Q4 2020 McCormick & Company Inc Earnings Call

January 28, 2021

[music].

Good morning, and this is Kasey Jenkins, Vice President and Mccormick Investor Relations. Thank you for joining today's fourth quarter earnings call to accompany this call was supposed to be satisfied that IRR that Mccormick dot com. Currently all participants are in a listen only mode. Following our remarks, we will begin a question and <unk>.

Especially if you need to reach the operator at any time during the call. Please press star Zero and we'll begin with remarks from Lawrence Courteous, Chairman, President and CEO and Mike Smith Executive Vice President and CFO. During our remarks, we will refer to certain non-GAAP financial measures. These include information and constant currency as well as adjusted.

Margin adjusted operating income adjusted income tax free adjusted earnings per share and adjusted leverage ratio that exclude the impact of special charges transaction and integration expenses related to the acquisition of true love and fairness and for 2019, the net non recurring benefit associated with the U S tax Act.

<unk> to the GAAP results are included in this morning's press release and slides as a reminder, we completed a two for one stock split at the end of our fiscal 'twenty and 'twenty as a result, all per share amounts mentioned today with from what will be also included in our 10-K reflects the retroactive presentation of those amounts on a split adjust.

Basic.

And our comments certain percentages are rounded please refer to our presentation for complete information. In addition, as a reminder, today's presentation contains projections and other forward looking statements actual results could differ materially from those projected the company undertakes no obligation to update or revise publicly any forward looking.

And then whether because of new information future events or other factors. It is important to note. These statements include expectations and assumptions, which will be shared related to the impact of the COVID-19 pandemic and.

On slide two our forward looking statement also provides information on risk factors, including the impact of COVID-19, and that could affect our financial results. It is now my pleasure to turn the discussion over to Lawrence.

Thank you Tracy and good morning, everyone. Thanks for joining us.

Starting on slide four our fourth quarter results completed a year of strong financial performance, we delivered strong results from 'twenty and 'twenty, despite great disruption proving the strength of our business model the value of our product capabilities.

Capabilities as a company as low as the successful execution of our strategies and.

I'm incredibly profitable and Mccormick has performed and this unprecedented operating environment.

We drove outstanding underlying operating performance, while protecting our reported recognizing their exceptional performance.

And important investments and our supply chain and brand building.

<unk> future growth and supporting our communities through Threep efforts.

Also excited about the recent acquisitions of Tallulah and photo two fantastic businesses that will continue to report differentiated growth and performance positioning Mccormick for success and 2021 and beyond.

Yeah.

A female and slide five we have a broad and advantaged global flavor portfolio with compelling offerings for every retail and customer strategy across all channels.

Breadth and reach of our portfolio across segments geographies channels and customers and product offerings creates a balanced and diversified portfolio to drive consistency and our performance during volatile times as evidenced by our fourth quarter and fiscal year results.

The sustained and shifts in consumer behavior to cooking and eating more at home for at home consumption drove substantial increases and our consumer segment demand as well as increases with our packaged food company customers and our flavor solutions segment.

On the other hand, we experienced declines in demand from our restaurants, and other foodservice customers and the away from home products and our portfolio.

The impact of this shift to more at home consumption has varied by region due to differing levels of away from home consumption and each of them.

Well as the pace of each region's COVID-19 recovery.

Taken together these impacts continue to demonstrate the strength and diversity of our offer.

Going into 2021, I'm confident our operating momentum will continue and our 2021 outlook, our continued underlying business momentum and the Tallulah and photo acquisitions are expected to drive robust sales adjusted operating income and earnings growth and fund our investments and business transformation.

This morning, I'll begin with our fourth quarter results reflect on our 2020 achievements and then share with you some of our 2021 business momentum and plans.

After that I will turn it over to Mike who will go in more depth on the quarter and fiscal year results as well as the details of our 2021 guidance.

Turning to slide six starting with our fourth quarter results, which were in line with the guidance. We provided for sales adjusted operating profit and adjusted earnings per share on our last earnings call.

And our top line versus the year ago period, we grew total sales, 5%, including a 1% favorable impact from currency.

And constant currency free grew total sales, 4% with both segments contributing to the increase.

Adjusted operating income declined 4% as growth from higher sales and CCI led cost savings for more than offset by higher planned brand marketing investments COVID-19 related costs and higher employee benefit expenses.

Our fourth quarter adjusted earnings per share was <unk> 79, compared to 81 and the prior year driven primarily by lower adjusted operating income for the partial offset from lower interest expense.

Turning to our fourth quarter segment business performance, starting on slide seven and our consumer segment, we grew fourth quarter sales by 6% on constant currency, 5% driven by consumers cooking and eating more at home.

Our Americas constant currency sales growth was 6% and the fourth quarter, our total Mccormick U S branded portfolio as indicated and our IRI consumption data grew 14%, which reflects the strength of our categories as consumers continue to cook more at home.

Similar to previous quarters, our sales increase was lower than the U S. IRI consumption growth, which was attributable to service level pressures and an increased level of pricing and scanner data.

As mentioned and our earnings call at the end of September we expected service level pressures from the fourth quarter due to the sustained increase in demand.

<unk>, our top selling holiday items, we had to suspend or curtailed production on some secondary product, which importantly drove our strong holiday execution and <unk>.

Consistent with previous quarters scanner data includes higher pricing growth due to the channel shift with grocery outpacing mass merchandisers and club stores as well as some impact from lower promotional activity.

Focusing on the U S branded portfolio and spices, and seasonings and other key categories, excluding dry recipe mixes and we grew fourth quarter consumption at double digit rates and again increased our household penetration and repeat buy rates.

Our fourth quarter dry recipe mixes consumption was impacted by supply constraints.

Double digit growth for the year as the spices and seasonings and the other key categories.

And the fourth quarter, we continued to gain share and categories less impacted by supply constraints, including hot sauces stocks and broth barbecue sauce, wet marinate and Asian product the.

The majority of our categories continued to outpace the total score and center of store growth rates favorably impacting the OLED and Mccormick brands, but smaller brands as well such as subs <unk> simply Asia and Thai kitchen.

And then ecommerce we had triple digit pure play growth does Mccormick branded consumption outpacing all major categories.

While we do not expect consumption to continue at a highly elevated level of our fourth quarter. We do expect continued and long lasting growth from the increase and consumers cooking more at home and most recent IRI scanner sales data from the five weeks ending January 17th So total Mccormick U S branded portfolio.

And subject there is still growing at approximately 11, 5% with continued strength and spices and seasonings.

Consumers are continuing to come to our brands and have a good experience and buy our products again and.

The fourth quarter, we increased our brand marketing investments and all regions as planned with the Americas messaging and promotional activities focused on holiday proving to be successful and our high level of effective brand marketing investments and our initiatives to deepen our digital engagement with consumers.

We're capitalizing and the opportunity to build long term brand equity capture trial and increased usage by existing consumable and.

And with the manufacturing capacity. We've recently added we are well positioned moving into 2021, and we will continue to drive growth through strong brand marketing category management initiatives and new product innovation.

Now turning to EMEA, our constant currency sales rose, 10% from the fourth quarter with broad based growth across the region. Our largest markets continued to drive double digit total branded consumption growth with market share gains across the region and several categories.

Spices, and seasonings consumption was strong and all markets and our broth and paper and in France, again had strong consumption growth and outpace the homemade desserts category and the <unk>.

U K, France Red Hot drove the hot sauce category growth and gained share with over 50% consumption growth.

And EMEA, our household penetration and rate of repeat buyers increased significantly across our major brands and markets during the fourth quarter and the full year compared to last year.

Importantly for the full year, we gained total EMEA region market share and spices, and seasonings and dry recipe mixes.

And the Asia Pacific region, our constant currency sales declined 10% driven by softness and branded foodservice products, which are included in our consumer segment and this region.

The foodservice industry is continuing to recover but at a gradual pace growth in China was also impacted by a shift to a later Chinese new year, and 2021, which in turn impacted shipments at the end of our year.

Excluding those impacts consumer consumption and the region was strong, particularly at Gourmet garden, and Frank's Red Hot and Australia.

Turning to slide eight our sales performance and flavor solutions returned to growth and the fourth quarter for the constant currency sales increase of 3% and all three regions contributed to the sales growth and.

And both our Americas and EMEA regions, we experienced increased demand from a consumer packaged food customers for our at home customer base with strength and the base business as well as momentum with new products.

Also in both regions, we experienced demand declines and our away from home customer base for branded foodservice and restaurant customers.

Net impact of this demand volatility along with pricing actions to cover cost increases drove EMEA fourth quarter constant currency sales growth of 5% and and the Americas, which is more skewed to branded foodservice growth of 2%.

And the Asia Pacific region, our constant currency sales grew 7% driven by Australia, and China growth with quick service restaurants, or <unk> customers, but we continue to see momentum and limited time offers and the core business, partially driven by the customers' promotional activities.

Moving from our fourth quarter results I'm pleased to share our full fiscal year accomplishments, which not only highlight what we've achieved during 2020, but fuel our confidence to drive another year of strong operating performance in 2021.

Starting with our 2020 financial results as seen on slide nine we drove 5% constant currency sales growth was 10% growth and our consumer segment led by consumers and cooking and eating more at home.

Offsetting this growth was a 2% constant currency sales decline and the flavor solutions segment as COVID-19 restrictions and most markets as well as consumer reluctance to dine out reduced demand from restaurants and other foodservice customers.

We achieved $113 million of annual cost savings driven by our CCI program, our fuel for growth and there continues to be a long runway and 2021 and beyond to deliver additional cost savings.

2020 was the ninth consecutive year from record cash flow from operations ending the year at over $1 billion a.

A 10% increase from last year, we're making great progress with our working capital improvements.

And at year, and our board of Directors announced a 10% increase and the quarterly dividend, marking our 30 <unk> consecutive year of dividend increases we have paid dividends every year since 1925 and are proud to be a dividend aristocrat.

Now I would like to comment on some of our 2020 achievements beyond our financial performance.

E Commerce growth accelerated significantly in 2020, which we were well prepared for from our past investments and investments we activated early in the year.

Our 2020 growth of 136% with outstanding with Triple digit growth and all categories, including pure play click and collect and our own direct to consumer properties.

We expect the consumer shift increased online shopping to continue and we are well positioned for the opportunities still ahead.

We continue to build long term brand equity through our brand marketing investments, increasing 7% and fiscal 2020.

Most recently with a double digit increase and the fourth quarter.

Across all regions, which will continue to drive strong growth momentum into 2021.

He designed targeted media and messaging focused on cooking at home and connecting with consumers digitally more than ever and 2020.

And our digital leadership was again recognized as we were ranked as the number one food brand with the highest designation of genius by Gartner <unk> research and their digital IQ U S ranking this.

This is the seventh year in a row, we were ranked in the top five food and beverage brands.

We continue to be recognized for our efforts for doing what's right for people communities and the planet. During 2020, we were recognized for the fourth consecutive year as the diversity, Inc. Top 50 company and earlier this week corporate Knights, Frank Mccormick and their 2021 global 100, most sustainable.

And as index is number one and the food products industry for the fifth consecutive year as well as the number one U S company overall and globally number six overall.

Finally during the year, we continued to invest to expand our global infrastructure and the Americas, We broke ground on a new state of the art northeast distribution Center, and Maryland, which will optimize our distribution network and.

And our EMEA region, we began construction on a new flavor solutions manufacturing facility and the U K to support the region strong and growing customer base.

And China, we are investing and flavor capabilities to further drive flavor solutions growth. These investments will create both capacity and capability, which will further drive our growth momentum.

Turning to 2021, Mike will go over our guidance and a few moments, but I'd like to comment on our recent acquisition announcements and provide highlights related to our growth momentum and 2021 plants.

Starting on Slide 11, and addition to the accomplishments I just mentioned, we have reinforced our global flavor leadership and accelerated our condiment and flavors gross platforms through the <unk>.

And <unk> acquisitions of Tallulah and phone to.

Lula and iconic brand and a high growth category as a leading Mexican hot sauce, and highly complements our existing hot sauce portfolio broadening our flavor offerings to consumers and foodservice operators.

<unk>, a leading north American manufacturer of flavors and increases the scale of our global flavors platform with the addition of its highly complementary portfolio to our flavor solutions segment, expanding our breadth and accelerating our portfolio migration more value added and technically insulated products.

We're excited about the 2021 growth contributions, we expect from Tallulah and photo which closed at the end of November and December respectively.

For both acquisitions, our transition and integration activities are progressing according to our plans and the alignment of our organization is underway and deliver on opportunities quickly and to aggressively drive growth.

Yeah.

We have a proven playbook and unmatched expertise to effectively and efficiently unlock tallulah significant growth potential.

And our consumer segment, we will leverage our operational expertise and infrastructure to elevate <unk> brand presence and increase the availability of its product and extend its product offerings into new flavors and formats and eating occasions to drive trial and household penetration.

Building, our enthusiasm is an outstanding momentum <unk> carried into 2021, continuing to outpace category growth was strong consumption.

And our flavor solutions segment with our broad presence across all foodservice channels, we'll be focusing on strengthening to Lula is go to market model there are opportunities to expand from Lulu distribution and its existing foodservice channel as well as increased new restaurant penetration, which we are uniquely positioned to realize and drive growth.

Mccormick and reach across our customers combined with our culinary foundation and deep insights on menu trend expands and the recipe inspiration and flavor solutions that we offer operators.

How many disorder, which in addition to accelerating our portfolio migration will be the cornerstone for accelerating our Americas flavor platform.

By expanding our breadth and depth and developing flavor. While also combining our infrastructures to provide greater scale and increase from manufacturing capacity and technical bench strength.

We're providing our customers with a more comprehensive product offerings, bolstering, our competitive position and creating more opportunities for growth.

With the addition of phone, we're advancing our health and wellness portfolio, we're expanding our research and development capabilities and technology platform with additional proprietary encapsulation methods.

<unk> expertise and flavor and health and performance nutrition products across a variety of applications.

Our clean and natural platform and meaningfully enhanced with the addition of phone is predominantly natural portfolio as well as their expertise, particularly in citrus fruit flavors.

Combination of our technology platforms and capabilities will provide a long runway for growth, enabling us to remain at the forefront of flavor development and expand our ability to create better for you and consumer preferred flavor solutions across a diverse range of applications for our customers.

Yeah.

Our complementary customer bases of global and mid tier customers provides growth opportunities for our collective portfolios.

Bonus customer centric culture is very similar to ours and with the combined power of our organizations and we're well positioned to reach a broader customer base deepening existing customer relationships by cross selling and a cinema inroads with new customers, while driving innovation and customer response to the acquisition has been favorable as they recognize our combined power increase.

And our customer value proposition.

We're confident we will deliver on our acquisition plans.

This confidence is bolstered by our proven track record of successfully integrating and increasing the performance of acquired businesses, such as our acquisition of Frank's and French's.

Acquisitions are a key part of our long term growth strategy and both Tallulah and phone will add to our strong history of creating value through acquisitions.

Now I'd like to briefly comment on the conditions, we're seeing and our markets their potential impact and our 2021 organic growth plans starting on slide 14.

Global demand for flavor remains the foundation for our sales growth, we are capitalizing on the growing consumer interest and healthy flavorful cooking trusted brands as well as digital engagement and purpose minded practices.

And as long term trends have only accelerated during the pandemic.

Our alignment with these consumer trends combined with the breadth and reach of our portfolio sustainably positions us for continued growth.

These underlying trends current market conditions, and a robust 2021 plans position us well to successfully execute on our growth strategies and both segments.

Starting with our consumer segment around the world. We continue to experience sustained elevated consumer demand, which is real incremental consumption and reflects the trend of consumers cooking more at home.

Across our <unk> region consumer demand continues to be strong and China consumer consumption remains strong and we continue to see recovery and foodservice, which and China is and our consumer segment as well as optimism about the Chinese new year holiday, which was significantly disrupted last year by the COVID-19 related lockdowns.

And then Australia, either with restaurant restrictions eased and away from home demand increasing at home consumption has remained elevated and.

And EMEA many of our largest markets have recently implemented more restrictive COVID-19 measures.

Further fueling at home consumption, and we're seeing sustained levels of demand and of course, we see the same and the Americas.

Consumers cookie and more from scratch and adding flavor to their meal occasions as a key long term trend, which has accelerated during the pandemic. Our proprietary consumer survey data supported by external research indicates consumers are doing the cooking experience and field meals prepared at home are safer healthier and better.

<unk> and cost plus.

And while there has been great advances in vaccine development and distribution and Theres, a significant amount of uncertainty regarding the pace of explanation and the upcoming months.

We believe the consumer behavior and sentiment driving and increased and sustained preference for cooking at home will continue globally and will persist beyond the pandemic further driving consumer demand for our products fueled by robust marketing differentiated new products and our strong category management initiatives.

Our categories across the globe experienced a sustained elevated level of demand for most of 2020 because of this shift and consumer preference, which coupled with added employee safety measures that initially reduced manufacturing capacity depleted finished goods inventory levels, both for us and our customers and challenged our operations.

The real pressure has been on our U S manufacturing operations, where do.

And the latter part of 2020, we added significant capacity.

We ended the calendar year with considerable incremental capacity through the expansion of our workforce scaling up partnerships with third party manufacturers and other measures in line with our previously shared plant and December our Americas consumer production output was approximately 40% higher than last year.

Currently service levels are improving and restoration plans have begun and most of the secondary items, which were suspended in order to meet the significant demand for our top selling product.

And now resumed shipping approximately two thirds of the products, which had been suspended with the balance to be added over the next several weeks and we expect shelf conditions to improve considerably over the next few weeks.

We're continuing to work through a stabilization period and inventory replenishment will progress through the first half of the year.

Our category management initiatives are designed to drive growth for both of our both our customers and Mccormick and I'd like to thank our customers for their partnership and working together with us on long term solutions.

And we're confident we're well positioned from success in 2021 and have implemented sufficient long term solutions and strengthened our supply chain resiliency longer term to support continued growth.

Our rollout will continue in 2021 and was increased cooking at home expected to continue. This initiative is even more exciting to drive both category and Mccormick branded growth.

Turning to global brand marketing, we continue to increase our investments across our entire portfolio, which have proven effective and achieved high ROI.

We'll continue to connect with consumers online learning real time insights into action by targeting messaging focused on providing information and inspiration for instance, with tips tricks, new recipes and products keep their meals exciting and cooking easy.

We expect our brand marketing investments combined with our valuable brand equities and strong digital consumer engagement will continue to drive growth with existing consumers and the millions of consumers gain and 2020.

New products are also integral to our sales growth and 2027% of our total Mccormick sales were from products launched and the last three years and our consumer.

<unk> segment, new product innovation differentiates our brands and strengthens our relevance with consumers.

Our 2020 launches and provide significant momentum going forward with exceptional trial.

Overall, the cell and of our new product launches and big bet innovation from our flavor solutions customers slowed in 2020 due to the focus on keeping core items on retail shelves.

Moving into 2021, we're excited about the strong pipeline, both we and our flavor solutions customers are carrying into the year.

And our flavor solutions segment, we have a diverse customer base and I've seen various stages of recovery.

From a food and home perspective, our flavor solutions growth varies by packaged food customer, but overall and as we mentioned last quarter. We have returned to pre COVID-19 growth rates, we're carrying our growth momentum with packaged food customers into 'twenty, one driven by strength and their core iconic products as well as new products and bigger bets and innovation.

And 2021.

And our away from home portion of this segment, our restaurants and other foodservice customers are still impacted by government and post COVID-19 restrictions and most markets and <unk>.

Some areas are restaurant customers, including quick service restaurants have been faced with an increase and restrictions due to case for surfaces. Although the impact has not been a significant as at the beginning of the crisis given many customers have adapted their operating model for delivery and Carryout.

Coverage of our branded foodservice customers continues to be slow and is also impacted by COVID-19 resurgence.

Overall, there was significant disruption experienced in 2020 recovery has begun and we're expecting it to continue and 2021.

As <unk> customers are oriented and less the dine and their recovery will be at a faster pace than the rest of the rest of the restaurant and foodservice industry.

We have positive fundamentals in place to navigate through this period and are excited about the recovery and momentum.

We are advantaged by our differentiated customer engagement and flavor solutions and plan on driving further wins for both us and our customers and fiscal 2021.

With our customer intimacy approach, we will continue to drive new product wins collaborate on opportunities and solutions managed through recovery clients and importantly, further strengthen our customer partnerships.

Additionally, the execution of our strategy to migrate our portfolio to more technically insulated and value added categories will continue in 2021 with top line opportunities gained from our investments to expand our flavor scale, our momentum and flavor categories as well as the opportunities from a phone and acquisition, we expect to realize further <unk>.

<unk> from this strategy.

In summary, we continue to capture the momentum we've gained and our consumer segment and a positive fundamentals in place and navigate through the flavor solutions recovery and are excited about our tallulah and phone and acquisitions all of which bolster our confidence for continued growth and 2021.

We expect sales growth to vary by region and quarter and 2021, given 2000 twenty's level of demand volatility and the pace of COVID-19 recovery, but importantly, we expect we will drive overall organic sales growth and both of our segments.

Our fundamentals momentum and growth outlook are stronger than ever.

Our achievements in 2020, our effective strategies and a robust operating momentum reinforce our confidence and delivering another strong year of growth and performance and 2021.

Following an extraordinary year and 2020 or 2021 outlook reflects both our strong underlying base business performance and acquisitions driving significant sales growth as well as strong operating income growth, even considering extraordinary COVID-19 costs and our business transformation investments, which highlights our for.

On profit realization.

Our top tier long term growth objectives remain unchanged and we're positioned for continued success.

And importantly, Mccormick employees around the world Ciber momentum and success.

During 2020, our employees demonstrated and advance their skills agility and resiliency during a highly challenging time now I'd like to thank them for their dedicated efforts and engagement as well as adapted to this new environment now.

Now Mike will share additional remarks on our 2020 financial results and 2021 guidance.

Thanks, Lawrence and good morning, everyone I will now provide some additional comments on our fourth quarter performance and full year results as well as detail on our 2021 outlook.

Starting on slide 19 during the fourth quarter sales rose, 4% and constant currency sales growth was driven by higher volume and mix and our consumer segment with volume and mix and our flavor solutions segment comparable to last year.

Pricing to partially offset cost inflation also contributed favorably to both segments.

The consumer segment sales grew 5% and constant currency led by the Americas and EMEA regions.

A sustained shift to at home consumption and cooking more at home as well as consumers, adding flavor at home to their restaurant Carryout and delivery meals continues to drive increased demand for our consumer products, resulting in higher volume and mix and these regions.

On slide 20, consumer segment sales and the Americas increased 6% and constant currency versus the fourth quarter of 2019, driven by higher volume and product mix across many brands, including simply Asia Thai kitchen, Thanks, Red Hot trenches, Lowry Zatarain's Gourmet garden and Stubbs to name a few.

Partially offsetting these increases were volume declines and Mccormick branded spices, and seasonings and recipe mixes as well as private label products due to capacity constraints.

And EMEA constant currency consumer sales grew 10% from a year ago with strong growth in all countries across the region and.

And most significant volume and mix growth drivers for our Schwartz and day CRO branded spices, and seasonings are talking and a homemade dessert products and our <unk> branded products and Poland.

Consumer sales and the Asia Pacific region declined, 10% and constant currency driven by lower branded foodservice sales and a shift to a later Chinese new year as Lawrence mentioned.

Turning to our flavor solutions segment and 523, we grew fourth quarter constant currency sales, 3% with growth and all three regions.

And the Americas flavor solutions constant currency sales grew 2% driven by pricing to cover cost increases offset partially by lower volume and product mix.

Volume and product mix declined due to a reduction and demand from branded foodservice and other restaurant customers.

And the offsetting this decline was higher demand from packaged food companies with particular strength and snack seasonings.

And EMEA constant currency sales increased 5% attributable to pricing to cover cost increases as well as higher volume and product mix.

Volume and product mix increased driven by sales growth with packaged food companies with strength and snack seasonings, partially offset by lower sales to branded foodservice and other restaurant customers.

And the Asia Pacific region flavor solutions sales rose, 7% and constant currency driven by higher sales of <unk>, and China, and Australia, partially all partially due to our customers' limited time offers and promotional activities.

As seen on slide 27, adjusted operating income, which excludes transaction costs related to the <unk> and go into acquisitions and special charges declined 4% and in the fourth quarter versus the year ago period with minimal impact from currency.

Adjusted operating income declined and the consumer segment by 2% to $221 million or.

We're in constant currency, 3%.

And the flavor solutions segment, adjusted operating income declined 9% to $70 million or 8% and constant currency.

Gross from higher sales and CCI led cost savings were more than offset and both segments by several drivers.

And the consumer segment, and 18% increase and brand marketing from the fourth quarter of last year unfavorably impacted adjusted operating income growth and and the flavor solutions segment.

<unk> product mix due to the decline and branded food service sales contributed two with adjusted operating income decline.

Both segments were also unfavorably impacted by COVID-19 related costs and higher employee benefit expenses, including incentive compensation.

I've seen on slide 28, gross profit margin and the fourth quarter was comparable to the year ago period, as we had planned.

Adjusted operating margin declined 180 basis points compared to the fourth quarter of last year.

Driven by the net impact of the factors I mentioned, a moment ago as.

And as well as higher distribution and transportation costs.

For the fiscal year gross margin expanded 100 basis points, driven by CCI led cost savings and favorable product mix.

Moving from the sales shift between segments, which more than offset COVID-19 related costs.

Adjusted operating income increased 5% and constant currency and adjusted operating margin was comparable to last year.

The consumer segment grew adjusted operating income, 16% and constant currency, primarily due to higher sales and CCI led cost savings, partially offset by a 7% increase and brand marketing higher incentive compensation expense and COVID-19 related costs.

And in constant currency the flavor solutions segment, adjusted operating income declined 20% driven by lower sales unfavorable product mix and manufacturing costs, COVID-19 related costs and higher incentive compensation expense.

With a partial offset from CCI back cost savings.

Turning to income taxes on slide 29, our fourth quarter adjusted effective tax rate of 22, 9% compared to 24, 7% and the year ago period was favorably impacted by discrete items for.

For the full year, our adjusted tax rate was 19, 9% as compared to 19, 5% from 2019.

Income from unconsolidated operations declined 9% and the fourth quarter of 2020.

And the full year was comparable to 2019.

At the bottom line as shown on slide 31 fourth quarter 2020 adjusted earnings per share was <unk> 79.

As compared to 81 per the year ago period.

The decline was primarily driven by our lower adjusted operating income, partially offset by the lower interest expense and a lower adjusted income tax rate per.

For the year or 5% constant currency increase and adjusted operating income combined with a lower interest expense drove a 6% increase and adjusted earnings per share to $2 83 per cent.

2020.

Including the impact of unfavorable currency exchange rates versus last year.

On slide 32, we summarized highlights for cash flow and a year and balance sheet.

Our cash flow from operations ended the year at a record high of more than $1 billion.

10% increase compared to $947 million and 2019, primarily driven by higher net income.

We finished the fiscal year with our cash conversion cycle down 9% versus our 2019 fiscal year and as we continue to execute against programs to achieve and working capital reductions.

We returned $330 million of this cash to our shareholders through.

Through dividends and we are very pleased that we fully paid off the term loans related to the acquisition and the Franks Red Hot and French's brands.

Following the acquisitions of <unk> and photo we have a pre synergy pro forma net debt to adjusted EBITDA ratio of approximately three nine times and.

And we expect to Delever to approximately three times by the end of fiscal 2022.

Based on our demonstrated track record of debt Paydown and our anticipated strong cash flow generation. We are confident that we will deliver on our plan.

Our capital expenditures were $225 million and 2020 and included growth investment and optimization projects across the Globe Inc.

<unk>, our ERP business transformation investment and beginning the supply chain global infrastructure investments about Lawrence mentioned earlier.

And 2021.

We expect our capital expenditures to be higher in 2020.

As we continue to spend on the initiatives, we have and progress as well and support our investments to fuel future growth.

We expect 2021 to be another year of strong cash flow driven by profit and working capital initiatives and our priority is to continue to have a balanced use of cash funding investments to drive growth returning a significant portion to our shareholders holders through dividends and paying down debt.

Now I would like to discuss our 2021 financial outlook on slides 33, and 34 with a brief update on our ERP replacement program.

Starting with our ERP replacement program, we remain committed to this business transformation initiatives and have recently completed our re phasing of the program.

We are now projecting the total cost of our ERP investment to range between $350 million and $400 million.

From 2019 through the anticipated completion of our global rollout and fiscal 2023.

With an estimated split of 50% capital spending and 50% of operating expenses.

As such the total operating expense impact for the program to be incurred from 2019 through 2023 is estimated to be between $175 million and $200 million.

Slightly lower than our previous estimate.

And fiscal 2021.

We are projecting our total operating expense to be approximately $50 million, which is an incremental $30 million over fiscal 2020.

And at this time, we are not anticipating any significant go lives from 2021.

By the end of 2021, we will have spent approximately $90 million of the total program operating expense.

We are excited to continue moving forward with this investment to enable us to further transform our ways of working and realize the benefits and a scalable growth platform.

Moving to our 2021 outlook with a broad and advantaged flavor portfolio.

Our robust operating momentum and effective growth strategies, we are well positioned for another year of differentiated growth and performance.

And our 2021 outlook.

We are projecting top line and earnings growth from our strong base business and acquisition contribution.

Earnings per cash, partially offset by the incremental COVID-19 costs and the ERP investment as well as a higher projected effective tax rate.

We also expect that there will be an estimated two percentage point favorable impact of currency rates on sales adjusted operating income and adjusted earnings per share.

At the top line, we expect to grow and constant currency sales, 5% to 7%, including the incremental impact of the Tula and phone and acquisition, which is projected to be and a range of three 5% to 4%.

We anticipate our organic growth will be primarily led by higher volume and product mix driven by our category management brand marketing new products and customer engagement growth plans.

As Lawrence mentioned earlier, we expect sales growth to vary by region and quarter and 2021, given 2000 twenty's level level of demand volatility and the pace of the COVID-19 recovery.

But importantly, we expect we will drive our overall organic sales growth and both of our segments.

Our 2021 adjusted gross profit margin is projected to be comparable to 25 basis points higher from 2020.

Which reflects margin accretion from the chiller and cone acquisitions.

Patients as well as unfavorable sales mix between segments and COVID-19 costs.

We estimate COVID-19 cost to be approximately $60 million from 2021 as compared to $50 million and 2020.

And weighted to the first half of the year.

Fiscal 2020, once COVID-19 costs are largely driven by third party manufacturing cost and of course could vary based on demand fluctuations.

Our adjusted operating income growth rate reflects expected strong underlying performance from our base business acquisitions, which is projected to be 10% to 12% constant currency growth.

Partially offset by a 1% reduction from increased COVID-19 costs and a 3% reduction from the estimated incremental ERP investment.

This results and a total projected adjusted operating income growth rate of 6% to 8% and constant currency.

This projection includes low single digit inflationary pressure and our CCI led cost savings target of approximately $110 million.

It also includes an estimated low single digit increase and brand marketing investments, which will be heavier and the first half of the year.

Our 2021 adjusted effective income tax rate is projected to be approximately 23% based upon our estimated mix of earnings by geography, as well as factoring and a low level of discrete impacts.

This outlook versus our 2020 adjusted effective tax rate.

As expected to be a headwind to our 2021 adjusted earnings per share growth of approximately 4%.

Our 2021 adjusted earnings per share expectations reflect strong base business and acquisition performance growth of 9% to 11% and constant currency.

Firstly offset by the impacts I, just mentioned related to COVID-19 costs are incremental ERP investment and the tax headwind.

This resulted in an increase of 3% to 5% or 1% to 3% and constant currency.

Our guidance range for adjusted earnings per share and 2021 is $2 91 to two to $2 96 ex.

Compared to $2 83 of adjusted earnings per share and 2020.

Based on the expected timing of some expense items, such as Covid, 19 costs and brand marketing and marketing investments as well as a low tax rate and the first quarter of last year, we expect our earnings growth to be weighted to the second half of the year.

And we had a strong start to the year, but recognize we are lapping a very strong second quarter of 2020.

In summary, we are projecting strong underlying base business performance and growth from acquisitions, and our 2021 outlook.

With earnings growth, partially offset by incremental COVID-19 costs and ERP investment as well as a higher projected effective tax rate.

I'd like to now turn it back to Laura for some additional remarks before we move to your questions.

Thank you Mike.

Now that Mike has shared our financial results and outlook in more detail I would like to recap the key takeaways as seen on slide 35.

We delivered strong results and 2020, despite great disruption proving the strength of our business model the value of our products and our capabilities as a company as well as the successful execution of our strategies.

We have a strong foundation, we're confident and the sustainability of at home consumption and with the investments we've made to strengthen our supply chain resiliency, we are even better positioned to capitalize on accelerating consumer trends were.

And we're excited about the recent acquisitions of Tallulah and phone App, which reinforce our global flavor leadership and accelerate our condiments and flavors growth platform.

We are confident these investments further position us for continued success.

Our fundamentals momentum and growth outlook are stronger than ever.

Our 2021 outlook reflects another year of differentiated growth and performance, while also making and investments for the future. We're confident we will emerge stronger from these uncertain times now, let's turn to your questions.

Thank you.

At this time, we'll be conducting a question and answer session.

And you'd like to ask a question. Please press star one from your telephone keypad and and confirmation tone will indicate your line is and the question queue can.

And can be press star two if you'd like to remove your question from the queue.

And so participants using speaker equipment, and maybe necessary to pick up your handset before pressing the star keys.

And please when we poll for questions.

Our first question comes from the line of Andrew Lazar with Barclays. Please proceed with your question good morning, everybody and thanks for the question Hey, Good morning, Andrew.

Alright, Thank you for the additional color and consumer Americas around some of the capacity and service level dynamics meant that you were facing over the last couple of months or quarters, I guess first off I'm curious if.

Those dynamics are in such a place now where we should expect sort of shipments.

To start to outpace consumption.

And in <unk> and <unk> or.

Or if you expect still maybe somewhat of a lag effect because.

And there's still building the capacity and the service levels to where you want them to be so im trying to just dimensionalize that sort of first quarter aspect, but more importantly, how.

And how to Dimensionalize, maybe how big of a benefit.

To 2001 organic growth just a rebuilding of inventory levels to the extent that that needs to happen can be to organic growth.

Quick follow up thank you sure while Andrew we have been ramping up production as we've gone through the through the fourth quarter and adult brilliant through the third and fourth quarter.

As we talked about on previous calls and.

Anybody that walks into a historic and see that the shelves are pretty poor condition. There are a lot of holes and the shelf, particularly and spices and seasonings and recipe mixes that reflects the fact that we've had our secondary skus on suspension.

To protect the key holiday items, and it's really been those two categories that had the greatest impact.

No.

Our other product categories.

Pretty good service through the.

The third and fourth quarter and into this year. So that's been our focus area.

We have.

Starting at the beginning of January and begun reinstating those secondary items.

And and.

And so they are coming back on.

Set and our prepared remarks about two thirds of them.

S and reinstated and.

The remainder coming in the coming weeks.

You'll see the shelves starting to.

Good.

Okay, and a lot better.

Actually over the next over the next few weeks, we still are allocating product theres, a big bow wave of demand ahead of us as our customers want to rebuild their inventory and frankly, everyone forgets about consumer pantries and being a bit better.

During this time as well.

So we do expect there to be a.

And the.

Benefit too.

To this fiscal year, and we're really thinking about it in terms of the first half in terms of the rebuild of.

Tumor inventories I also want to emphasize that this is an Americas problem, our manufacturing has really been good.

And be able to keep up with the demand and the and.

And the rest of the world.

Just the scale of our consumer business and the Americas.

So great.

Particularly in the fourth quarter of the year, even in normal circumstances, we have to pre build inventory to supply them.

Huge demand.

Comes through and those categories.

And the fourth quarter of the year and.

Coming into the fourth quarter.

And very much hand to mouth already due to the sustained demand.

That's why we are signaling that we're going to have service issues.

Through the fourth quarter, and we knew that to be the case and we'll say.

Commenting on cash.

Current conditions and I don't want to get too much.

Into 2021.

Almost two thirds of the way through our first quarter.

And the service levels.

And we are shipping.

Shifting to our customers, while we while we're still allocating product.

It's the best service that we've had since the spring.

Got it.

And you for that and then a super quick follow ups.

And found your comments very interesting around the trends Youre seeing and Australia.

And as restrictions ease.

Consumption of at home items still remains elevated at this point.

And some other companies have said similar things and I've also heard similar things be discussed around.

And China for some companies as well and there is restrictions have eased and I may have missed it are you seeing that same dynamic in your China business is well beyond that.

Yes, we are but it's not quite as clean and try and it because in China. They are effectively reinstated some restrictions.

Same as it was a year ago, where there was a government lockdown, but the government is encouraging people not to travel is encouraging people to celebrate Chinese new year at home.

And generally in China, and the government gives us encouragement to do something to do it.

And so and so I think thats the EBIT.

And that right now for Chinese new year Im not sure we can draw a lot of conclusions around.

And consumer behavior, it's not quite as clean as in Australia, where COVID-19 seems to be under control restrictions have been lifted and consumers are still making the choice without that and government encouragement.

And to continue to Cook at home.

Two and 2021 Chinese new years.

Later in the first quarter. So it will after that is done we'll have a better read on it yes, I think so.

So you know and.

A couple of other companies have commented on it and I will just say it again.

Consumer research.

Syndicated information that we get and our own proprietary research and so as consumers.

Are enjoying cooking more at home.

Three out of four consumers, saying from relaxes them and reduces their stress.

Fully a quarter of consumers say ex they intend to cook more at home.

After the pandemic.

And they are even now.

And with the added uncertainty around the vaccine timing and and.

Take up of the vaccine and do various emerging I think that there is a lot of reasonably consumption is going to be elevated this year at least for quite some time.

Thanks very much.

The next question comes from the line of Ken Goldman with Jpmorgan. Please proceed with your questions.

Hi, Thanks, so much.

I wanted to ask Hey, everybody.

I think you mentioned.

And when you talked about the sales drivers organic sales drivers for.

'twenty one.

I think he mentioned and volume and product mix and unless I missed it I didn't think I heard pricing.

And so I'm curious do you expect pricing to play any major role and your growth this year and.

And as a corollary to that how might you maybe describe the willingness of your customers to kind of accept price sites at this time.

Sure well, Ken first of all.

<unk>.

As an ongoing discussion with customers I don't want to get too specific about.

Pricing actions that haven't been taken because of customer and competitive.

Reis and stuff.

And so our comments on the pretty limited right now.

I'll remind everybody on the call it 40% of our sales are through the flavor solutions segment and a great portion of.

That is based on.

Contractual relationship for the pass through of <unk>.

Pricing.

I don't think we have the same pressure on pricing and maybe some other companies are now our outlook is for low single digit inflation.

Unique basket of commodities and and.

And input costs that are not an exact match to inflation or.

Zach matched to our peers do use CCI.

And as well we are seeing cost inflation freight is up ocean freight and particular as an emerging.

The current and emerging concern.

But.

And really not prepared to talk about.

Thank you and any specific comments about pricing right now.

Do have some ramp from 2020, our pricing actions and.

And where we need to take pricing in 2021 her confidence we can take it.

Thank you for that and then from my follow up you're balancing a lot of things right now.

Some might consider outside what might be the normal course of business right, you're undertaking and ERP implementation or at least you're starting to right you're integrating two acquisitions, you're navigating through COVID-19. So can you just help us think about how you and your team or be balancing some of the balls and the air right now we're keeping them in the air and how you sort of.

Allocate your time your data to the day to day.

Blocking and tackling and just selling core products and there's a lot sort of building on right now with the company.

Well Ken.

There was a lot going on but I think that we can handle and we have a strong ambition to grow.

The choice full about priorities and so yeah, we suspended our business transformation and ERP activity.

Last year and order to make sure that.

And we could focus on dealing with the crisis and.

And keep our people safe for quality.

And do all the.

Great things for business continuity.

Come out stronger.

And thought.

So as that was and that was a pause.

This is not a suspension, we paused our activity and.

And we think we've got the resources to ramp back up.

Even during that pause we spent some time.

Re scoping.

The aligning partners Inc.

And we've actually come out of it with them and with a stronger program and got a lot of data cleansing done.

Those who have been through this before and other toys and issue.

And so we feel pretty good about our ability to handle that handle the recovery.

Our business and we really are actually quite thrilled about the two acquisitions that we made and we've added a great asset and each one of our segments.

This has been a great capital allocation decision.

And the integration of these are pretty straight.

Straight forward.

Okay.

Thank you you want to comment on that and integrations are going very well I mean, the <unk>, obviously is more of a plug and play and it's.

<unk> co pack like we've said so that's a pretty straightforward one and phone App has a great business and.

As I said before it's discrete teams focusing on them and helping integrate into our business. So it's not taking away from the base focus we need on the core business, if thats kind of where youre going with that.

Yes, I was just curious, but that's a that's a helpful answer thank you gentlemen.

Thank you.

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

Good morning, everyone.

Alexia.

Hi that and so my first question actually go to E Commerce.

I just wonder why you ended fiscal.

Fiscal 'twenty in terms of E commerce as a percentage of sales.

And.

Has that slowed down and tool.

In the late deposits, Yeah, and just wondering what the prognosis and as intended gross on that site.

We've got tremendous growth and E commerce.

And we went through the year, we've talked about this a couple of times and the Sun.

And as everybody else and and I know our own experiences anecdotally.

Many of us have shopped on E commerce.

If you take all three legs of E commerce, as we think about it.

And CTC pure play and and our.

And our click and collect type.

Customer brick and mortar efforts at.

All of that was up well over 100% net.

On a global scale and and and while we don't actually disclose the total percentage of our business.

That is from.

E Commerce on the consumer side, it was it's less than 10%, but it's up substantially from.

Past years and.

Continuing a long trend of.

Shift by consumers to shop and with ecommerce.

Great and then as my follow up and Ken.

Ken mentioned.

And awful lot of uncertainty out there we're still living through these unprecedented time, if you think about your outlook for 2021.

What do you think the biggest uncertainty.

Maybe positively and negatively and <unk>.

The risks and either direction, Thank you and I'll pass it on.

The biggest uncertainty.

I mean, it's also the most obvious one is the pace.

Recovery from the <unk>.

Anthemic and.

And.

The durability of the consumer behaviors coming out of it.

And the and.

And really it's one of the recovery of the foodservice side.

We wonder about and why.

Whether consumers are going to continue to cook at home I think theirs.

I think that there's a pretty broad range of possible outcomes.

And again vaccine takeout variance that might come up. So those are those are some pretty I'd say, that's the that's the biggest uncertainty factor out there.

I will say, yes, we are managing through this now on a much more uptake mandates and operational basis, rather than and a crisis mode.

No.

Think we're very well prepared.

Four four.

The possible outcomes from the market.

I want to add anything.

And we're prepared for any.

And any environment, we are broad and diversified portfolio just like we showed last year that have that kind of sales growth and.

And performance, we can manage any environment and I think the two bars appointed because we think theres consumers' trends will be sticky although people will go out to eat as the vaccine becomes more.

Yes.

Global but we think we've created some habits and <unk>.

Hey.

Wonderful Thank you I'll pass it on.

Our next question is from the line of Robert Moskow with Credit Suisse. Please proceed with your question.

Hi, Thanks.

Bottom line.

Good morning.

And I wanted to know about the guidance for the first half of the year. I think you said the earnings growth is going to be back half weighted.

And I look at the first quarter coming up.

And you seem to have a very easy comparison to a year ago in the core operations.

Which were down and sales and down and EBIT.

I think I and others have a pretty outsized first quarter expectation fundamentally.

Because it's inventory reloading.

And and I guess, improving performance and flavor solutions as well so.

Can you can you help us think about first quarter, a little bit too you mentioned the tax rate, but other than that as it is and actually going to be a strong start in first quarter.

Hey, Rob it's Mike I'll take that one and made some great point I mean, we did highlight the first half second half story within the first half. There are two stories also obviously, if the easy comparison, especially from a consumer perspective in the first quarter.

Okay.

We're off to a strong start this year as you would suspect as you can see and some of the consumption data in the U S primarily.

And we also know we're lapping a really strong second quarter and alright, and I think it's something as you look at your modeling.

And you want to adjusted.

And that assumption tax rate and he knows a really tough comparison and the first quarter compared to last year, which was highlighted but in the first half as we've talked about we're going to have COVID-19 costs and will be across both quarters, primarily and the first half significant investment and A&P as we drive our brands as we recover.

It really is.

And first quarter, two but and the second quarter also.

Yeah and all.

And also and for the second half as you think about it.

Our our COVID-19 costs are high and the first half, but we begin to get them out of the business and the second half of.

A year ago.

<unk> ramping up.

Got it.

And things that were expensive.

Relative to Covid and so.

We'll have to book.

And we'll have the unwinding of that a bit of a.

The tailwind and the second half of the year and Youll see things like ERP costs build throughout the year. So it would be again and first half second half could it be more weighted to the second half.

Okay, and a follow up.

And I was surprised to see flavor solutions positive and fourth quarter and you mentioned, it's really driven by CPG is there a way to break out how much growth youre seeing and CPG right now and how much of a decline youre seeing and the.

The other half of the flavor solutions business, which is more foodservice oriented.

And would you would you would expect that relationship to continue in 2021.

Yes.

Thank you.

Answer that one and Lawrence can add and there I mean, we're seeing and we're not going to give you percentages because it really varies by region based on the split of our packaged vs versus restaurant, but in the Americas, we've seen very strong.

CPG performance mid to high single digits offset by by similar ranges on the branded foodservice and restaurant side.

But it's the mix of the business interest and regions, which gives you.

But overall, the and positive we're very thrilled with that and we know a lot of people were surprised by that even though consumer grew very strongly and we're at a point to one thing where we were.

And maybe our sales performance for the fourth quarter.

And different than our expectations. It would be in this area of flavor solutions it was a bit stronger.

Crossed before.

And then.

With a solid and we gave that guidance.

Okay alright. Thanks.

Thank you.

Our next question is coming from the line of Science and only with Deutsche Bank. Please proceed with your question.

Yes, hi, good morning.

So first I just wanted to ask Lawrence you had made a comment early on about the pricing disconnect that were seeing and Nielsen. So I was wondering if you could expand a little bit on that maybe clarify.

And what I'm really trying to get at is I think Andrew had asked a question around the.

And if there.

Theres any quantification of what the inventories reload might be and the first half that would be really helpful. Okay, and I think those two different questions, but on pricing. There are two things that are happening and.

Nielsen net.

And it looks like there is more pricing, perhaps and there and there actually is.

And the.

First is that there has been a bit of a channel shift as we've gone through the crisis.

Where.

I would say regular.

Regular grocery has been stronger than than other channels and it tends to carry a higher price point.

As a result.

That comes through.

And if pricing inflation and.

And the Nielsen data.

That is really kind of artificial and that was one of the things set up.

And was.

It was 22.

And then the other is there is still a reduced level of promotional activity.

That is.

And that's happening and.

And not just for us but across the board that comes through.

And what was the price increase.

And the Nielsen data.

As far as the inventory build we've not really quantified it but but.

It stands to reason that.

There is going to be.

The substantial catch up.

And on trade stock.

But we will ship to ship under consumption now for three quarters and I think that you can.

Expect that.

Are.

American supply chain catches up that will you'll start to see a shipping above consumption consumption is still very strong.

And I mentioned that.

Our production was up 40% and.

And in December.

Remember from our U S consumer business and.

And.

The market took all of that and it is just.

There's still flashed it through.

And when we talk about inventories and it's not backroom warehouse stocks.

Its restocking the shelf itself.

And that's.

Part of that I think that that's going to be.

Okay.

And a gradual process as we go through the first half of the year.

Okay understood and then I was wondering if you could talk a little bit about how retailers are thinking about you had mentioned shelf realignment last year, you would spend a significant amount of time talking about that at Cagny and I know some of those efforts or paused, how should we think about the timing of.

That as we go into the SCR well.

We do have a reinvention of the spy style and.

And so it's important to category management programs.

So it's a win win and it's great for the customers and it's great for us.

Although we didn't make as much progress on that last year as we would have hoped and we were talking about at Cagny.

And we were able to.

Impact.

A little over 5000 stores last year. So we did continue that that effort, even with the with the pandemic.

Going on and we would expect to get a line.

And like number of stores again and.

2021.

Is really between the two years is quite enough it really moves the needle.

And so we're continuing with those efforts that we think are important.

And this has also been a been a chance to rethink the assortment and the and the category and so we've taken a look.

And as part of this is part of this.

Moving to.

It reduces the number.

Of items and the storefront for their for their section and we've also looked at the assortment that we offer and and we've SKU rationalize out.

Part of the early long tail of products that we have.

About 250 items.

And the.

Urged by seasoning and recipe mix category to simplify our assortment as well.

Great. Thank you so much.

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

Yes. Thanks, good morning, everyone. Good morning, and good morning, Adam Good morning, I, just wanted to maybe clarify a little bit at this point on it and channel inventory kind of restocking or hitting your the shops restocked notwithstanding the backward house inventories restocked at the segment level and at the company level you're guiding on.

<unk> revenue growth of about one 5% to 3% three 5% a year for the full year.

You talked about kind of there being some unfavorable segment mix. So presumably we're going to have the expectations of the consumer business being a little below that and flavor solutions above that baseline.

And the consumer business does have a.

A tailwind of.

And this restocking benefits if you think about the first half as you've been under shipping consumption now I understand the consumption comps get exceedingly difficult as you get into March April may, but I'm, just trying to wrap my head around the idea that with some inventory we're thinking about inventory restock, we're thinking about kind of flat to up 2% or so consumer growth and I'm sure make sure I.

Understanding the moving pieces within that.

Bob.

Well.

I'm not sure.

To address each one of those points, but.

Our expectation is for our.

Tumor segment too.

Flow.

And in 2021.

It's independent of the acquisition that we that we've made many of our categories.

And have been and full supply through the through the whole crisis.

All of this discussion about.

Detore stocking at GDP per.

Predominantly and herbs and spices seasoning and recipe mixes.

The.

Yes.

The growth is going to vary from quarter to quarter, I think we're going to lap some extraordinary consumption. So false consumption is still running strong for us.

The most recent periods with the spill.

11, 5% and that.

That includes the fact that we've got all of them.

All of those.

Cash on the shelf.

And that is.

Really strong and is quite elevated.

And that compares to over 50% consumption growth and Q2 and.

And I believe and focus on number one.

And I was already some out of the numbers.

And my finger right now in Q3.

And so we're going to we're going to lap that and those are some pretty tough comps and the consumer business up for the for the from.

The Americas and.

And not exactly the same numbers, but comparable peaks.

Come and across EMEA, so and so.

So that's going to be.

Net of a headwind as we built scale.

Past those.

Yes, I think we have to talk about a lot our flavor solutions business being a little lumpy because it's based on customer demand and things like that consumer will be lumpy. This year because of the quarterly comparisons. So much happened last year by quarter that youre going to have to we're going to help you through that but we're giving broad guidance for the year, which makes it a little difficult because most of its already forgotten.

<unk> thousand 20.

Okay, and if I could.

And have a quick follow up just talking about low single digits kind of raw material cost inflation. Maybe this is more from Mike just maybe go through some of the key buckets in terms of demonstrate packaging.

Any specific pockets of on the actual raw materials that are maybe more concerning from the inflationary side that we should be focused on there.

And as Lawrence mentioned, we have a broad market basket of things, which are very different than our peers and you have the normal big big volume items, and some are up and some are down.

But nothing stands out, particularly I mean, we all know everyone in the industry is getting hit recently by Ocean freight and other freight strength.

And that's in our market basket, and we say low single digit we don't break it out but <unk>.

70% of our costs are really it's really raw material and packaging, so that but there's nothing I would say that it is.

Crazy at this point and the bigger impact that frankly is the incremental and extraordinary expenses per.

Dealing with the coke prices.

Our right now running through our business that we expect to get out.

And if we get into the second half day.

Okay, that's really helpful and pass it on thank you.

Yeah.

Thank you. Our final question is from the line of Peter Counsel from Bank of America. Please proceed with your price.

Hey, guys. Good morning, Thank you for taking the question.

Thank you.

Lawrence maybe just to go back to Andrew <unk> question around.

Around China, I guess, maybe what's underappreciated is the idea that organic growth and consumer probably relied at least to some extent on on China, foodservice, making a pretty remarkable comeback.

We've heard about some retrenchment that recently I think in your prepared remarks, you said as well can you just.

And maybe give us.

Look into how youre thinking about that recovery of your China foodservice customers from the balance of 'twenty one.

And then I have a follow up but I'll speak broadly about China and expecting that we're going to have a very strong recovery and.

And China.

China had a very.

Strong response to the Covid crisis.

Okay.

Very comprehensive lockdown consumers does not have a chance to shop.

Yes.

And so so.

Yes.

The results and China, the first and second quarter last year were.

And really depressed and.

And so I expect to see a very strong rebound from that as we as we as we lap.

Lap those.

Those numbers and and.

And Additionally, I think there is a little bit of a benefit from Chinese.

Chinese new year being slightly later this year than last year.

Some of.

Chinese new year volume that would have normally shifts.

And at the end of our fiscal year actually falling into the fourth quarter and so that's going to be.

As a favorable comparison.

Got it no that's helpful.

Fourth quarter last year.

Right right.

And Mike maybe just one clean up I don't know what would be in your outlook there and if you had given on interest expense, but just anything there would be helpful.

No I mean, obviously you can calculate what we talked about our assumptions on the acquisitions for us and the models, so and that's an incremental cost and 2021, and we'll get a natural decline and somebody other based parts of the portfolio as we aggressively paid down debt last year.

Overall interest is up.

Obviously and you know Peter.

Related to your question, Yes, we spent up on A&P and the fourth quarter and every region known from world, including in China to make sure that our consumer business was off to a strong start.

No.

He is not just for immediate.

And this performance, but for long term brand building it.

China was one of the markets that.

And that we invested additional A&P and and.

And the fourth quarter of last year that will that will help us get a good start on 2021.

Thanks, very much guys.

Great. Thanks, Thank you.

And I'll now turn the floor and Lawrence guarantees for his closing remarks.

Now I'd like to thank everyone for your questions and for participating on today's call.

Mccormick is differentiated by the breadth and reach of our balanced portfolio, which drives consistency and our performance during volatile times I'm incredibly proud of the way Macquarie performed during 2020 gross outstanding underlying operating performance during a precedented times.

And while prioritizing the safety and health of our employees and supporting the communities and which we operate we expect to drive even further growth as we continue to execute on our long term strategies actively respond to changing consumer behavior or capitalize on new opportunities from our relative strength.

Our investments provide a new foundation for growth, while enhancing our agility and our relevance with consumers and customers, which positions us well for continued success and long term shareholder value creation.

Thank you Lawrence and thanks, everyone for joining today's call and if you have any further questions regarding today's information. Please feel free to contact me. This concludes this morning's call have a nice day.

[music].

Good morning, and this is Kasey Jenkins Vice President of Mccormick Investor Relations. Thank you for joining today's fourth quarter earnings call to accompany this call are supposed to be satisfied that IRR that Mccormick dot com.

All participants are in a listen only mode. Following our remarks, we will begin the question and answer session and you need to reach the operator and anytime during the call. Please press star zero.

And with remarks from Lawrence Courteous, Chairman, President and CEO, and Mike Smith, Executive Vice President and CFO. During our remarks, we will refer to certain non-GAAP financial measures. These include information and constant currency as well as adjusted gross margin adjusted operating income adjusted income tax rate adjusted earnings per share and adjusted Levered.

Ratio that exclude the impact of special charges transaction and integration expenses related to the acquisition of true love and fairness and for 2019 net non recurring benefit associated with the U S tax Act reconciliations to the GAAP results are included in this morning's press release and slides as a reminder, we complete.

You did a two for one stock split at the end of our fiscal 'twenty and 'twenty as a result, all per share amounts mentioned today with from what will be also included in our 10-K reflects the retroactive and presentation of those amounts on a split adjusted basis in <unk>.

Our comments certain percentages are rounded please refer to our presentation for complete information. In addition, as a reminder, today's presentation contains projections and other forward looking statements.

Actual results could differ materially from those projected the company undertakes no obligation to update or revise publicly any forward looking statements, whether because of new information future events or other factors. It is important to note. These statements include expectations and assumptions, which will be shared related to the impact of the COVID-19 pandemic.

As seen on slide two our forward looking statement also provides information on risk factors, including the impact of COVID-19 that could affect our financial results. It is now my pleasure to turn the discussion over to Lawrence.

Thank you Tracy and good morning, everyone. Thanks for joining us.

Starting on slide four our fourth quarter results completed a year of strong financial performance, we delivered strong results and 2020, despite great disruption proving the strength of our business model the value of our product and our capabilities as a company as well as the successful execution of our strategy.

And incredibly profitable and Mccormick has performed and this unprecedented operating environment.

We drove outstanding underlying operating performance, while protecting our employees and recognizing their exceptional performance.

And important investments and our supply chain and brand building.

<unk> future growth and supporting our communities.

We're also excited about the recent acquisitions of Tallulah and phone two fantastic businesses that will continue to support differentiated growth and performance positioning and Mccormick for success and 2021 and beyond.

As seen on slide five we have a broad and advantaged global flavor portfolio with compelling offerings for every retail and customer strategy across all channel.

Breadth and reach of our portfolio across segments geographies and channels customers and product offerings creates a balanced and diversified portfolio to drive consistency and our performance during volatile times as evidenced by our fourth quarter and fiscal year results.

The sustained and shifts in consumer behavior to cooking and eating more at home or at home consumption drove substantial increases in our consumer segment demand as well as increases with our packaged food company customer and our flavor solutions segment.

On the other hand, we experienced declines in demand from our restaurants, and other foodservice customers and the away from home products and our portfolio.

The impact of this shift to more at home consumption has varied by region due to differing levels of away from home consumption and each as well as the pace of each region's COVID-19 recovery.

Taken together these impacts continue to demonstrate the strength and diversity of our offer.

Heading into 2021, I'm confident our operating momentum will continue and our 2021 outlook, our continued underlying business momentum and the Tallulah and further acquisitions are expected to drive robust sales adjusted operating income and earnings growth and fund our investments and business transformation.

This morning, I'll begin with our fourth quarter results reflect on our 2020 achievements and then share with you some of our 2021 business momentum and plans.

After that I will turn it over to Mike who will go in more depth on the quarter and and fiscal year results as well as the details of our 2021 guidance.

And our top line versus the year ago period, we grew total sales, 5%, including a 1% favorable impact from currency and.

In constant currency grew total sales, 4% with both segments contributing to the increase.

Adjusted operating income declined 4% as growth from higher sales at CCI led cost savings for more than offset by higher planned brand marketing investments COVID-19 related costs and higher employee benefit expenses.

Our fourth quarter adjusted earnings per share was <unk> 79, <unk> compared to 81 and the prior year driven primarily by lower adjusted operating income for the partial offset from lower interest expense.

Our Americas constant currency sales growth was 6% for the fourth quarter, our total Mccormick U S branded portfolio as indicated and our IRI consumption data grew 14%, which reflects the strength of our categories as consumers continue to cook more at home.

And more to previous quarters, our sales increase was lower than the U S IRI consumption growth.

And is attributable to service level pressures and an increased level of pricing and scanner data.

As mentioned and our earnings call at the end of September we expected service level pressures and the fourth quarter due to the sustained increase in demand.

To protect our top selling holiday items, we had to suspend our curtailed production on some secondary product, which importantly drove our strong holiday execution.

And consistent with previous quarters scanner data includes higher pricing growth due to the channel shift with grocery outpacing mass merchandisers and club stores as well as some impact from lower promotional activity.

Our fourth quarter dry recipe mixes consumption was impacted by supply constraints.

And a double digit growth for the year as the spices and seasonings and the other key categories.

And the fourth quarter, we continued to gain share and category is less impacted by supply constraints, including hot sauces stocks and broth barbecue sauce, wet marinate and agent product.

And in E. Commerce, we had triple digit pure play growth does Mccormick branded consumption outpacing all major categories.

While we do not expect consumption to continue at a highly elevated level of our fourth quarter. We do expect continued at long last and growth from the increase and consumers cooking more at home and most recent IRI scanner sales data from the five weeks ending January 17th So total Mccormick U S branded portfolio of <unk>.

<unk> is still growing at approximately 11, 5% with continued strength and spices and seasonings.

Consumers are continuing to come to our brands have a good experience a buyer products again.

And the fourth quarter, we increased our brand marketing investments and all regions as per.

<unk> with the Americas messaging and promotional activities focused on holiday proving to be successful and.

And our high level of effective brand marketing investments and our initiatives to deepen our digital engagement with.

And with consumers.

We are capitalizing and the opportunity to build long term brand equity Castor trial and increased usage by existing consumers and we're.

And manufacturing capacity, we have recently added we are well positioned moving into 2021 and will continue to drive growth through strong brand marketing category management initiatives and new product innovation.

Now turning to EMEA, our constant currency sales rose, 10% in the fourth quarter with broad based growth across the region. Our largest markets continued to drive double digit total branded consumption growth with market share gains across the region and several category.

Spices, and seasonings consumption was strong and all markets and our broth and a branded <unk> again had strong consumption growth and outpace the homemade dessert category.

And the U K, France Red Hot drove the hot sauce category growth and gained share with over 50% consumption growth.

And EMEA, our household penetration and rate of repeat buyers increased significantly across our major brands and markets during the fourth quarter and the full year compared to last year.

And importantly for the full year, we gained total EMEA region market share and spices, and seasonings and dry recipe mixes.

And the Asia Pacific region, our constant currency sales declined 10% driven by softness and branded foodservice products, which are included in our consumer segment and this region.

The foodservice industry is continuing to recover but at a gradual pace growth in China was also impacted by a shift to a later Chinese new year and 2021 with the current impacted shipments at the end of our year.

Excluding those impacts consumer consumption and the region was strong, particularly at Gourmet garden, and Frank's Red Hot and Australia.

Turning to slide eight our sales performance and flavor solutions returned to growth and the fourth quarter with constant currency sales increase of 3% and all three regions contributed to the sales growth.

Also in both regions, we experienced demand declines and our away from home customer base for branded foodservice and restaurant customers.

And now starting with our 2020 financial results as seen on slide nine we drove 5% constant currency sales growth with 10% growth and our consumer segment led by consumers cooking and eating more at home.

Partially offsetting this growth was a 2% constant currency sales decline and the flavor solutions segment as COVID-19 restrictions and most markets as well as consumer reluctance to dine out and reduced demand from restaurants and other foodservice customers.

We achieved $113 million of annual cost savings driven by our CCI program, our fuel for growth and there continues to be a long runway and 2021 and beyond to deliver additional cost savings.

2020 was the ninth consecutive year of record cash flow from operations ending the year at over $1 billion at 10%.

Net increase from last year, we're making great progress with our working capital improvements at.

And at year, and our board of Directors announced a 10% increase and the quarterly dividend sparkling our 30 <unk> consecutive year of dividend increases we have paid dividends every year since making 25 and are proud to be a dividend aristocrat.

Now I would like to cover some of our 2020 achievements beyond our financial performance.

E Commerce growth accelerated significantly in 2020, which we were well prepared for from our past investments and investments reactivated early in the year.

Our 2020 growth of 136% with outstanding with Triple digit growth and all categories, including pure play click and collect and our own direct to consumer properties.

We expect the consumer shift increased online shopping to continue and we are well positioned for the opportunities still ahead.

We continue to build long term brand equity through our brand marketing investments, increasing at 7% and fiscal 2020.

Most recently with a double digit increase and the fourth quarter.

Across all regions, which will continue to drive strong growth momentum into 2021.

Key design targeted media and messaging focused on cooking at home and connecting with consumers digitally more than ever and 2020.

Our digital leadership was again recognized as we were ranked as the number one food brand with the highest designation that genius by Gartner <unk> research and their digital IQ U S ranking.

This is the seventh year in a row, we were ranked in the top five food and beverage brands.

We continue to be recognized for our efforts, we're doing what's right for people communities and the planet. During 2020, we were recognized for the fourth consecutive year as the diversity, Inc. Top 50 company and earlier this week corporate Knights ranked Mccormick and their 2021 global 100, most sustainable corporate.

<unk> index is number one and the food products industry for the fifth consecutive year as well as the number one U S company overall and globally number six overall.

Finally during the year, we continue to invest to expand our global infrastructure and the Americas, We broke ground on a new state of the art northeast distribution Center, and Maryland, which will optimize our distribution network.

And our EMEA region, we began construction on a new flavor solutions manufacturing facility and the UK to support the region strong and growing customer base.

And China, we are investing and flavor capabilities to further drive flavor solutions growth. These.

These investments will create both capacity and capability, which will further drive our growth momentum.

Starting on Slide 11, and addition to the accomplishments I just mentioned, we have reinforced our global flavor leadership and accelerated our condiment and flavors growth platforms, and our recent acquisitions of Tallulah and phone.

Tallulah and iconic brand and a high growth category as the leading Mexican hot sauce, and highly complements our existing hot sauce portfolio broadening our flavor offerings to consumers and foodservice operator.

We're excited about the 2021 growth contributions, we expect from Tallulah and photo which closed at the end of November and December respectively.

For both acquisitions, our transition and integration activities are progressing according to our plans and the alignment of our organizations is underway and deliver on opportunities quickly and to aggressively drive growth.

Yes.

We have a proven playbook and unmatched expertise to effectively and efficiently unlock tallulah significant growth potential and.

And our consumer segment, we will leverage our operational expertise and infrastructure to elevate <unk> brand presence and increase the availability of its product and extend its product offerings and to new flavors and formats and eating occasions to drive trial and household penetration.

Building, our enthusiasm is an outstanding momentum to Lola carried into 2021.

And to outpaced category growth with strong consumption.

And our flavor solutions segment with our broad presence across all foodservice channels, we'll be focusing on strengthening to <unk> go to market model there are opportunities to expand <unk> distribution and its existing foodservice channel as well as increased new restaurant penetration, which we are uniquely positioned to realize and drive growth.

Mccormick reach across customers combined with our culinary foundation and deep insights on menu trend expands and the recipe inspiration and flavor solutions that we offer operators.

Turning to Florida, which in addition to accelerating our portfolio migration will be the cornerstone for accelerating our Americas flavor platform.

And by expanding our breadth and depth and developing flavor, while also combining our infrastructures and provide greater scale and increase from manufacturing capacity and technical bench strength.

We're providing our customers with a more comprehensive product offerings, bolstering, our competitive position and creating more opportunities for growth.

With the addition of photo we're advancing our health and wellness portfolio, we're expanding our research and development capabilities and technology platform with additional proprietary encapsulation methods.

<unk> expertise and flavor and health and performance nutrition products across a variety of applications.

Our clean and natural platform and meaningfully enhanced with the addition of phone is predominantly natural portfolio as well as their expertise, particularly in citrus and fruit flavors.

Combination of our technology platform and capabilities will provide a long runway for growth, enabling us to remain at the forefront of flavor development and expand our ability to create better for you and consumer preferred flavor solutions across a diverse range of applications for our customers.

Our complementary customer bases of global and mid tier customers provides growth opportunities for our collective portfolios.

One is customer centric culture is very similar to ours and with the combined power of our organizations, we are well positioned to reach a broader customer base deepening existing customer relationships by cross selling and established and inroads with new customers, while driving innovation and customer response to the acquisition has been favorable as they recognize our combined power increase.

And as our customer value proposition.

We're confident we'll deliver on our acquisition plans. This confidence is bolstered by our proven track record of successfully integrating and increasing the performance of acquired businesses, such as our acquisition of Frank's and French's and.

Acquisitions are a key part of our long term growth strategy and both Tallulah and phone a full add to our strong history of creating value through acquisitions.

Now I'd like to briefly comment on the conditions, we're seeing and our markets their potential impact and our 2021 organic growth plans starting on slide 14.

Global demand for flavor remains the foundation for our sales growth.

We are capitalizing on the growing consumer interest and healthy flavorful cooking trusted brands as well as digital engagement and purpose minded practices. These.

These long term trends have only accelerated during the pandemic.

Our alignment with these consumer trends combined with the breadth and reach of our portfolio sustainably positions us for continued growth.

And these underlying trends current market conditions, and a robust 2021 plan position us well to successfully execute on our growth strategies and boat segments.

Across our APC region consumer demand continues to be strong and China.

Consumer consumption remains strong and we continue to see recovery and foodservice, which and China is and our consumer segment as well as optimism about the Chinese new year holiday, which was significantly disrupted last year by the COVID-19 related lockdowns.

And then Australia, either with restaurant restrictions eased and away from home demand increasing at home consumption has remained elevated.

And EMEA many of our largest markets have recently implemented more restrictive COVID-19 measures further fueling at home consumption and we are seeing sustained levels of demand and of course, we see the same and the Americas.

And tumors cooking more from scratch and adding flavor to their meal occasions as a key long term trend, which has accelerated during the pandemic. Our proprietary consumer survey data supported by external research indicates consumers are doing the cooking experience and field meals prepared at home are safer healthier better.

Tasting and cost less.

And while there has been great advances in vaccine development and distribution, there's a significant amount of uncertainty regarding the pace of vaccination and the upcoming months.

Our categories across the globe experienced a sustained elevated level of demand for most of 2020 because of this shift and consumer preference, which coupled with added employee safety measures that initially reduced manufacturing capacity depleted finished good inventory levels, both for us and our customers and challenged our operations.

The real pressure has been on our U S manufacturing operations, where do the latter part of 2020, we added significant capacity.

We ended the calendar year with considerable and incremental capacity through the expansion of our workforce scaling up partnerships with third party manufacturers and other measures in line with our previously shared plant and December our Americas consumer production output was approximately 40% higher than last year.

Currently service levels are improving and restoration plans have begun on most of the secondary items, which were suspended in order to meet the significant demand for our top selling product. We've now resumed shipping approximately two thirds of the products, which had been suspended with the balance to be added over the next several weeks and.

We expect shelf conditions to improve considerably over the next few weeks.

And we're continuing to work through a stabilization period and inventory replenishment will progress through the first half of the year.

We're confident we're well positioned from success in 2021 and have implemented efficient long term solutions and strengthened our supply chain resiliency longer term to support continued growth.

Also in the U S and 2020, we began our initiative to reinvent the in store experience for spices, and seasonings consumers by introducing new merchandising elements to improve navigation and drive exploration. Our rollout will continue in 2021 and with increased cooking at home expected to continue.

This initiative is even more exciting to drive both category and Mccormick branded growth.

Turning to global brand marketing, we continue to increase our investments across our entire portfolio, which have proven effective and achieved high ROI.

We will continue to connect with consumers online and in real time insights into action by targeting messaging focused on providing information and inspiration for instance, with tips tricks, new recipes and products Keith per mill is exciting and cooking Edd we.

New products are also integral to our sales growth and 2027% of our total Mccormick sales were from products launched and the last three years.

And our consumer segment, new product innovation differentiates our brands and strengthens our relevance with consumers.

Our 2020 launches and provide significant momentum going forward with exceptional trial.

Overall, the sell in of our new product launches and Big bet innovation from our flavor solutions customers slowed in 2020 due to the focus on keeping core items on a retail shelf.

Moving into 2021, we're excited about the strong pipeline, both we and our flavor solutions customers are carrying into the year.

And our flavor solutions segment, we have a diverse customer base and have seen various stages of recovery.

From a food and health perspective, our flavor solutions growth varies by packaged food customer, but overall as we mentioned last quarter. We have returned to pre COVID-19 growth rates, we're carrying our growth momentum with packaged food customers into 'twenty, one driven by strength and their core iconic products as well as new product and bigger bet innovation.

2021.

And our away from home portion of this segment, our restaurants and other foodservice customers are still impacted by government imposed COVID-19 restrictions and most markets and <unk>.

Some areas are restaurant customers, including quick service restaurants and <unk>.

Been faced with an increase and restrictions due to case resurgent says, although the impact has not been as significant as at the beginning of the crisis given many customers have adapted their operating models for delivery and Carryout.

And the recovery of our branded foodservice customers continues to be slow and is also impacted by COVID-19 resurgence.

Overall, there was significant disruption experienced in 2020 recovery has begun and we're expecting it to continue in 2021.

As <unk> customers are oriented and less the dine in their recovery will be at a faster pace than the rest of the rest of the restaurant and foodservice industry. We.

We had positive fundamentals in place to navigate through this period and are excited about the recovery and momentum.

We are advantaged by our differentiated customer engagement and flavor solutions and plan on driving further wins for both us and our customers and fiscal 2021.

With our customer intimacy approach, we will continue to drive new product wins and collaborate on opportunities and solutions managed through recovery clients and importantly, further strengthen our customer partnerships.

Additionally, the execution of our strategy and migrate our portfolio to more technically insulated and value added categories will continue in 2021 with top line opportunities gained from our investments to expand our flavor scale, our momentum and flavor categories as well as the opportunities from a phone and acquisition, we expect to realize further <unk>.

<unk> from this strategy.

We expect sales growth to vary by region and quarter in 2021, given 2000 twenty's level of demand volatility and the pace of COVID-19 recovery, but importantly, we expect we will drive overall organic sales growth and both of our segments.

Our fundamentals momentum and growth outlook are stronger than ever.

And our achievements in 2020, our effective strategies and a robust operating momentum reinforce our confidence and delivering another strong year of growth and performance and 2021.

Following an extraordinary year and 2020 or 2021 outlook reflects both our strong underlying base business performance and acquisitions driving significant sales growth as well as strong operating income growth, even considering extraordinary COVID-19 cost and our business transformation investments, which highlights our focus.

On profit realization.

Our top tier long term growth objectives remain unchanged and we're positioned for continued success.

And importantly, Mccormick employees around the world driver and momentum and success during 2020, our employees demonstrated and advance their skills and agility and resiliency during a highly challenging time now I'd like to thank them for their dedicated efforts and engagement as well as adapted to this new environment now.

Now Mike will share additional remarks on our 2020 financial results and 2021 guidance.

Thanks, Lawrence and good morning, everyone I will now provide some additional comments on our fourth quarter performance and full year results as well as detail on our 2021 outlook.

Pricing, partially offset cost inflation also contributed favorably to both segments.

The consumer segment sales grew 5% and constant currency led by the Americas and EMEA regions.

Partially offsetting these increases were volume declines and Mccormick branded spices, and seasonings and recipe mixes and.

As well as private label products due to capacity constraints.

And EMEA constant currency consumer sales grew 10% from a year ago with strong growth in all countries across the region.

And most significant volume and mix growth drivers for our Schwartz and to CRO branded spices, and seasonings, our coffee and a homemade dessert products and our <unk> branded products and Poland.

Consumer sales and the Asia Pacific region declined, 10% and constant currency driven by lower branded foodservice sales and a shift to a later Chinese new year as Lawrence mentioned.

Turning to our flavor solutions segment and 523, we grew fourth quarter constant currency sales, 3% with growth and all three regions.

And the Americas flavor solutions constant currency sales grew 2% driven by pricing to cover cost increases offset partially by lower volume and product mix.

Volume and product mix declined due to weight reduction and demand from branded foodservice and other restaurant customers.

Partially offsetting this decline was higher demand from packaged food companies with particular strength and snack seasonings.

And EMEA constant currency sales increased 5% attributable to pricing to cover cost increases as well as higher volume and product mix.

As seen on slide 27% adjusted operating income, which excludes transaction costs related to the Tula and stone and acquisitions and special charges declined 4% and the fourth quarter versus the year ago period with minimal impact from currency.

Adjusted operating income declined and the consumer segment by 2% to $221 million.

And we're in constant currency, 3%.

And the flavor solutions segment, adjusted operating income declined 9% to $70 million or 8% and constant currency.

Growth from higher sales and CCI and that cost savings were more than offset and both segments by several drivers.

And the consumer segment, and 18% increase and brand marketing from the fourth quarter of last year unfavorably impacted adjusted operating income growth and and the flavor solutions segment and <unk>.

Favorable product mix due to the decline and branded foodservice sales contributed two with adjusted operating income declined.

Both segments were also unfavorably impacted by COVID-19 related costs and higher employee benefit expenses, including incentive compensation.

As seen on slide 28, gross profit margin and the fourth quarter was comparable to the year ago period, as we had planned.

Adjusted operating margin declined 180 basis points compared to the fourth quarter of last year.

Driven by the net impact of the factors I mentioned a moment ago.

As well as higher distribution and transportation costs.

For the fiscal year gross margin expanded 100 basis points, driven by CCI led cost savings and favorable product mix.

Resulting from the sales shift between segments, which more than offset COVID-19 related costs.

Adjusted operating income increased 5% and constant currency and adjusted operating margin was comparable to last year.

And constant currency the flavor solutions segment, adjusted operating income declined 20% driven by lower sales unfavorable product mix and manufacturing costs, COVID-19 related costs and higher incentive compensation expense with.

And with a partial offset from CCI back cost savings.

Turning to income taxes on slide 29, our fourth quarter adjusted effective tax rate of 22, 9% compared to 24, 7% and the year ago period was favorably impacted by discrete items.

For the full year, our adjusted tax rate was 19, 9% as compared to 19, 5% from 2019.

Income from unconsolidated operations declined 9% and the fourth quarter of 2020.

And the full year was comparable to 2019.

At the bottom line as shown on slide 31 fourth quarter 2020 adjusted earnings per share was <unk> 79.

As compared to 81 cents per the year ago period.

The decline was primarily driven by our lower adjusted operating income, partially offset by the lower interest expense and a lower adjusted income tax rate per.

Per the year or 5% constant currency increase and adjusted operating income combined with a lower interest expense drove a 6% increase and adjusted earnings per share to $2 83 per cent.

2020.

Including the impact of unfavorable currency exchange rates versus last year.

On slide 32, and summarized highlights for cash flow and the year and balance sheet.

Our cash flow from operations ended the year at a record high of more than $1 billion.

10% increase compared to $947 million and 2019, primarily driven by higher net income.

We finished the fiscal year with our cash conversion cycle down 9% versus our 2019 fiscal year and as we continue to execute against programs to achieve working capital reductions.

We returned $330 million of this cash to our shareholders through.

Through dividends and we are very pleased that we fully paid off the term loans related to the acquisition and the Franks Red Hot and French's brands.

Following the acquisitions of <unk> and photo we have a pre synergy pro forma net debt to adjusted EBITDA ratio of approximately three nine times and.

And we expect to Delever to approximately three times by the end of fiscal 2022.

Based on our demonstrated track record of debt Paydown and our anticipated strong cash flow generation. We are confident that we will deliver on our plan.

Our capital expenditures were $225 million and 2020 and included growth investments and optimization projects across the globe, including our ERP business transformation investment and beginning our supply chain global infrastructure and investments that Lawrence mentioned earlier.

And 2021, we expect our capital expenditures to be higher in 2020, as we continue to spend all the initiatives, we have and progress as well and support our investments to fuel future growth.

Now I would like to discuss our 2021 financial outlook on slide 33, and 34 with a brief update on our ERP replacement program.

Starting with our ERP replacement program, we remain committed to this business transformation initiatives and have recently completed our re phasing of the program.

We are now projecting the total cost of our ERP investment to range between $350 million and $400 million from.

And from 2019 through the anticipated completion of our global rollout and fiscal 2023.

And with an estimated split of 50% capital spending and 50% of operating expenses.

As such the total operating expense impact for the program to be incurred from 2019 through 2023 is estimated to be between $175 million and $200 million.

Slightly lower than our previous estimate.

And fiscal 2021, we are projecting our total operating expense to be approximately $50 million, which is net incremental $30 million over fiscal 2020 and.

And at this time, we are not anticipating any significant go lives in 2021.

By the end of 2021, we will spend approximately $90 million and the total program operating expense.

We are excited to continue moving forward with this investment to enable us to further transform our ways of working and realize the benefits of a scalable growth platform.

Moving to our 2021 outlook with a broad and advantaged flavor portfolio of our robust operating momentum and effective growth strategies, we are well positioned for another year of differentiated growth and performance.

And our 2021 outlook.

We are projecting top line and earnings growth from our strong base business and acquisition contribution.

Net earnings growth cash, partially offset by the incremental COVID-19 costs and the ERP investment as well as a higher projected effective tax rate.

We also expect that there will be an estimated two percentage point favorable impact of currency rates on sales adjusted operating income and adjusted earnings per share.

We anticipate our organic growth will be primarily led by higher volume and product mix driven by our category management and marketing new products and customer engagement growth plans.

As Lawrence mentioned earlier, we expect sales growth to vary by region and quarter and 2021, given 2000 twenty's level level of demand volatility and the pace of the COVID-19 recovery.

But importantly, we expect we will drive our overall organic sales growth and both of our segments.

Our 2021 adjusted gross profit margin is projected to be comparable to 25 basis points higher from 2020.

And which reflects margin accretion from the Lula and <unk> acquisitions, as well as unfavorable sales mix between segments and COVID-19 costs.

We estimate COVID-19 cost to be approximately $60 million and 2021 as compared to $50 million and 2020.

And weighted to the first half of the year.

Fiscal 2020, once COVID-19 costs are largely driven by third party manufacturing costs and of course could vary based on demand fluctuations.

Our adjusted operating income growth rate reflects expected strong underlying performance from our base business acquisitions, which is projected to be 10% to 12% constant currency growth.

Partially offset by a 1% reduction from increased COVID-19 costs and a 3% reduction from the estimated incremental ERP investment.

This results and a total projected adjusted operating income growth rate of 6% to 8% and constant currency.

This projection includes low single digit inflationary pressure and our CCI led cost savings target of approximately $110 million.

It also includes an estimated low single digit increase and brand marketing investments, which will be heavier and the first half of the year.

Our 2021 adjusted effective income tax rate is projected to be approximately 23% based upon our estimated mix of earnings by geography, as well as factoring and a low level of discrete impacts.

This outlook versus our 2020 adjusted effective tax rate.

As expected to be a headwind to our 2021 adjusted earnings per share growth of approximately 4%.

Our 2021 adjusted earnings per share expectations reflect strong base business and acquisition performance growth of 9% to 11% and constant currency.

Offset by the impacts I, just mentioned related to COVID-19 costs are incremental ERP investment and the tax headwinds.

This resulted in an increase of 3% to 5% or 1% to 3% and constant currency.

Our guidance range for adjusted earnings per share and 2021 is $2 91 to two to $2 96 and.

Compared to $2 83 fab from adjusted earnings per share and 2020.

Based on the expected timing of some expense items, such as COVID-19 costs and brand marketing marketing investments as well as our low tax rate and the first quarter of last year, we expect our earnings growth to be weighted to the second half of the year.

We had a strong start to the year, but recognize we are lapping a very strong second quarter of 2020.

In summary, we are projecting strong underlying base business performance and growth from acquisitions, and our 2021 outlook.

With earnings growth, partially offset by incremental COVID-19 costs and ERP investment as well as a higher projected effective tax rate.

I'd like to now turn it back to loss for some additional remarks before we move to your questions.

Thank you Mike and.

Now that Mike has shared our financial results and outlook in more detail I would like to recap the key takeaways and keen on slide 35.

We're excited about the recent.

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