tremendous to right the of add I it’s the

a We right seeing right big are for items baking strongly now. the doing item in vanilla seasonal

expect staying after the good. at factor important displays season grilling people McCormick. the Easter more, down grilling items to there. for getting Easter the actually because our is I’d less get season starts be out is the got honestly, about We home bigger often grilling And and get with you’ve up. to holiday Easter displays for us say And that’s Easter, talk we grilling a the to really

Robert Moskow

right. Great. you. All Thank

Lawrence Kurzius

Thanks.

Operator

with proceed Our the Dickerson of is Please Jeffries. question. from line with question Rob next your

Rob Dickerson

you so Hope Thank well. everyone’s much. Great.

was I March you So kind vanilla said ending look, know XXth, that week of up.

at a XX% a first just I said is of or is this about your more, consumption questions in lot Obviously, just potential, was really eat right? home there destock pantry How there load, There’s think around question vanilla. - do is shift cooking plus. you think people a you general?

think margin, get leverage respect some decent you hopefully the I no lift. there’s margin. solutions to just of op secondly, kind actually would volume And going know forward, QX, on then guidance, then And the segment I but with had flavor

just shift kind not flavor the foodservice side, offset? maybe we’re given that, the on and there of maybe flavor an same benefits consumer some yeah, But but is could think Or sure like be in structural the kind solutions Thanks. that, on can there some framework kind how goes solutions? for that of side, of we about

Lawrence Kurzius

Yeah.

stock, to to be On I it’s that’s incremental have think something de-loaded. that the and to going pantry not there’s be consumption going real

– consumption look about home, used spices talking to - recipe to We’re spices, there used condiments you to happening used home. at seasoning, meals if to and more is mixes cook at food

It’s point this be time, to up. to that we some such There’s it’s eating incremental think going - probably freeze like usage of view not that it. Consumers uncertainty unloading, not require really that glut a as there’d as on at is any about kind the into a And pantry least going up. to this the paper going consumer there’s of real at say but near time. measure where on have can we I’d toilet here that at it, market we are would play

Michael Smith

margin on about margin, really perspective you we a had kind the flavor your margin at the solutions. gross from line I think question great structural a right, the - first quarter of are

portfolio the continue We migration.

job, continue Our crisis. during CCI have teams we’ll done a do great a and job this to great

volume as to obviously, lot those continue. going problem We you of more away from those perspective, on so have the off, can’t give some drops we is of count Rob, favorabilities. But can. really some go overhead an absorption of we’ll volume The if a guidance forward, you

Rob Dickerson

you then be I and the maybe you bit and able of maybe solutions pronounced offset. far XX% just earlier heard consumer think flavor so service food than little the March a from through coming to And Sure. perspective, Okay. that that be more a your business quick see restaurants I in follow-up, pressure could say might

is and comment, piece piece So I the that XX% just just clarify want of business… the to other that given

Lawrence Kurzius

I the want on through largely you want month - March. of so also I of to that, lockdown was remind Rob, most to China

going there’s pretty going and impact be now. China. recovery that Hubei an from in just a be for now, But And as well. going are province to there impact - They example, actually be significant to reopening so so is from so there’s a - to

Rob Dickerson

Okay.

that the sounds pressure X% year for is more point event? at it really, of expected QX this like X% So on China a to

Lawrence Kurzius

I’d say, first mostly a half it. of

Rob Dickerson

Yeah.

much. Stay right. All you Thank so Cool. safe. Okay.

Lawrence Kurzius

Thanks, Rob.

Operator

Please the Our line Adam is proceed Goldman Sachs. question. from of next question with with your Samuelson

Adam Samuelson

Appreciate you you. guys me today. Thank squeezing in

back, coming different from First, a line. it’s question an earlier

current but about thinking about in know, period, talked you just in Lawrence, marketing spend - Just current trade generally. generally, the the promotions I trade

I as it when - people the long it almost on how consumer store, you seems like buying it seems if that evolve center And what indiscriminate have the as are mean, taking? shelf does the of is in it. the

Just that the margin become of how equation the year? does the part kind earnings balance over of of

Lawrence Kurzius

marketing are it them right selling wish really what I lot keep I to support that - I trade in and was Right. easy. customers fastest. now, collaboratively of But working that items with supply our I a customer the about mean, with think the mean, is

with the up that in a promotion the so keep so stop. reduction is there’s can’t you activity frankly, reason it, And customers and

shouldn’t So stopped. so have there’s we -

have curtailed we some So promotions.

customer. will just go the to how our an year, play able continue to the that’s be with kind through think right period that we see to hard I a with as that now extraordinary and reach activity meaningful we’ll we’re out that It’s equilibrium, promotional new is of going through

Michael Smith

our last we’ve online years. more consumers to go for migrating to And digital of and really the – couple trade spend as digital been

of you’ll more So there. see that

Adam Samuelson

kind a kind I of different And of mean, have pretty second normal just kind of that’s on your assortment I Okay. stock portfolio, then velocity. complex kind patterns a That’s pantry helpful. maintenance, and of sales the been consumption that question, of happening, SKUs

normally just I wouldn’t can it time. or some even again I turn velocity Are returning items months bigger get SKUs stay think things seen, you just, turning uplift fast? for in And from Or sales data have your that restock some been those could of the you’ve faster? surprised that would pantry take longer seeing the of the you guess, the to where several in in that faster things

Lawrence Kurzius

the it condiments. and I at piece surprise items the highest the magnitude, terms hit the know, is it look But It’s to mix. recipe which orders They’re you that not extent a think the of you pantry you of when a are in surprise. velocities stocking apart everyone. of suddenness consumer our with and with

these some the to increases. And Sauce, are that are seeing that frankly, RedHot ones are items biggest items of Frank’s not that stockpiled, pretty are the that but consumed be quickly. tend

Adam Samuelson

the color. appreciate I Okay.

Operator

Thank you.

Chris Please the your of Our next question line with Stifel. proceed from is Growe with question.

Chris Growe

morning. Hi. Good

Lawrence Kurzius

Good morning.

Chris Growe

all you glad well safe. doing and I’m are

just So I two questions, if could.

The overall, being business I margin higher understand, first the most, to that’s about think we the pressured as restaurant is would a that be, want business area the overall?

even in In get to around general in I just profit business. my terms. there size larger want of particular, the curious effect was in the I’m head a from softness China, that profitability that there,

play this then bit the I to understand to second how just quarter I inventory to how environment. had just And Thank the building know a now you. had I in first do expect compares and your US, that obviously, question out inventory on you year. in last a could that increase forward of this stand to that want year, Where influence business? an in going

Michael Smith

Chris. is This Hey, Mike.

we the in flavor the business, wheel, and where the If to about portfolio of you flavors. breakout, talked higher flavor show solutions flavor solutions that. migration margin remember XX% have we more That’s businesses about our we generally

lower business. Custom margin condiments, ingredients, coatings, generally

of really some don’t the it’s lower to there, flavor so whole generally We business. I margin want talked side the group. good characterize to But than the have in

very China, a Specifically developed mean, us. market China is I talking about for

We have there. scale

large We people. manufacturing lots facilities, have of

solutions. generally flavor there and are across So good consumer the margins

perspective. QX significant from why that’s So profit a a impact seeing you’re pretty in

Lawrence Kurzius

to Mike that are that comparable about, margins component wheel has the branded talking forward, business. going And foodservice our was consumer the

within mix a structures with So that. service business which that characterize margin there’s piece, low margins margin. branded there’s a the food of service consumer-like we There’s of as the and is part quick generally restaurant

Michael Smith

There your Chris, was it? a second part question. was of what

Chris Growe

going think about last how they forward? just in year, here the those a seem? should like either inventory That down comp, going the are tough Yes, seems but changes, to and it first on up grow we would or quarter from was therefore,

Michael Smith

they’re shelves think of don’t mean, don’t on you’re have trying if their that inventories being I you customers - right Yeah, would a lot I now. their successful. stock are they to store know I any mean, going think I to grow you see, in into walk areas.

where inventory don’t stabilize. think - It’s thinking hard to is retail about say now, side customer - I a know I’d anyone right that in is don’t or going the to reduction. I

I now stock. stay scrambling right think they’re in to

Chris Growe

the to understand from to consumption ahead to shipping of point trying Lawrence, you you a ship Can an but then? get then? number, degree And broad not exact that ship of are which you’re ahead Just - then, to able I’m consumption now.

Lawrence Kurzius

really can’t I - would that. on be really speculating I Yeah,

with are the would say It We up up are is challenging to now we keep with that - right I demand. demand. keeping

I we as - And some would chain, - not supply ERP way the echoes preparation in frankly, that all stressed really might as had which chain more if well that we than side be building been even down now. shift are our we’d we our the also, inventory would say and right through supply for prepared on we were

Operator

of with your Please line David comes with DD Driscoll Research. next Our question. proceed the question from

David Driscoll

Really here. guys you and getting me the understand time appreciate I Great. in,

some and follow ups, these hope I are So just enhancive.

you? in XX% you company in foodservice the business, can the The don’t think the decline of but March, first what I magnitude of said the the question,

consumer just I a side, magnitude is trying the appreciate to but the business. the have decline of sense a what you sense in March? this the get on XX% positive of numbers of foodservice Do of

Lawrence Kurzius

being was definitely credible than changing think significant. or Well, that is think announced in your it’s not exactly, situation. it - really it’s to to I And It openings not going are not said area closures fast that we’re colleague’s you and a I guidance a you almost daily. position give meaningful right and we’re more in say Restaurant now. know this what

Michael Smith

everything. before, EMEA actions different regions we in with different like shutting it’s significant we the say, downturn world, seen What of said a down government the can because has without

David Driscoll

it Okay. the unfold follow-ups. like talk would? just you year this? program over it of you in an And the the originally other CCI environment then as about even quick thought can two Does Mike, just rest

I mean, do really door? think you given how demand got on, just your the have that people can you you this. to product the through execute don’t going sure out going these I programs? you Or re-task that understand to making

any right are thoughts big help. you of So give there

But That’s Thanks, of the And this guys big your for increasing in I bit. big your the manufacturing then new last products talked a focus are and on products you around SKUs for SKUs kind guys. of some runs? on just new focus it terms just you question of reducing your was your little me. had versus You’ve directly,

Michael Smith

Hey, a good has program Dave. CCI, This is CCI for us since Mike. long-term XXXX. been question.

have of culture. in into our really year pipeline it’s We a strong and this coming projects ingrained

teams still on programs. have We working CCI

You’re factor organization still the our priorities. guidance. CCI competing program. We any of confident right lot it though, stress of feel not on not about that’s is - a a But in puts that withdrawal any our

pass the second in new CCI And this achieving feel back results. to real those but the and get some program to our quarter, things Again, and confident normal, we say degree. shall too hopefully, always in we still

Lawrence Kurzius

so on I sorry, teams our take on first long-term perspective quarter, on marketing on first Again has likewise going our repeat already always won’t that. commercialization NPD, products again, and and But this a continuing are and and business, place half, be won’t our pipeline. we to we a work I’ve the commented NPD. - will important the And good there’ll as I R&D as just And teams teams there’s new be repeat been. an for have pass to -

David Driscoll

you. Thank

Lawrence Kurzius

Thanks.

Operator

Thank you.

of line comes question. question of the your with final today Bank Our proceed Please with Peter Galbo from America.

Peter Galbo

to I to of math first of similar make guys. kind imply Lawrence, sort full X% in that the X% would of of million a squaring hit around hit want about me just $XX and hit year, X% the second I’m of thinking fitting to then you morning thank to wanted quarter X.X% in just sure China. in. the the and quarter? million I for Hey, Good Obviously, a for kind about right. ask or kind $XX some

Hubei some customers also from the you’ve be would commentary, hearing given helpful. know foodservice of but maybe China outside just in anything early you’re I on ground, the your province And

Lawrence Kurzius

Sure.

right. the all the we expect. I we see And the in it’s in math of right terms the strong that magnitude but business, ramping So think do I that your up you’re that quarter. second is a of order wouldn’t impact that a say impact of in second but quarter, there

occurred the have gone are a and opening their would weeks, the but over most they that stated our of period in Regarding service open. building. consumer has slowly And restaurants our customers have that food publicly That China, is industry teams restaurants - open of are confirm are. traffic

some And areas you into - get Shanghai. along or know, like seeing the like where they are movement the region, depending Normal to still traffic of are recovery is And them openings are XX%. restaurants. those the of in as places much Hubei, like they’re a only furthest as XX% on few days or freedom into the enough or confident consumers have and only are they not in weeks

some color. gives Wuhan. you We’ve including in people China, that X,XXX in Hope got good X,XXX almost

the So, happening on actually we there. what’s of pretty ground pulse good a have

Peter Galbo

Got it. helpful. that’s very No,

recessionary around just performance You helpful also some McCormick’s commentary broader during gave periods.

been of of questions recessionary just private that think happens one label we’ve with what the a is in getting I kind general period. in

what you label? saw of So maybe speak could categories in in some with just from anything XXXX XXXX and in your of that, competition you to private kind

Lawrence Kurzius

well, well had during and of do our growth. you to we’ve those brands, Our we’re done private private want - that forget that recessionary supplier is don’t so I times. we’ve label. experience good label both a And does

recessionary strong. We, at again, growth the was business last and look periods, back our two consumer

I’d in I think consumer the was for remarks. prepared stronger our business we the we slightly actually say mentioned numbers total that numbers that than quoted company. those US

Peter Galbo

Great. Thanks very much, guys.

Lawrence Kurzius

you. Thank

Operator

Lawrence you. call Kurzius Thank the closing I’ll to for turn back remarks.

Lawrence Kurzius

call. you patience And want did all everyone questions for your participating staying over. thank of Thanks, questions. to for take your and for We today’s on Great. for the

advantaged a continues a And broad leader and in portfolio, bit which long. flavor, so, with little run we’ve we’re and McCormick growth. to differentiated drive is a

deliver the changes growing We an and at and to ever to have in in new and world the innovation industry that environment markets all and and flavor while an We ideas, profitable faster pace. channels, changing is readily operate purpose. business with responding

to respond a risks unprepared One with to being to of unexpected the any most agility significant significant disruption. company is

to and that disruption manage but well prepared, McCormick not emerge experiencing to all are now, We is it, through stronger. only

drive and will our With are focus strategies and us on for become our people, build confident performance to long-term positioned growth a enable relentless better future we to growth, even value shareholders.

Kasey Jenkins

you, everyone and thanks Lawrence, today’s to for call. Thank joining

stays This this regarding day hope If everyone the you to Have questions please a further today’s and concludes reach out healthy me. call have any good safe. information, and morning.

McCormick & Company (MKC) 31 Mar 202020 Q1 Earnings call transcript