Q1 2024 McCormick & Co Inc Earnings Call
Yes.
Fostering Great: Good morning. This is fostering great VP of Investor Relations. Thank you for joining today's first quarter earnings call to accompany this call. We've posted a set aside on our IR website IR Mccormick Dot Com with me. This morning are Brendan Foley, President and CEO, and Mike Smith, Executive Vice President and CFO.
During this call we will refer to certain non-GAAP financial measures.
Fostering Great: The nature of those non-GAAP financial measures and related reconciliation to the GAAP results are included in this morning's press release and slides.
Fostering Great: In our comments certain percentages around it please refer to our presentation for complete information.
Fostering Great: This presentation contains projections and other forward looking statements.
Fostering Great: 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. Please refer to our forward looking statement on slide two for more information I will now turn the discussion over to Brendan.
Brendan F. Foley: Good morning, everyone and thank you for joining us as many of you have probably seen on the news. This morning that Francis Scott Key bridge collapsed in Baltimore.
Brendan F. Foley: Let's go out to everyone impacted by this terrible tragedy.
Brendan F. Foley: We have activated the team and are monitoring the situation.
Brendan F. Foley: We are pleased to start the year with strong first quarter.
Brendan F. Foley: Our performance reflects the early success of our prioritized investments to improve volume trends and drive profitable growth.
Brendan F. Foley: I will begin my remarks. This morning, with an overview of our first quarter results focusing on top line drivers next I'll provide a perspective on industry trends highlight some early signs of success as well as areas. We continue to work on and review our growth plans.
Brendan F. Foley: Nick will then go into more depth on the first quarter financial results and review our 2020 for outlook and finally before your questions I will have some closing comments.
Brendan F. Foley: Turning now to our results on slide four.
Brendan F. Foley: In the first quarter sales grew 2% in constant currency, reflecting a 3% contribution from pricing.
Brendan F. Foley: Offset by 1% decline in volume and product mix.
Brendan F. Foley: Primarily driven by the pruning of low margin business and are getting business divestiture.
Brendan F. Foley: Underlying volume was flat compared to the prior year.
Brendan F. Foley: Sequentially from the fourth quarter volume trends improved in both consumer and flavor solutions. We believe this improvement is indication of continued progress as we remain focused on driving quality topline growth throughout our portfolio.
Brendan F. Foley: In consumer volumes improved substantially from the fourth quarter in the Americas and EMEA, we drove positive volume growth, while continuing to benefit from pricing actions in Asia Pacific volume performance was impacted by the macro environment in China as we expected.
Brendan F. Foley: We continue to expect full year 2020 for China consumer sales to be comparable to 2023 outside of China, We delivered strong sales growth driven by both price and volume.
In flavor solutions, our results are solid and growth was driven by price and underlying volume growth, partially offset by the impact of <unk> divestiture.
Brendan F. Foley: We are pleased with our performance recognizing many of our customers, including consumer products companies or Cpg's at quick serve restaurant <unk> continued to experience volume softness in their businesses. We are continuing to collaborate with our customers and navigate this challenging environment and we remain optimistic about our growth.
Brendan F. Foley: For the year, it's worth noting that volume trends in the flavor solutions typically fluctuate quarter to quarter.
Brendan F. Foley: Largely attributable to customer activity, including new product launches limited time offers and there are other promotional activity.
Brendan F. Foley: As we said at the Cagny Conference Mccormick is a growth company and 'twenty 'twenty four is an important investment year to return to our long term objectives.
Our results demonstrate the early impact of investments, we have made to fuel our top line and further capitalize on the underlying growth of our categories. We have a robust set of initiatives and continue to expect share gains in units to lead our trends and our results will build throughout 2024.
Speaker Change: Let me share some of our perspectives on the industry trends.
Speaker Change: We are in a unique position with our portfolio's breadth and reach in both consumer and flavor solutions, our shared insights give us a very strong understanding a consumer's flavor preferences behaviors and trends.
Speaker Change: Consumers remain challenged two years of steep inflation has had an impact and many are exhibiting value seeking behavior.
Speaker Change: While food inflation is slowing it's compounded impact is still being felt by consumers.
Speaker Change: Stretched resulting in choice full spending decisions.
Speaker Change: <unk> is continuing from the fourth quarter and.
In the first quarter with higher inflation in the foodservice channel as slowing retail food prices, we broadly saw a shift from.
Speaker Change: Food away from home to food at home consumption in our major markets. We are also seeing improvement in center store categories and some softness in restaurant traffic across all regions. As we said the current state of the consumer is not defined by any one trend it remains dynamic.
Speaker Change: And we are responding with speed and agility I'm encouraged by the early success of our key initiatives. We have the right plans in place that are continually influenced by what matters, most to our consumers and customers and fit within our strategic priorities.
Speaker Change: Moving to slide five let me highlight for the quarter some of the key signpost of our success Administrate, we have the right plans in place.
Speaker Change: Starting with spices and seasonings in Americas, EMEA and Asia Pacific, Excluding China, we grew volumes in the U S. Our unit share performance continues to improve and we drove dollar share gains in eastern Europe.
Speaker Change: And recipe mixes we strengthened our performance with volume growth in the Americas reversing the trends from the fourth quarter.
Speaker Change: Recipe mixes where significant driver of UK volumes.
Speaker Change: And homemade dessert. We're also a substantial driver of France is volume growth.
Speaker Change: And both we realized both unit and dollar market share gains.
Speaker Change: Growth in our <unk> business is strong across key categories, including outpacing the category and alcoholic beverages and performance nutrition.
Speaker Change: Finally, we grew volume in branded foodservice and realize market share gains in spices, and seasonings and on tabletop and hot sauces.
Speaker Change: Before I get into our growth plan, let me touch on some areas where there is some pressure.
Speaker Change: We continue to experience volume declines in the prepared food categories that we participate in like frozen and Asian.
Speaker Change: In Americas consumer importantly, these items represent a small part of our portfolio and improved volume trends in our core categories is beginning to offset these declines.
Speaker Change: Our muster in Americas consumer as we discussed in our last earnings call. We continue to experience extremely low price points for private label, which is impacting our consumption and driving down category dollars while performance in mustard improved relative to the fourth quarter. We still have work ahead of us.
Speaker Change: We plan to drive further volume improvements by narrowing price gaps and increasing promotions new products, including <unk> <unk> and importantly through recent distribution wins.
Speaker Change: Moving to hot sauce, and Americas consumer consumption volume trends improved in the fourth quarter, particularly coinciding with our successful Super Bowl activation campaign.
Speaker Change: Reflecting on our first quarter performance it highlights two dynamics.
Speaker Change: We have underlying strength in our base business and strong consumer loyalty.
Speaker Change: Our growth plans remain consistent.
Speaker Change: Fueling growth through increasing dose cholewa and Frank's Red Hot brand marketing with Frank's activated year round for the first time as well as exciting innovation aligned with consumer trends and expanding distribution.
Speaker Change: Recently, we have seen a surge in $1 price point trial sizes from new and existing small players, which is incremental to the category and is pressuring our share performance. We remain the leader in this attractive fragmented and growing category <unk>.
Speaker Change: New buyers presents a great opportunity to win new households, using our growth levers as well as our scale and capabilities in.
Speaker Change: In flavors are growth with quick serve restaurants and flavor solutions was impacted by sluggishness, our traffic in EMEA and Asia Pacific.
Speaker Change: Finally, some of our consumer packaged food customers continue to experience softness volumes within their own business.
Speaker Change: In both Americas and EMEA, we are focused on working with our customers to support their innovation plans and continue to diversify our customer base over time.
Speaker Change: Before I talk to our growth plans in detail, let me touch on spices and seasonings at a global level. We are pleased with the growth and consumption we delivered in the quarter.
Speaker Change: Specifically looking at U S spices and seasonings, we are driving significant improvements.
Speaker Change: Our new packaging continues to increase velocity on shelf.
Speaker Change: And we are recapturing distribution points and a sequential improvement led to positive unit share gains at the end of the quarter.
Speaker Change: In addition, our growth is supported by our increased brand marketing and new products.
Speaker Change: Lastly, we expect to largely start seeing the impact of our actions and our results during the second half of the year. Following most of our customers shelf resets at the end of the second quarter.
Speaker Change: Let's now move to our growth plans on slide six which are leading our strong first quarter performance and we will continue to drive our success in 2024 and beyond.
Speaker Change: Brand marketing, new products, and packaging innovation and category management proprietary technologies and customer engagement continued to be the initiatives behind our growth levers.
Speaker Change: Starting with brand marketing.
Speaker Change: Our plans across all categories are supported by our global brand marketing initiatives.
Speaker Change: <unk> investments to connect with consumers and fuel growth.
Speaker Change: Our differentiated brand marketing is driven by a combination of factors.
Speaker Change: In addition to maintaining a high share of voice, we are committed to having the best content in our categories content that inspires and educates consumers and reaches them at the right points on their path to purchase and their flavor journey.
Speaker Change: From flavor exploration and menu planning shopping and cooking and even to eating and sharing the experience online.
Speaker Change: In Q1 brand marketing spend was up significantly compared to the prior year as expected. This increase was broad based across all regions. It was an important driver in improving volumes.
Speaker Change: Through our efforts across multiple channels, particularly in retail media, we are driving further household penetration and increasing by rates across spices, and seasonings recipe mixes and condiments.
Our holiday campaigns across our region proved successful our marketing campaigns in the Americas highlight our everyday value at point of difference to consumers and are supporting our improved volume trends and share improvement.
Speaker Change: Our Frank Super Bowl activation campaign with Jason Kelsey now a retired NFL player was very successful, we gained new buyers and media and consumer sentiment as well as engagement from other big brands was incredibly positive.
We continued to benefit from new products and packaging. It is one of the primary drivers of our growth and as we said at Cagny. The performance of our launches continues to improve we are continued to realize growth from a 2023 launches for example, our cholewa salsas and recipe mixes are driving new buyers to the category and our <unk>.
Speaker Change: Leading our expectations since launch and we continue to build the U S distribution and they're also launching both formats and Canada. This year.
Speaker Change: The rollout of our U S everyday urban Spice portfolio is on plan and expect it to be fully shipped by the end of the second quarter.
Speaker Change: Or not at the same range of Schwartz seasonings and recipe mixes continues to drive our innovation performance and expand household penetration with younger consumers.
Speaker Change: As we look ahead to the rest of the year.
Speaker Change: With our renovated recipe mixes we have opportunities to win more dinner occasions, with new global cuisine seasonings in both Americas, and EMEA and reshaping the portfolio by shifting offerings to meet consumers' growing preference for non red meat proteins and.
Speaker Change: And seasoning blends and exciting growth opportunity you mentioned at Cagny, we are launching new lobbies seasoning blends in large sizes, which offer a value price point to consumers.
Speaker Change: And we're really excited about the French red Hot gifts and popular flavors and a squeeze bottle format, we just launched and looking forward to another campaign.
Speaker Change: Featuring Jason Kelsey.
Speaker Change: In flavor solutions, we are leveraging our proprietary technologies to support our innovation and flavors to win new customers diversifying our customer base and drive share gains across our portfolio.
Speaker Change: Our momentum with our flavors customers continues to be strong and fuel our new product pipeline we.
We are collaborating with many of our customers to heat up their products from snacking to beverages.
Speaker Change: Our heat brief win rates are strong across our regions. We continue to dedicate resources, where we have built to win.
Speaker Change: In branded foodservice, we have a strong innovation agenda, including launching a cattlemen's Hawaiian Bbq flavor.
Speaker Change: Expanding our seating portfolio with two CRO line extensions and extending Mccormick <unk>, which has had great performance in our consumer segment into this channel.
Speaker Change: Let's turn to category management, where I'd like to review, our revenue management efforts and expanding distribution.
Speaker Change: First revenue management remains a capability and we have a history of optimizing pricing on shelf to benefit both Mccormick and the retailer we continue to take a surgical approach to managing our price gaps to private label and branded competitors. Our price investments are primarily focused in Americas, consumer where they impact about 50% of.
Speaker Change: Our portfolio in that segment.
Speaker Change: Revenue management will continue to be an important tool for driving growth and we will consistently leverage real time analytics and insights to refine our plans.
Speaker Change: In terms of expanding distribution, we continued and the progress on restoring a majority of the distribution that was lost due to supply issues, we have secured wins and new distribution.
Speaker Change: To further strengthen our value proposition in EMEA, we have grown distributions into fast growing discount channel and in the U S are lower we felt the price point is expanding across the stores of the leading discounter.
Speaker Change: And in China, we are expanding in small format stores, which have grown rapidly in recent years as well as into third and fourth tier cities.
Speaker Change: We are meeting the consumer where they live and shop.
Speaker Change: Let me briefly mentioned our heat platform as you heard in my remarks, he infused products span our portfolio and are driving growth. We expect him to continue to be a long term growth accelerator globally for Mccormick.
Consumers, particularly younger generations continue to drive demand in this play a profile.
Speaker Change: We are uniquely positioned to win in heat or global iconic brands and are meaningful scale and expertise that we have been building for decades.
Speaker Change: To wrap up we believe the execution of our growth plans will be a win for our consumers customers or categories, and Mccormick, which will differentiate and strengthen our leadership.
Speaker Change: As we look ahead to 2024, and we are maintaining our outlook.
Speaker Change: Mike will share more of the details at a high level, we expect our top line to be at the mid to high end of our guidance range given the momentum we saw in the first quarter.
Speaker Change: We are confident in our initiatives and we have provided proof points of when they're working that.
Speaker Change: That said, we also continue to reflect the uncertainty in the consumer environment and our outlook for 2024.
Speaker Change: Before I pass the call to Mike, Let me reiterate a few points.
Speaker Change: We are deliberately focus on attractive high growth categories across all segments, resulting in a significant long term tailwind to drive profitable growth that said it is crucial that we continue to capitalize on this position of strength.
Mike Smith: The long term trends that fuel our categories consumer interest in healthy flavorful cooking flavor exploration and trusted brands continue to be very strong and importantly, consumer enjoyment and cooking is growing.
Mike Smith: We remain dedicated to improving volumes, we continue to refine our plans and are prioritizing our investments to drive impactful results and returned to differentiated and sustainable volume led growth.
Mike Smith: And you should continue to expect improvement over the coming year and into 2025 and beyond now or to Mike.
Mike Smith: Thanks, Brendan and good morning, everyone.
Mike Smith: Starting on slide eight our topline constant currency sales grew 2% compared to the first quarter of last year.
Mike Smith: Reflecting 3% of pricing benefit offset by a 1% volume and mix decline.
Mike Smith: As expected volume were impacted by our strategic decision to exit DSD direct store delivery of our bagged Hispanics devices in the Americas the.
Mike Smith: The exit of a private label product line and the divestiture of a small canning business in EMEA.
Mike Smith: Underlying volume and mix performance was flat for the quarter, reflecting a sequential improvement from the fourth quarter. Our total underlying volume growth were down approximately 3%.
Mike Smith: In our consumer segment constant currency sales growth of 1% reflects a 3% increase of pricing actions.
Set by a 2% volume decline, which is due to a 1% impact from the DSD business like what I just mentioned lower.
Mike Smith: Lower volume and product mix in the Americas, specifically in prepared food categories, including freezing frozen in Asia, consistent with our expectations.
Mike Smith: And the impact of the macro environment in China.
Mike Smith: On slide nine consumer sales in the Americas were comparable to last year contribution from price was offset by volume and mix decline of 3%.
Mike Smith: This decline was fully attributable to the DSD exit and lower volume and product mix in the prepared food categories I just mentioned.
Mike Smith: In EMEA constant currency consumer sales increased 8%.
With 5% increase from pricing actions and 3% volume growth.
Mike Smith: Sales growth was broad based across product categories and our meter markets. We are pleased with volume growth, we delivered in EMEA and expect the momentum to continue through 2024.
Mike Smith: Constant currency consumer sales in the APAC region were down 5%.
Mike Smith: Driven by a 6% volume decrease primarily due to the macro environment in China.
Mike Smith: Outside of China, we drove high single digit sales growth with price and volume contributing equally.
Mike Smith: And the growth was broad based across categories and markets.
Mike Smith: Okay.
Mike Smith: Turning to our flavor solutions segment on Slide 12, we grew first quarter constant currency sales by 2% with pricing contributing 2% and volume contributing 1%.
Mike Smith: Our debt by a 1% decline due to the divestiture of the Kenny business.
Mike Smith: And the exit of a private label product line in EMEA.
Mike Smith: In the Americas flavor solutions constant currency sales rose, 3%, reflecting a 2% contribution from price and 1% growth in volume and product mix.
Mike Smith: Sales growth was led flavor, most notably in performance nutrition and branded foodservice.
Mike Smith: In EMEA constant currency sales decreased by 1%.
Mike Smith: Adding a 3% impact from the.
Mike Smith: Divestiture of the <unk> business.
Mike Smith: Pricing actions of 4% were partially offset by lower volume and product mix of 2% primarily attributable to the exit of private label product line I mentioned earlier.
Mike Smith: In the APAC region flavor solutions sales grew 5% in constant currency with a 4% contribution from pricing and 1% volume growth.
Mike Smith: Inside of China sales remained negatively impacted by geopolitical boycott some of our quick service restaurant customers are.
Mike Smith: Everything in Southeast Asia.
Mike Smith: As seen on slide 16, gross profit margin expanded by 140 basis points in the first quarter versus the year ago period.
Mike Smith: Fibers in the quarter included favorable product mix.
Mike Smith: The benefit of our comprehensive continuous improvement program or CCI, and our global operating effectiveness program.
Mike Smith: As well as effective price realization.
Mike Smith: As we look to the second quarter, we expect gross margins to modestly expand compared to the year ago period, as we realized our highest level of pricing and cost recovery in the second quarter of 2023.
Mike Smith: This trend may differ from our historical cases for.
Mike Smith: Gross margin increased sequentially every quarter throughout the year. However, we continue to expect higher margins in the second half compared to the first half the year.
Mike Smith: Now moving to slide 17, selling general and administrative expenses or SG&A increased relative to the first quarter of last year, driven by brand marketing and research and development investments.
Mike Smith: Which were partially offset by CCI cost.
Mike Smith: Cost savings.
Mike Smith: As a percentage of net sales SG&A increased 110 basis points.
Mike Smith: And marketing increased significantly compared to the prior year.
Mike Smith: Our investments are yielding results and we anticipate continuing to invest behind these efforts.
Mike Smith: Sales growth and gross margin expansion, partially offset by higher SG&A costs resulted in an increase in adjusted operating income of 5% compared to the first quarter of 2023.
Mike Smith: <unk> in constant currency.
Mike Smith: Adjusted operating income.
Mike Smith: Consumer segment was up 2% with minimal impact from currency.
Mike Smith: In flavor solutions, adjusted operating income increased 15% and included a 1% currency impact.
Mike Smith: We remain committed to restoring flavor solutions profitability and in the first quarter as expected we drove margin expansion versus the prior year in this segment.
Mike Smith: Our performance this quarter reflects our commitment to increase our profit realization and positions us well to make continued investments in 2024th to fuel top line growth.
Mike Smith: Turning to interest expense and income taxes on slide 18.
Mike Smith: Our interest expense was comparable to the prior year.
Mike Smith: Our first quarter adjusted effective tax rate was 25, 5% compared to 21, 8% in the year ago period.
Our tax rate in the prior year benefited from discrete tax items.
Mike Smith: We expect these benefits to occur later in the year for us in 2024.
Mike Smith: As a result, we continue to expect our tax rate to be approximately 22% for the year.
Mike Smith: Our income from unconsolidated operations in the first quarter reflects strong performance in our largest joint venture.
Mike Smith: Mccormick to Mexico, we are.
Mike Smith: The market leader, where Mccormick branded mayonnaise marmalade, the metro product lines in Mexico, and the business continued to contribute meaningfully to our net income and operating cash flow results.
Mike Smith: At the bottom line as shown on slide 21st quarter 2024, adjusted earnings per share was <unk> 63.
Mike Smith: And compared to $50 for the year ago period.
Mike Smith: The increase was attributable to higher operating income.
Mike Smith: Driven by sales growth and gross margin expanded.
Mike Smith: As well as the results from Mccormick de Mexico joint venture.
Mike Smith: Partially offset by higher adjusted effective tax rate.
Mike Smith: On slide 21, we've summarized highlights for cash flow and the balance sheet.
Mike Smith: Our cash flow from operations was strong in the first quarter $138 million.
Mike Smith: Compared to $103 million in 2023.
Mike Smith: The increase was primarily driven by higher operating income and working capital improvements.
Mike Smith: We returned $130 million of cash to our shareholders through dividends and used $62 million for capital expenditures.
Mike Smith: As a reminder, capital expenditures include projects to increase capacity and capabilities to meet growing demand.
Mike Smith: Our digital transformation and optimize our cost structure.
Mike Smith: Our priority remains to have a balanced use of cash funding investments to drive growth returning a significant portion to our shareholders through dividends and paying down debt.
Mike Smith: Importantly, we remain committed to a strong investment grade rating and continue to expect 2020 would it be another year of strong cash flow driven by profit and working capital initiatives.
Mike Smith: Now turning to our 2024 for announcements financial outlook on slide 22.
Mike Smith: Our outlook continues to reflect our prioritize investments in key categories to strengthen volume trends and drive long term sustainable growth.
Mike Smith: Well I appreciate the uncertainty of the consumer environment.
Turning to the details.
Mike Smith: First currency rates are expected to unfavorably impact sales adjusted operating income and adjusted earnings per share by approximately 1%.
Mike Smith: At the top line, we continue to expect constant currency net sales to range between a decline of 1% to growth of 1%.
Mike Smith: Given the momentum in the first quarter, we expect to be closer to the midpoint to high end of our guidance range.
Mike Smith: In terms of pricing, we continue to expect a favorable impact related to the wrap of last year's pricing actions most significantly in the first half.
Mike Smith: Really offset by a price at management investments that will drive volume growth.
Mike Smith: We expect to drive improved volume trends as the year progresses.
Mike Smith: Through the strength of our brands and the intention and targeted investments we are making.
Mike Smith: As we noted our initiatives will take time to materialize and we continue to expect to return to volume growth in the second half of the year.
Mike Smith: Any new macroeconomic headwinds.
Mike Smith: Starting in the second quarter, we will have lapped the impact of the DSD and private label product line business.
Mike Smith: The divestiture of the <unk> business will impact us through the third quarter.
Mike Smith: We expect to continue to prune lower margin business throughout the year as we optimize our portfolio.
Mike Smith: The impact of which will be reflected within the natural fluctuation of sales.
Mike Smith: And finally in China, our food away from home business, which is included in APAC consumer is expected to be impacted by slower demand in the first half of the year.
Mike Smith: And as such we expect China consumer sales to be comparable to 2023 for the full year.
Mike Smith: While we recognize there has been volatility in demand in China. We continue to believe in our long term growth trajectory of the China business.
Mike Smith: Our 2020 for gross margin is projected to range between 50 to 100 basis points higher in 2023.
Mike Smith: This gross margin expansion reflects favorable impacts from pricing product mix and cost savings from our CCI and <unk> programs.
Mike Smith: Partially offset by the anticipated impact of low single digit increases in Boston inflation and our increased investments.
Mike Smith: Additionally, we expect to begin reducing our dual running costs related to our transition to the new flavor solutions facility in the UK in the back half of the year.
Mike Smith: Moving to adjusted operating income, we expect 4% to 6% constant currency growth.
Mike Smith: This growth is projected to be driven by our gross margin expansion as well as SG&A cost savings from our CCI.
Mike Smith: <unk> and <unk> programs, partially offset by investments to drive volume growth, including brand marketing.
Mike Smith: We expect our brand marketing spend to increase high single digits in 2024, reflecting a double digit increase in investments, partially offset by CCI savings.
And we continue to expect our increased investments in brand marketing to be concentrated in the first half of the year.
Mike Smith: Our 2024 adjusted affected income tax rate projection of approximately 22% is based upon our estimated mix of earnings by geography, as well as factoring in discrete impacts.
Mike Smith: We expect a mid teens increase in our income from unconsolidated operations, reflecting the strong performance, we anticipate and Mccormick de Mexico.
Mike Smith: To summarize our 2024 adjusted earnings per share projection of $2 80.
Mike Smith: To $2 85.
Mike Smith: Next a 4% to 6% increase compared to 2023.
Speaker Change: As we head into the second quarter, let me summarize some of the puts and takes.
We expect to drive volume improvement with some pressure expected in flavor solutions through the trends as Brendan mentioned earlier.
Speaker Change: Fully lap the impact of pricing actions, we took in the prior year and activate significant portion of our price management efforts.
And continue our investments in brand marketing as our programs are working and driving growth.
Speaker Change: As a result, our operating profit will likely be less robust for the second quarter. However, we continue to anticipate strong profit growth in the second half of the year.
Speaker Change: As Brendan noted we are dedicated to improving volumes, we are prioritizing our investments to drive impactful results and returned a differentiated and sustainable volume led growth we remain confident.
Speaker Change: Confident in the underlying fundamentals of our business and delivering on our profitable growth reflected in our 2024 financial outlook.
Brendan F. Foley: Thank you, Mike before moving to Q&A I would like to close with our key takeaway on slide 23.
Brendan F. Foley: First quarter results and our volume trajectory demonstrate that we are making the right investments to drive long term sustainable organic growth and reinforces our confidence.
Brendan F. Foley: We are executing on our proven strategies and investing behind our business with speed and agility and an alignment to consumer behavior and capitalizing on our advantage categories across segments.
Brendan F. Foley: We are able to do this and continue to make good progress on managing costs led by our CCI programs to support our increased investments in the business drive margin expansion.
Brendan F. Foley: Our performance for the quarter, coupled with our growth plans give us confidence in achieving the mid to high end of our projected constant currency sales growth for 2024.
Brendan F. Foley: Finally, I want to recognize Mccormick employees around the world for their contributions and reiterate my confidence that together, we will drive the profitable growth reflected in our 2024 outlook now for your questions.
Thank you if you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before question Mr. Keyes our fares.
Brendan F. Foley: Question comes from the line of Andrew Lazar with Barclays. Please proceed with your question.
Andrew Lazar: Great. Thanks, Good morning, Brendon and Mike.
Andrew Lazar: Good morning, Andrew.
Maybe to start off your first quarter organic sales, obviously came in better than I think the street had forecast and it sounds like maybe better than you might have initially expected.
But it's of course, it's a seasonally smaller quarter for performance as well.
Andrew Lazar: While you did confirm that the full year sales growth range. Obviously was notable your comment and your comments about having increased confidence in achieving the mid to high end of your constant currency sales growth range for the full year. So I was hoping maybe you could give us a sense of some of the specifics.
Andrew Lazar: What gave you that greater confidence now than when you first gave guidance last quarter.
Speaker Change: Uh huh.
Speaker Change: Well, thanks, Andrew for the question.
Speaker Change: Maybe just to open up with.
Speaker Change: A couple of remarks, I think drive at the heart of your question, we did have a strong quarter.
Speaker Change: We drove a little bit more on sales, which does give us confidence to be in that mid to upper half of our range.
Speaker Change: And I think importantly, we accomplish the things that we said we would do and we've made a lot of good progress we drove sequential improvement volume improvement in our core categories, especially on spices and seasonings.
Speaker Change: We said this would be a year of investment and we were able to quickly execute the programs that we intend to take out in the market that was as an example increased brand marketing new product launches are performing well from 2023 and.
Speaker Change: That targeted price gap management execution and at the same time, we did expand margins. So we are pleased with the results yet it is the start of the year and it's our smallest quarter as you called out and so we're keeping it in perspective.
Speaker Change: But this is strong progress and.
Speaker Change: And so I think that gives us some of that confidence going into the rest of the year as we noted on the call.
Speaker Change: We're probably as you'd expect.
Speaker Change: Our pricing assumptions haven't changed so this doesn't imply that volumes are improving as we as we go through the year.
Speaker Change: We have targeted investments that we continue to expect to improve those volume trends as the year progresses and to drive volume growth during the second half of the year.
Speaker Change: We're focused on what we can control and we're confident in those initiatives that we've called out and hopefully.
Speaker Change: The proof points that can be decided.
Speaker Change: We don't necessarily got by quarter or segment of regions will then provide some additional color on that from a segment level. We would expect those volumes to be relatively similar with Scott St volume growth in both segments in the second half.
Speaker Change: And.
Speaker Change: So we did call out.
Speaker Change: The flavor solutions volume does fluctuate quarter to quarter, So thats something that we still expect to see across our business largely attributable to customer activity.
Speaker Change: But we do feel like there is a lot of good momentum I think that we've had.
Speaker Change: We've established the drivers of west.
Delivering this we've made substantial investments in the first half of the year on increased brand marketing. So it already happened in Q1, we expect to do.
Speaker Change: More of that in Q2.
Speaker Change: We also have new product launches coming out in 2024.
Speaker Change: We called out that flavor maker lines going into next to mortar or we have a lot of Frank's innovation coming out in the marketplace.
Speaker Change: Leading to grilling season.
Speaker Change: We're really quite pleased with our category management and renovation.
Speaker Change: Across our portfolio, so I think that will speak to our.
Speaker Change: Our confidence in the year.
Speaker Change: As we continue to move forward.
Speaker Change: Okay, and then I know volumes and specifically in consumer Americas, I think we're down about 6% in the fourth quarter of last year and as you noted down and much more modest sort of less than 3% in the first quarter would you expect consumer Americas volume to sort of continue to improve sequentially from here and again in that segment.
Speaker Change: It could inflect to positive during the second half of the year or are some of the headwinds you pointed out that that's still existing consumer Americas still more of a challenge too.
Speaker Change: Yes, let me give more context around Q1, and then that might also help but.
Speaker Change: Sort of the foundation for how to think about.
Speaker Change: A year ago.
The volume decline of $2 six in the Americas for Q1.
Speaker Change: It's really coming through two key factors one is that DSD exit.
Speaker Change: Okay.
Speaker Change: Over the last four quarters so.
Speaker Change: It was one of the drivers so that two 6% and then that decline in the prepared food categories. As we noted on the call.
Speaker Change: So if you exclude those two factors volume growth in consumer Americas would've been flat to slightly positive.
So I think thats kind of helps to sort of set a foundation for how to think about the year to go also in our key categories in Q1 growth in spices, and seasonings and recipe mixes.
Pretty pretty healthy, but was offset by declines in hot zones.
Speaker Change: So that's our context I think we would provide against Q1.
Speaker Change: As we look forward to the year, we expect volumes to continue to sequentially improve.
Speaker Change: <unk>.
Speaker Change: Drive volume growth as we get into the second half.
Speaker Change: That would probably be the best perspective, I can provide.
Speaker Change: On that I think to think about too is this is not just about Americas consumer I mean, we're building volume globally and the consumer side and a lot of the same brand building activities such as increased A&P, we've talked about this in the call.
Speaker Change: Is it all regions. So we can continue to support those brands globally in each of our regions as much as the Americas.
Speaker Change: Thank you so much.
Speaker Change: Thank you. Our next question comes from the line of Peter Galbo with Bank of America. Please proceed with your question.
Peter Thomas Galbo: Hey, guys. Good morning, Thanks for taking the question.
Sure.
Peter Thomas Galbo: Mike maybe just to follow up on Andrew's question, I think if you strip out DSD.
Peter Thomas Galbo: The exited in the first quarter, you still kind of had a ship ahead of consumption ahead of what the scanner data would have said.
Peter Thomas Galbo: North American consumers. So maybe I know you probably don't want to give them like basis point level detail, but if you could kind of rank between attract.
Some of that co manufacturers can you do.
Peter Thomas Galbo: Some of the upside drivers relative I guess to the southern.
Peter Thomas Galbo: And our data that drove kind of the positive variance in the quarter.
Peter Thanks for your for your your question on that.
Peter Thomas Galbo: On an apples to apples basis, our consumption is roughly in line with our sales and we are shipping to consumption.
Speaker Change: What's probably driving the U S consumption lagging on.
Speaker Change: Americas consumer services, we had good growth in Latin America, Canada contributed to our global growth.
Speaker Change: But we also delivered growth in unmeasured.
Excluding that that DSD.
Speaker Change: This exit that we talked about and so we do expect.
Speaker Change: And continued alignment between consumption and shipments moving forward. We don't really believe that there is any sort of inventory movement that we can call out.
Speaker Change: At this point in time.
Speaker Change: But it's also important to call out in that in unmeasured growth was primarily driven by ecommerce.
Speaker Change: It represents just globally for us about 5% of our total consumer sales and so.
That's pretty healthy and positive, but we've seen double digit growth in all 23, and ecommerce and did account in Q1.
Speaker Change: So we continue to believe that E. Commerce is a growth channel and we do continue to put resources against it but coming back to the sort of the topic to your question on.
Speaker Change: The influences unmeasured channels I would probably think about that as 20 to consider and think about but largely we really believe that our shipments and consumption are broadly in alignment.
Speaker Change: Okay.
Speaker Change: Got it no. That's helpful. And then maybe you guys just I wanted to clarify on China.
Speaker Change: Slide you say, maybe two things.
Speaker Change: I think in the in the China consumer business, which I know is kind of more branded foodservice that there was some weakness, but then on China flavor solutions, you talked about strength in <unk> in China. So just.
Speaker Change: Wanted to maybe unpack a bit more on those can be two different things and get a better read.
Kind of between those two sub segments and thanks very much.
Speaker Change: Sure I'll answer a couple of comments here and Mike might have some things to add.
Speaker Change: We're not thinking about China any differently.
Speaker Change: Then what we said last quarter.
Speaker Change: Largely met our expectations for the first quarter, both from consumer perspective in our flavor solutions segment perspective, and we continue to expect that.
Speaker Change: For total 2020.
Speaker Change: 2020 for China consumer sales to be comparable to 2023.
Speaker Change: Broadly our outlook for the Chinese consumer does remain cautious I mean, there are several reasons to continue.
Speaker Change: Continue to think that way.
Speaker Change: <unk> on the persisting unemployment with young adults and reduced consumer confidence.
Speaker Change: Consumers are still looking.
Speaker Change: Spend in and our business.
Speaker Change: <unk> falls into our consumer segment.
Speaker Change: As sales to smaller independent restaurants, and they are losing some traffic to the larger MSR change that might be where youre hearing us say two different banks.
Speaker Change: And so I offer that as some perspective around that yet like we do with other regions. We have placement flight to address how we're looking at China in a changing trends with Chinese.
Speaker Change: Chinese consumers.
Speaker Change: Then we do expect our flavor solutions business to be stronger in 2024, just based on the trends that we're seeing.
Speaker Change: That's I think some of the perspective, Mike do you want to add yes, I think we were in China about two months ago and saw a lot of these trends where the <unk>.
Mike Smith: Big established Qs stars are starting to gain share and drive some traffic into their stores versus that kind of smaller mom and pop type stores.
Mike Smith: I would just give you a context to this kind of talk as we talk about our full flavor solutions business.
Mike Smith: Our business in some parts of the world like China is really doing well other parts, it's a bit challenged so.
Mike Smith: If you think about our guidance is it things that you can talk about the flavor solutions business is lumpy and part due to the fact that.
Mike Smith: Our CPG customers and CSR customers control, new product launch just foot traffic and things like that but China has started off strong on the <unk> side, which is great.
Speaker Change: Great. Thanks, guys.
Speaker Change: Thank you. Our next question comes from the line of Max <unk> with BNP.
Max: Please proceed with your question.
Max: Hey, Thanks for the question.
Max: Yes.
Max: Talking about making.
Max: Morning.
Max: Quarter, you talked about making good progress.
Max: Restarting distribution that was lost.
Max: Gas supply issues in it and to do that I think you're right.
Alright.
Max: And that you still have line of sight too.
Max: Making some good progress on getting that distribution back consolidated customer reset in the middle of this year I was just curious if you could give us a bit more color on.
Max: The updated insight you've gotten over the past couple of months since we last heard from you on what Youre seeing what youre hearing with regard to customer ratings.
Max: Spices and seasoning.
Speaker Change: Thanks for the question Max.
Speaker Change: As a reminder.
Speaker Change: The practice continuations that over the course of the list.
Speaker Change: Those last two years make up roughly 50% of the TDP losses that we experience. So just reminder, as background on that and then.
Speaker Change: The other GDP that we lost really due to supply we've recovered earlier, but quite a bit of it not entirely all of it but a lot of it I think the context I would add on top of that in terms of what we're seeing right now across our core categories, we're really making pretty.
Speaker Change: Good progress. So for example, just on recipe mix.
Speaker Change: Our total distribution points were up again in Q1 and.
Speaker Change: At this point, we probably have the highest tdp's, we've seen in that category profit compared to last three or four years.
And our share of TD piece is really quite healthy strong on hot sauce again, our tdp's were up in Q1.
Speaker Change: We have the highest total GDP points on that business too.
Speaker Change: In the last three years mustard similar situations Tep's were up again in Q1.
Speaker Change: And we have the highest total tdp's and on that one the share of GDP for the last three years. So.
Speaker Change: A number of categories, we feel like we're doing quite well, it's progressing quite nicely.
Speaker Change: Up against the spices and seasonings, we're also making pretty good progress in about five of our top six segments, we're seeing.
Speaker Change: <unk> growth.
Speaker Change: Broadly right now the shares is flat for us, but we expect that to improve as we go through the year a lot of these <unk>.
Speaker Change: When you think about any category or most of them tend to happen in the middle of the year, we think towards the end of Q2 those.
Speaker Change: Those will start to reflect on shelf.
Speaker Change: And so I wouldn't say for all of Q2, but definitely as we go to the back half of the year, we think there'll be more of a reflection of.
Speaker Change: Of the gains that we think.
Speaker Change: Yeah.
Speaker Change: Great and then one more on flavor solutions and so it's nice to see the positive volume growth.
Speaker Change: To start the year it was a bit earlier than we all expected.
Speaker Change: And he's from Oxy and.
Speaker Change: And I know you called out that this segment.
Speaker Change: You can have fluctuations from there due to limited time offering promotional timing.
Speaker Change: New product launches what have you.
Speaker Change: With that comment.
Speaker Change: You can see and know that we know that would make you think we could see.
Speaker Change: Some step back in <unk> or is it more just kind of and.
Speaker Change: This is a segment that is more volatile and theres potentially reason to think that we could see it get back to you.
Speaker Change: Flatter performance in ticket and I'll leave it there.
Thanks.
Speaker Change: Yes. This is Mike, Yes, I think you're right, we're really happy with our first quarter performance there the sequential improvement, but some of our regions. The tsi business is pretty materials such as in EMEA.
And it's very public some of the covenants coming out talking about foot traffic. So.
Speaker Change: I think as Brenda said in the call. The second quarter, there is a bit of a bit of a headwind there on the flavor solutions side, so I wouldn't be surprised by that but.
Speaker Change: Third to second half both for consumer and flavor solutions volumes were expecting expecting strength.
Speaker Change: I think I think about it.
Speaker Change: <unk>.
Speaker Change: Versus quarters, because quarters get very can get very nice.
Speaker Change: Next makes a difference sometimes so within the first half we're still calling for kind of flattish volumes second half volume growth across the business I think about it too.
Speaker Change: Yeah.
Speaker Change: Great. Thanks very much.
Speaker Change: Thank you. Our next question comes from the line of Adam Samuelson with Goldman Sachs. Please proceed with your question.
Adam Samuelson: Yes. Thank you good morning, everyone.
Adam Samuelson: Good morning Ann.
Adam Samuelson: Morning.
Adam Samuelson: So I guess I wanted to dig in a little more on the Americas.
Adam Samuelson: Zuma businesses.
Adam Samuelson: Just maybe you can provide a little more context, and then Mike one.
Adam Samuelson: The point on spices, and seasoning and unit share.
Adam Samuelson: Improvement.
Adam Samuelson: Yeah.
Mike Smith: Was that coming through faster than you expected is that.
Mike Smith: Tracking as you thought.
Retail sales probably in January in particular.
Mike Smith: Okay.
Accelerated for the football industry will then.
Mike Smith: Whether some of that channel shift dealing too soon.
Mike Smith: Seems like it's gone back to the same similar trends through February the units.
Do you think how that unit share through.
Mike Smith: Yeah.
Mike Smith: The quarter since the February or was there some bigger uplift.
Mike Smith: Towards the end of the quarter there.
Mike Smith: Adam happy to provide more context on spices and seasonings.
Adam Samuelson: Maybe speaking first to slightly what we saw in the industry I think through the first quarter as our prepared remarks noted we.
Adam Samuelson: If we think about what was what appeared to be a very.
Adam Samuelson: Challenging difficult Q4, we start seeing reserve store.
Adam Samuelson: Improvement compared to Q4.
Adam Samuelson: Rodley and maybe that hemant expenses, the food away from home to some degree.
Adam Samuelson: Certainly a cold winter all benefits Mccormick, we'd like to see people. It makes a lot of Chile and.
Adam Samuelson: And so.
Adam Samuelson: That always is great for hardware recipe mix business, but what we're speaking specifically of spices and seasonings here. So we tend to.
Adam Samuelson: Think about this from a different perspective, what's really driving I think our performance right now is.
Adam Samuelson: I would point out maybe a couple of things that are benefiting our business. Our new packaging continues to increase philosophy on shelf and we're rolling out more.
Adam Samuelson: Of that one.
Adam Samuelson: Pulling through more of it will be complete by the end of the second quarter.
Adam Samuelson: So we were et cetera.
Adam Samuelson: Q4, we believe that we're obviously get somewhere between 75 and 100 at this point in time.
Adam Samuelson: So thats driving improvement we are recapturing distribution points too and we think that sequential improvement led to some positive.
Adam Samuelson: Our increase in advertising and the velocity of our new coming from our new packaging led to unit share gains at the end of the quarter.
Adam Samuelson: And that increase in advertising I think certainly was one of the things that we think will let a lot of our positive trends.
Adam Samuelson: In our business spices, and seasonings and so these are some of the things that we've spoken to I think from not only the fourth quarter call, but also at Cagny and I would just reiterate them here the collection or the integration of all of that together.
We believe is driving the right level performance on the business.
Adam Samuelson: Raul.
Okay. That's helpful and let me just to compromise the comments on the on the second quarter and the gross margin.
Raul: That will be up modestly year over year, I guess I'm just trying to make.
<unk>.
Raul: Should we be thinking about SG&A percent of sales similar to the.
Raul: Similar to the first quarter.
Raul: Doesn't seem like your top line, maybe a little bit of a setback in flavor solutions sequentially on the in terms of the topline, but it doesn't seem like you're talking about a big step back from it in terms of the overall company.
Raul: Sales.
Speaker Change: I know last year was a tougher comp on price cost, but I guess im trying to just make sure I understand why it would seem like the.
Speaker Change: The profit growth if not the profit dollars themselves are.
Speaker Change: Decelerating.
Speaker Change: Well I think Adam maybe you can think about it this way I mean second quarter is kind of inflection point for us the pricing, which for the first quarter was about two 7% and think about it because a year is going to be up 1%. So second third and fourth quarters is coming down.
Speaker Change: While volume is turning positive and we're getting sequentially improvements in that second quarter. Yet you don't have as much to cover for pricing and your volume loss improving isn't at the level. It is in the second half so that in the second quarter as I said in the remarks.
Speaker Change: Some of our price gap management activity more than in the first quarter, so that puts a little pressure off.
Speaker Change: On.
Speaker Change: On the sales side and the profit line, but we're confident those investments including.
Speaker Change: Increased A&P, which we had in the first quarter, but also in the second quarter or two.
Speaker Change: Contribute to driving sequential improvement in both Q2, but in the second half so.
Speaker Change: I think we're taking a little bit is that a bit of it like I said, it's an inflection point before the volume growth would you talk about the second half so it puts a little pressure on margins, we're still haven't.
Speaker Change: Positive margin improvement versus last year, but if you think about last year that was like the sweet spot of when our pricings are really going in.
Becoming the cost impact and we talked about that last last second quarter. So that was at that point, our margins were up 300 basis points from the prior year I think it was so.
Speaker Change: But we still see again back to the first half second half.
Speaker Change: Really good margin improvement in the second half.
Speaker Change: For the first half. This is the first half is about investments.
Speaker Change: The benefit in the first quarter also the rapid Joey programs things like that which did help the first quarter, but.
Speaker Change: There are a lot of moving parts in the back and that's why we tried to move it to give you a little bit of.
Speaker Change: In summary in the script.
Color: Color is appreciate it I'll pass it on thank you.
Color: Thank you. Our next question comes from the line of Robert Moskow TD Cowen. Please proceed with your question.
Color: Hi.
Robert Moskow: Couple of follow ups. Thanks.
Robert Moskow: Can you remind us again.
Robert Moskow: What percent of the portfolio in the U S are you executing this price cap strategy I think you said, it's 50%.
Robert Moskow: And maybe a little more color on what segments, you're you're working on right now.
Robert Moskow: What you are learning from that.
Robert Moskow: Secondarily.
Robert Moskow: You mentioned some dollar trial sizes in hot sauces, I havent seen that explain a little bit why you think thats incremental to the category.
Robert Moskow: Is your competition doing it and if so are they gaining any share as a result or is it really just helping everybody. Thanks.
Robert Moskow: Okay.
Speaker Change: Thanks, Rob.
Speaker Change: So let me address.
I just want to make sure I don't forget your second question as I address your tires.
Speaker Change: With regard to price gap management.
Speaker Change: I think I just.
Speaker Change: I would go back to confirming what we said.
Speaker Change: Also at Cagny is that that that program and that if those efforts, which is targeted on a SKU by SKU basis represents less than 15% of our Americas, 15% already.
Speaker Change: Wanted to clarify one five not five Oh I thought you, maybe said 50, and it's one 5%.
Speaker Change: Right.
Speaker Change: And it's really being applied to targeted parts of our spices and seasonings category and recipe mixes.
Speaker Change: So.
Speaker Change: We're also taking price gap management efforts selectively across other regions.
I would say EMEA is an example of that.
Speaker Change: This is just part of I think the good tactical blocking and tackling on.
Speaker Change: The parts of our portfolio, what we think negative price point, just simply isn't that a place where it can be successful so.
Speaker Change: That's the color I would add to that now specifically on your question on hot sauce.
Speaker Change: The background of a first provide and this is an attractive category, there's always particularly more so than most categories a lot of new competition always entering into the category. So this is something that we we we live and operate with all the time, we do have underlying strength in our base business on hot sauce and really help.
Speaker Change: Consumer loyalty.
Speaker Change: And our plans remain pretty consistent we're fueling a lot of growth through increasing boat show goulette in Franks.
Speaker Change: <unk> marketing in fact, Frank is going to be activated all 12 months of the year in terms of being on air.
Speaker Change: And that's the first time, we're doing that really to really tap into the growth that we've seen this estimate.
And we're also expanding distribution, but our underlying trends are pretty pretty good now more recently, particularly in like the end of the fourth quarter or the beginning of the first quarter.
Speaker Change: <unk> seen retailers push that the concept of the trial sizes like at a dollar price point and its created obviously a lot of consumer value. When you have just a really low opening price point of a dollar for something that's like an ounce or less product.
Speaker Change: But it has resulted in significant unit growth.
Speaker Change: And it's been driving down sort of the category volume and dollar growth that maybe we had been seeing going into this time period. So that is our strength our share performance, particularly.
Speaker Change: As you might imagine a lot of this is driven by gifting during the holidays and so you can see.
Speaker Change: The big Spike and it's kind of decelerating since then.
Speaker Change: We still believe it's something that's contributing positively to the category because it's adding new users to the category we've evaluated.
Speaker Change: How much is coming from new households versus existing households, and the majority of it is coming from new households into the category. So that's always a positive.
Speaker Change: We're taking some of these earnings and looking at.
Speaker Change: Our own efforts are having a trial size and competing in this kind of promotional area.
We think it's obviously anything that drives trial and awareness to category I think is healthy.
Speaker Change: And importantly, it's also building upon actions that we already have in place behind Hot sauce, which is a lot of the nation coming out this year.
Speaker Change: A particularly a lot of France, but also cholewa, we're increasing the A&P support on all the brands and where we have traditional promotional periods for these categories. We're just making sure they're at the right times during the year end.
Speaker Change: I can use education, obviously, the summer certainly lend itself to that.
Speaker Change: Like 5 de Mayo too so that's the context in a hotspot.
Okay got it and just to follow up on the 15%.
Speaker Change: As you make it through the year just optically we see market share data that that still doesn't look like it's where you want it to be from a dollar basis and spices and seasonings is.
Speaker Change: Is it possible that the other 85% of the portfolio might also need to be addressed in terms of pricing gaps or are you comfortable that.
Speaker Change: That you don't need to take an action there.
Speaker Change: I think we're comfortable.
Speaker Change: That we don't need to take any action and we are.
Speaker Change: Pretty precise.
Speaker Change: Might say that in terms of how we apply this and where the best needs to be applied.
Speaker Change: So beer, but I also have to say we're constantly evaluating so every month, we're looking at data and results and deciding whether or not.
Speaker Change: <unk> is in the right place.
Speaker Change: But I think we have a lot of confidence that we're focusing on the right percentage of some of the business, but to speak more specifically I think to just share perspective around that while we don't guide to market share with specificity I think.
Speaker Change: Trends in our business right now we're going into.
Speaker Change: The right direction.
Speaker Change: And in many ways delivering against what we would expect to see which as you know.
That focus on share improvement for us as we're looking at our business plans first begins with improving unit growth.
Speaker Change: And then we expect dollar.
Speaker Change: To sort of follow on top of that but like in U S spices and seasonings.
Speaker Change: We're seeing that type of performance right now and so just so I. Appreciate this is a big integrated effort with a lot of other activities to including increased brand marketing innovation price pack architecture. Other category management efforts that we're putting forth. So I wouldn't single out any one of those levers, but actually they all work together.
Speaker Change: And that's sort of the perspective I would add on top of your question.
Speaker Change: Got it okay. Thank you.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Thank you. Our next question comes from the line of Matt Smith with Stifel. Please proceed with your question.
Matthew Smith: Hi, Good morning, I wanted to ask a follow up question on that targeted price gap management in the U S consumer spices and seasonings business.
Matthew Smith: Particularly in terms of phasing as you've built up or are you targeting 15% of the portfolio meaning.
Or is it more targeted in the fourth quarter you made some progress against the 15% that you're targeting in the first quarter and are still some more to go in these categories, where you see opportunity to use your price gap management tools to improve share should should we expect that to continue to build into the second quarter.
Hey, Matt.
Matthew Smith: Let me kick off and I think as you think about that 15% is going to have a distress one five <unk>.
Matthew Smith: Europe.
Speaker Change: Is that is a total look at the year. So indeed, I would say our Q1 isn't necessarily at that level, yet and we would expect to start to hit that type of percentage of our business as we go through the year. So just quickly off the top I wanted to.
I'll provide some of that context around your question, Mike in Mexico question, and just as I said in the script that quarter is a bit of pressure because it doesn't.
Speaker Change: Innovation in the second quarter, so youre right, a little bit before more in the first second quarters. When it was really almost fully activated quite nicely. So.
Speaker Change: But again as these are investments to drive that volume growth building throughout the year, which we were the early results of the first fourth and first order investments are very positive combined with A&P and things like that Brendan just make it so that whole program.
Speaker Change: Thank you for that and you talked about.
Speaker Change: So particular portions of the portfolio in the U S that are challenged.
Particularly mustard or your frozen prepared foods can you talk about some of the.
Speaker Change: Your outlook for the improvement in those categories do.
Brendan F. Foley: Do you have plans in place to address some of the lower price point mustard, and then is it really just the consumer recovery, that's going to drive the improvement in your frozen prepared foods.
Brendan F. Foley: So I'll speak first to mustard.
Brendan F. Foley: Just again.
Brendan F. Foley: Readdress sort of the context of the background on this we definitely are seeing sort of a lot of low price points with private label.
Brendan F. Foley: Fairly low.
Brendan F. Foley: Which impacted our consumption is just driving down the category dollars, but importantly, it's impacting our trajectory on consumption. So we do plan to improve those trends in 2024.
Brendan F. Foley: Largely I think we're going to look at increasing promotional programs. So we have a big grilling season, and quite excited actually about the growing season coming up.
Brendan F. Foley: A big part of that is our number a number of items within our portfolio.
Brendan F. Foley: Plus just making sure we are at the right price points I think across that business were also strengthening distribution too which will strengthen trends on top of that.
Brendan F. Foley: So that's our perspective on masters it will it will continue to get better but.
Brendan F. Foley: As we were talking about in the fourth quarter I don't know that we are.
Brendan F. Foley: We saw what we saw in the first quarter was.
Brendan F. Foley: Contrary to what we're expecting as we start to implement those plans, particularly as we get to the grilling season.
Brendan F. Foley: On the prepared foods category that we spoke to we're riding the trends right now in the marketplace.
Brendan F. Foley: And I think that's what you would expect to see us.
Brendan F. Foley: How we would see us perform.
Brendan F. Foley: It's a smaller part of our portfolio we would not.
Brendan F. Foley: As part of that core.
And so we are really I think just watching the trends make sure we follow what's going on in the category.
Brendan F. Foley: And we're treating it much like in that manner.
Brendan F. Foley: Yes, hi about it too is when you think about we've talked about portfolio management and.
Brendan F. Foley: This is part of it we're making sure the items we have in our portfolio.
Brendan F. Foley: Whether on the consumer or flavor solutions side, the prudent business that doesn't meet our target so you'll see some of that probably in.
Brendan F. Foley: In this area too, but we will be calling out of the separate items.
Speaker Change: Thank you for that I can pass it on.
Speaker Change: Thank you. Our next question comes from the line of Tom Palmer with Citi. Please proceed with your question.
Tom Palmer: Good morning, and thanks for the question.
Tom Palmer: To ask on just the shelf resets coming later in the second quarter.
Tom Palmer: Is is this incremental from a shelf space standpoint, I mean is there going to be.
Tom Palmer: Ending on how the timing goes the potential for some favorable shipment timing as we think about the second quarter I would assume that's not factored into your outlook I just want to understand kind of the moving parts there and also kind of.
Tom Palmer: If that is the key driver of this expanded shelf set.
Tom Palmer: Yeah.
Tom Palmer:
Tom Palmer: Well.
Tom Palmer: We do believe that when we gain in Tep's distribution, we view that as incremental to.
Tom Palmer: Our presence in the market at that time I think.
Tom Palmer: Speaking to them its impact on the second quarter, we feel like we've got that called in and our outlook for the rest of the year. So I don't know if theres anything specific I want to identify for the second quarter behind this.
Tom Palmer: And when exactly all of that stuff ships et cetera, I think that's a level of detail.
Tom Palmer: Probably wouldn't be getting into at this point I think Thomas maybe it is.
Thomas: You're kind of focusing on the shelf renovation with the new bottles, that's been rolling out.
Thomas: From the end of last year into this year, and that's really not a big shipment.
Thomas: We're replacing its kind of going.
Thomas: Not a big reset is the same size bottle basically it fits on a roll band. So we're just kind of filling the pipeline with that so you're not going to see a big Spike you will see better velocity and things like that which is why we did it and that will build throughout the year. Some of the resets that you talked about with winning new business on their categories. Their shelf sets happened sometime in the second quarter and we.
Thomas: Benefit us in the second half so there's kind of two different thoughts there do you think about it.
Speaker Change: Got it.
Speaker Change: And welcome to the call is your first call with Us Thomas.
Speaker Change: Thank you.
Speaker Change: I'll leave it at that thanks.
Speaker Change: Thank you. Our final question. This morning comes from the line of Rob Dickerson with Jefferies. Please proceed with your question.
Robert Dickerson: Great. Thanks.
Robert Dickerson: Swann upfront question too mechanical ones.
Robert Dickerson: So I just wanted to go back I guess last time last question just too.
Robert Dickerson: The total we're seeing then.
Robert Dickerson: <unk> tracked channel data, which clearly you know all of us look at.
Robert Dickerson: And then what you did.
Robert Dickerson: And overall consumer and Americas was better.
Robert Dickerson: And I think I heard you say like Latin America was due.
Robert Dickerson: Well E com it sounds like it's growing double digit.
Robert Dickerson: It's still it's still trying to get a little bit more color because I feel like if E com.
Robert Dickerson: It had been growing double digit or a lot now where a lot of them kind of already been doing well.
Robert Dickerson: Like there's got to be some delta in there that's driving.
Robert Dickerson: <unk>.
Speaker Change: The difference between what we're seeing in that tracked channel data relative to what you report because it clearly was much better in Q1 versus let's say prior three years. So then as we're all looking at that data going forward.
Speaker Change: Should we I guess.
Speaker Change: That you will be tracking nicely ahead of that given the same drivers or or maybe not because you're also saying you ship to consumption, but it's all what we see and so what we've seen for the past 11 quarters. So I'm just.
Speaker Change: There was something in there that's what we're all asking but I just I just didn't really get it.
Speaker Change: Well.
Speaker Change: Rob I think there's possibly two different questions there.
Speaker Change: I think an attempt at what.
Speaker Change: What I think you're getting at which is.
Speaker Change: What we're seeing in our business and we read our businesses for <unk> and that's a much broader more refined view of our categories.
And so we are you know.
Speaker Change: Reflecting that kind of data in our performance as we talk about it.
Speaker Change: Compared to what Nielsen might be reporting I think traditionally we've seen differences in reporting.
Speaker Change: We don't release.
Speaker Change: Reconcile that on the call or do anything of that nature, but but there have been at times, you know the difference and what Nielsen might be reporting in terms of how.
Speaker Change: Sure capturing the category versus the more refined.
Speaker Change: Higher level broader view as we look at spices and seasonings.
Speaker Change: In our category so.
Speaker Change: That might address.
Speaker Change: Part of your question now.
Speaker Change: The other half that could it be it's about a measured channels et cetera, and I would go back to the comments that I made earlier that we largely see everything pretty much being in line between shipments and consumption.
We are getting a lot of strong growth in e-commerce as I called out earlier on the call. So that certainly is something that could create a difference in the numbers and the metrics.
Speaker Change: Obviously, good performance in Canada, and Latin America.
Speaker Change: I'm going to pause to see if maybe if.
Speaker Change: If we thoughtfully address I think no I think that's fair that's fair that's fair totally until I get it I just thought.
I'd ask one last time and then just quickly.
Speaker Change: On the Mexico business to the JV.
Speaker Change: I know guidance is for mid teens, I think it's mid teens growth for the year, you put up like 50% in Q1.
Speaker Change: So maybe just kind of did you discuss kind of what actually did occur to drive that growth in Q1 and then.
Speaker Change: Given what we saw in Q1 should.
Speaker Change: Like why do you think you can still grow mid teens.
Speaker Change: <unk> already so ahead.
Speaker Change: No.
Speaker Change: Thanks joint venture.
Speaker Change: Great Great first quarter.
Speaker Change: And against a weaker first quarter two so there's some of that in there.
Speaker Change: Is there a little bit too early to call of the year.
Speaker Change: Here there is in the economy in Mexico, Theres, a lot of price volume things Theyre going through also as they've managed the year. So.
Speaker Change: Again, a strong underlying business.
Speaker Change: Really happy with it but yeah.
Speaker Change: We're hoping rest of the year is just as strong as the first quarter, but it's a little bit too early to call on that one okay. All right fair enough and then just quickly Mike I'm glad you asked the question because we don't get a lot I mean, it's such a large part of our portfolio does it gets ignored because it's below operating profit, but very probable business.
Speaker Change: We are dominant.
Speaker Change: We have a real strong brand position down there across a couple of categories and we export into the U S to.
Speaker Change: And other things too so it's really really good business for us.
Mike Smith: Yeah and it was.
Mike Smith: Actually core driver of net income.
Mike Smith: Anyway.
Speaker Change: And then I guess, just Mike Kelly.
Mike Smith: Don't think I've heard you speak to interest expense guidance, but you do frequently provide that so I don't know if you have that and that's all I have.
Speaker Change: The fact that we didn't provide it needs is not really that material. We only I think last year was the first year, we provided it but.
Speaker Change: It was roughly equal for the first quarter, so I wouldn't expect.
Speaker Change: A whole lot of change for the year.
Speaker Change: Thank you so much perfect.
Speaker Change: Thank you that concludes our question and answer session I'll turn the floor back to Mr. Frank <unk> for any final comments.
Frank: Thank you and thanks to all joining today's call. If you have any further questions regarding today's information. Please feel free to contact me. This concludes our conference call.
Frank: Yeah.
Frank: [music].
Frank: Okay.
Frank: [music].
Frank: [music].
Frank: Good morning.
Frank: Great.
Speaker Change: Oster relations. Thank you for joining today's first quarter earnings call to.
Speaker Change: To accompany this call we've posted a satisfied on our IR website IR, Don Mccormack Dot Com with me. This morning are unemployed.
Speaker Change: And Mike Smith, Executive Vice President and CFO. During this call, we will refer to certain non-GAAP financial measures.
Speaker Change: The nature of those non-GAAP financial measures and the related reconciliations to the GAAP results are included in this morning's press release and slides.
Speaker Change: In our comments certain percentages around it please refer to our presentation for complete information.
Speaker Change: 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 because of new information future events or other factors. Please refer to our forward looking statement on slide two for more.
Speaker Change: The information I will now turn the discussion over to Brendan.
Brendan F. Foley: Good morning, everyone and thank you for joining us.
Brendan F. Foley: As many of you have probably seen on the news this morning, but Francis Scott key page collapsed in Baltimore.
Brendan F. Foley: Thoughts go out to everyone impacted by this terrible tragedy.
Brendan F. Foley: We have activated the team and are monitoring the situation.
Brendan F. Foley: We are pleased to start the year with a strong first quarter.
Our performance reflects the early success of our prioritized investments to improve volume trends and drive profitable growth.
Brendan F. Foley: I will begin my remarks, this morning, with an overview of our first quarter results focusing on top line drivers.
Brendan F. Foley: Next I will provide perspective on industry trends highlight some early signs of success.