Dive Brief:
- Ingredients manufacturer McCormick & Co. is looking to offset costs related to U.S. import tariffs on China through a series of operational cutbacks and price hikes, CFO Marcos Gabriel said in a Tuesday earnings call.
- While the Trump administration’s trade policy remains fluid, Gabriel said McCormick plans to adapt by making “some very targeted price adjustments” and by leveraging cost savings from its corporate improvement plan.
- The pricing actions are not expected to have a material impact on the business or McCormick’s sales outlook for the year. However, Gabriel added, that could change as the tariff scenario evolves.
Dive Insight:
As President Donald Trump forges ahead with tariffs on key trading partners including China, Canada and Mexico, consumers in other countries have pulled back on buying U.S.-made goods, with some even boycotting bourbon in response to the president’s actions.
When asked if McCormick was experiencing any related sales declines, CEO Brendan Foley said in the March 25 earnings call that “currently we’re not experiencing any sort of difficulties there.”
Canada and the U.S. both had strong quarters in terms of consumption and performance, Foley said. According to McCormick’s latest earnings report, the company saw consumer sales volumes increase 3% over last year for the Americas region, with nearly 2% gains for the Europe, Middle East and Africa and Asia Pacific regions.
McCormick’s first quarter sales totaled $1.6 billion, about the same as last year. Domestic and global sales growth was offset by pricing and unfavorable currency rates, Gabriel said on the call.
Net income declined 2% to $162.3 million in the first quarter over last year. Despite a challenging economic backdrop, Foley is optimistic about consumer trends fueling demand gains.
Consumers are “becoming more health conscious, with many cooking at home and shopping the perimeter for protein and produce,” Foley said. “This is reinforcing a demand increase for flavor and McCormick’s categories.”
He said the company’s focus is to meet consumers and customers where they are, with the goal of expanding into mass market, club and e-commerce channels.
McCormick has supply chain and manufacturing operations across 29 countries, with most of its locations concentrated in North America and Europe, according to its website. The company sources ingredients from around the world, including China, and has a manufacturing presence in that country.
Gabriel said McCormick plans to provide more updates on its outlook as the year progresses and tariffs evolve. Currently, the company expects foreign currency rates to unfavorably impact sales by 1% and adjusted earnings per share by 2%.
In addition to its headquarters in Hunt Valley, Maryland, there are also facilities responsible for manufacturing herbs, spices, condiments and hot sauces in Atlanta, Georgia, Irving, Texas and Springfield, Missouri, to name a few.
The ingredients maker opened a sprawling distribution center near Baltimore in 2022 that is capable of getting products to every four in ten Americans within a day from the location.
