Q2 2024 McCormick & Co Inc Earnings Call

Faten Freiha: Good morning, this is Faten Freiha, VP of Investor Relations. Thank you for joining today's second quarter earnings call. To accompany this call, we've posted a set of slides on our IR website, ir.mccormick.com. With me this morning are Brendan Foley, President and CEO; Mike Smith, Executive Vice President and CFO; and Marcos Gabriel, Senior Vice President, Global Finance and Capital Marketing. During this call, we will refer to certain non-GAAP financial measures. 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. In our comments, certain percentages are rounded.

Good morning. This is fucking Frank Hall VP of Investor Relations. Thank you for joining today's second quarter earnings call to accompany this call. We posted a satisfying IR website I already got Mccormick Dot Com with me. This morning are Brendan Foley President and CEO.

Speaker Change: Smith Executive Vice President and CFO, and Mark Oki Bell Senior Vice President Global Finance and capital market. During this call we will refer to certain non-GAAP financial measures 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 are rounded please refer to our presentation for complete information.

Faten Freiha: Please refer to our presentation for complete information. Today's presentation contains projections and other forward-looking material, and actual results could differ materially from those projected.

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, whether because of new information future events or other factors. Please refer to our forward looking statement on slide two for more information.

Faten Freiha: The company undertakes no obligation to update or revise publicly any forward-looking information, 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. Good morning, everyone, and thank you for joining us.

Speaker Change: I will now turn the discussion over to Brendan.

Brendan: Good morning, everyone and thank you for joining US we are pleased with our second quarter performance, particularly as we continue to navigate a changing and complex consumer landscape.

Brendan Foley: We are pleased with our second quarter performance, particularly as we continue to navigate a changing and complex consumer landscape. Our differentiated results demonstrate the success of our prioritized investments to accelerate volume trends and further capitalize on the underlying growth of our category. McCormick remains a growth company, and 2024 continues to be an important investment year as planned, as we have activated many of our initiatives, and we are starting to see results that support our confidence in delivering on our long-term objectives.

Brendan: Our differentiated results demonstrate the success of our prioritized investments to accelerate volume trends and further capitalize on the underlying growth of our categories.

Brendan: <unk> remains a growth company and 2024 continues to be an important investment year as planned as we have activated many of our initiatives and we are starting to see results that support our confidence in delivering on our long term objectives.

Brendan Foley: This morning, I will begin my remarks with an overview of our second quarter results, focusing on the top line drivers. Next, I will provide perspective on industry trends, highlight some areas of success, as well as areas we continue to work on, and review our growth plans with a focus on innovation. Mike will then go into more detail on the second quarter financial results and review our 2024 outlook. And finally, before your questions, I will have some closing comments. Turning now to our results on slide four, in the second quarter, sales declined by 1% in constant currency, reflecting flat pricing and a 1% decline in volume and product mix.

Speaker Change: This morning, I will begin my remarks, with an overview of our second quarter results focusing on the top line drivers next I will provide perspective on industry trends highlight some areas of success as well as areas. We continue to work on and review our growth plans with a focus on innovation Michael.

Brendan Foley: Volume growth in our consumer segment was offset by declines in flavor solutions related to softness in some of our quick-serve restaurant, or QSR, and packaged food customers' volumes, as well as the timing of customer activities, as expected. However, although certain parts of our flavor solutions business are pressured, given our collaboration and strong innovation pipeline with our customers, we expect volume trends to improve during the second half of the year. In our consumer segment, volumes improved substantially from the first quarter across our major markets and delivered volume growth.

Speaker Change: Mike will then go into more depth on our second quarter financial results and review our 2020 for outlook.

Speaker Change: And finally before your questions I will have some closing comments.

Speaker Change: Turning now to our results on slide four.

Mike: In the second quarter sales declined by 1% in constant currency, reflecting flat pricing and a 1% decline in volume and product mix.

Mike: Growth in our consumer segment was offset by declines in flavor solutions related to softness in some of our quick serve restaurant <unk> and packaged food customers volumes as well as the timing of customer activities as expected.

Although certain parts of our flavor solutions business are pressured given our collaboration and strong innovation pipeline with our customers, we expect volume trends to improve during the second half of the year.

Mike: In our consumer segment volumes improved substantially from the first quarter across our major markets and delivered volume growth.

Brendan Foley: In the Americas, we delivered solid sequential volume improvement for three consecutive quarters, and our pricing in the second quarter reflects the activation of our price gap management plans to support improved volumes in the second half as planned. In EMEA, we drove positive volume growth across our major markets and core categories for the second consecutive quarter. We expanded distribution in the grocery, discounter, and e-commerce channels and realized benefits from new product innovation.

Mike: In the Americas, we delivered solid sequential volume improvement for three consecutive quarters and our pricing in the second quarter reflects the activation of our price gap management plans to support improved volumes in the second half as planned.

Mike: In EMEA, we drove positive volume growth across our major markets in core categories for the second consecutive quarter, we expanded distribution in the grocery discounter and e-commerce channels and realized benefits from new product innovation.

Brendan Foley: In Asia-Pacific, outside of China, we delivered strong volume-led sales growth as we executed the rollout of our new consumer-preferred packaging for our core spices and seasonings portfolio and realized distribution. This performance was tempered by China, as expected, although sequentially volume trends improved in China.

Mike: In Asia Pacific outside of China, We delivered strong volume led sales growth as we executed the rollout of our new consumer preferred packaging for our core spices and seasonings portfolio and realized distribution gains. This.

Mike: This performance was tempered by China as expected, although sequentially volume trends improved in China.

Brendan Foley: Results in our consumer business reflect continued focus on increased brand marketing investments, accelerating innovation in alignment with consumer trends, and expanding distribution. Let me now share our current view on the state of the consumer. Consumers continue to exhibit value-seeking behavior. Financial anxiety remains elevated, particularly in the United States, and especially among mid- to low-income households, due to the compounding impact of inflation.

Mike: Results of our consumer businesses reflect continued focus on increased brand marketing investments accelerating innovation and alignment with consumer trends and expanding distribution.

Brendan Foley: In addition, inflation in the food service channel is leading to softness in food away from home consumption and impacting restaurant traffic, particularly for QSRs, across many of our regions. Volumes on the retail side, particularly in the center of the store, remain soft. Consumers continue to buy just what they need and make more frequent trips to the store. On the other hand, they are increasingly shopping on the perimeter and continuing to cook at home.

Mike: Let me now share our current view on the state of the consumer consumers continue to exhibit value seeking behavior financial anxiety remains elevated, particularly in the United States, especially with mid to low income households, due to the compounding impact of inflation.

Mike: In addition inflation in the foodservice channel is leading to softness in food away from home consumption and impacting restaurant traffic, particularly with <unk> across many of our regions.

Mike: Volumes on the retail side, particularly in the center of store remained soft consumers continue to buy just for what they need and make more frequent trips to the store on.

Mike: On the other hand, they are increasingly shopping that perimeter and continuing to cook at home.

Brendan Foley: Certain categories, such as spices and seasonings, as well as condiments and sauces, are seeing a benefit from these trends. Furthermore, as consumers are looking to stretch their budgets, our categories represent a fraction of the cost relative to proteins, produce, and carbs and drive the majority of the flavor. In fact, in the second quarter, spices and seasonings were the top category in center store growth across measured channels, and McCormick is the leading branded player and driving category unit growth. What continues to differentiate McCormick is that we operate in great categories across all channels. We offer products at every price point, from premium to lower price points.

Mike: Certain categories, such as spices, and seasonings as well as condiments and sauces are seeing a benefit amid these trends as consumers are looking to stretch their budgets are categories represent a fraction of the cost relative to proteins prejudiced in carbs and drive the majority of the flavor.

Mike: In fact in the second quarter spices, and seasonings was the top category in center store growth across measured channels and Mccormick has the leading branded player and driving category unit growth.

Mike: What continues to differentiate Mccormick is that we operate in great categories across all channels. We offer products at every price point for premium to lower price points, we have a broad and diversified portfolio to meet evolving consumer demands. We are part of the solution for consumers importantly.

Brendan Foley: We have a broad and diversified portfolio to meet evolving consumer demands. We are part of the solution for consumers. Importantly... We believe that we have the right plans in place that are continually informed by what matters most to our consumers and customers. Moving to slide five, let me highlight for the quarter some of the key areas of our success. For our global consumer segment, including the Americas, our core categories delivered solid volume growth. [inaudible] In the U.S., our share performance improved, resulting in positive gains in unit share for the quarter. In addition, we drove dollar share gains in France and Eastern Europe.

Mike: We believe that we have the right plans in place that are continually informed by what matters most to our consumers and customers.

Brendan Foley: In recipe mixes, we continue to strengthen consumption trends in the Americas, particularly in our Mexican product lines, through our price gap management investments, as well as distribution growth. In addition, in EMEA, recipe mixes were a significant driver of UK volume growth, and we realized dollar market share gains for two consecutive quarters. In Mustard, we are driving improved unit consumption and unit market share trends across our regions. In the Americas, we expanded distribution and acted on our pricing investment. In addition, innovation is yielding results. Our creamy dill pickle mustard performance is exceeding our expectations.

Mike: Moving to slide five let me highlight for the quarter some of the key areas of our success.

Mike: For our global consumer segment, including the Americas, our core categories delivered solid volume growth in.

Mike: In spices and seasonings, we delivered volume growth across all of our major markets in the U S. Our share performance improved resulting in positive gains in unit share for the quarter. In addition, we drove dollar share gains in France and eastern Europe.

Mike: And recipe mixes we continued the strengthening consumption trends in the Americas, particularly in our Mexican product lines through our price gap management investments as well as distribution growth. In addition in EMEA recipe mixes were a significant driver of U K volume growth and we realized dollar market share gains for two consecutive quarters.

Mike: <unk>.

Mike: And mustard, we are driving improved unit consumption and unit market share trends across our regions in the Americas, we expanded distribution and actions our pricing investments. In addition, innovation is yielding results our creamy dill pickle muster performance is exceeding our expectations.

Brendan Foley: In Poland, mustard consumption continues to grow, and we are realizing dollar market share gains, which strengthened from the first quarter. And Flavor Solutions, we had pockets of strength this quarter, and our America's Branded Food Service business, despite softness in the overall market, grew volume. In our America's Flavors business, our performance with high-growth innovator customers remains strong. We grew in non-alcoholic beverages and saw continued strength in performance nutrition. In Asia-Pacific, including China, we drove strong volume growth as we benefited from new customer products and promotions. Let me now touch on some areas where we are seeing some pressure. We continue to experience volume declines in the prepared food categories that we participate in, like frozen and Asian, and America's Consumer.

Mike: In Poland mustard consumption continues to grow and we are realizing dollar market share gains with strengthened from the first quarter.

Mike: In flavor solutions, we had pockets of strength this quarter.

Mike: In our Americas branded foodservice business, despite softness in the overall market we grew volumes in.

Mike: In our Americas flavors business, our performance with high growth innovator customers remained strong we grew in non alcoholic beverages and saw continued strength in performance nutrition.

Mike: In Asia Pacific, including China, We drove strong volume growth as we benefited from new customer products and promotions.

Mike: Let me now touch on some areas, where we are seeing some pressure.

Mike: We continue to experience volume declines in the prepared food categories that we participate in like frozen and Asian, and Americas Consumer importantly, these items represent a small part of our portfolio and the volume growth in our core categories is beginning to fully offset these declines.

Brendan Foley: Importantly, these items represent a small part of our portfolio, and the volume growth in our core categories is beginning to fully offset these declines. In hot sauce, we have underlying strength in our base business and strong consumer loyalty, and we continue to invest in our market-leading brand. In the Americas, consumption and share trends improved in the second quarter, on top of our first quarter improvement. However, a couple of short-term items continue to impact our share. First, it is a peer that is lapping its own supply chain disruptions.

In hot sauce, we have underlying strength in our base business and strong consumer loyalty and we continue to invest in our market leading brands.

Mike: In the Americas consumption and share trends improved in the second quarter on top of our first quarter improvement.

Mike: A couple of short term items continue to impact our share.

Mike: First it has appeared is lapping their own supply chain disruptions and second new price pack architecture in the form of trial sizes, which have been incremental to the category as.

Brendan Foley: And second, new price pack architecture in the form of trial sizes, which have been incremental to the category. As we realize the benefit of our increased innovation, including Frank's new Dippin' Saucers and Squeeze Bottles, as well as many trial sizes, A&P Investments, and Distribution Expansion, we expect to drive improved hot sauce consumption trends in the second half of 2024. In Flavor Solutions, our volumes were impacted by slower QSR traffic in both EMEA and the Americas.

Mike: As we realize the benefit of our increased innovation, including Frank's new different sources and squeeze bottles as well as many trial sizes A&P investments and distribution expansion, we expect to drive improved hot sauce consumption trends in the second half of 2024.

Mike: In flavor solutions, our volumes were impacted by slower USR traffic in both EMEA and the Americas, we expect to improve these volume trends as we continue to execute on our growth plans in the second half of the year.

Brendan Foley: We expect to improve these volume trends as we continue to execute on our growth plans in the second half of the year. Finally, some of our consumer packaged food customers experienced additional softness and volumes within their own business in both the Americas and the NBA. We are collaborating with our customers to support their innovation plans, and we are continuing to diversify our customer base over time. Before moving to our growth plans, I'd like to note that our total U.S. branded portfolio consumption, as indicated by Cercana data and combined with unmeasured channels, outpaced our sales growth this quarter, as our brand investments drove improved consumption, and we are lapping the increased shipments that came in ahead of the 2023 pricing This is a function of timing from quarter to quarter.

Mike: Finally, some of our consumer packaged food customers experienced additional softness in volumes within their own business in both the Americas and EMEA.

Mike: We are collaborating with our customers to support their innovation plans and we are continuing to diversify our customer base over time.

Mike: Before moving to our growth plans I'd like to note that our total U S branded portfolio consumption as indicated by sarcoma data and combined with unmeasured channels outpaced our sales growth this quarter.

Mike: As our brand investments drove improved consumption and we are lapping the increased shipments that came in ahead of the 2023 pricing actions of the prior year.

Mike: This is a function of timing from quarter to quarter.

Brendan Foley: Let's now move to our growth plans on slide six, which are supporting our second quarter performance and will continue to drive our success in 2024 and into 2025. Our base business is strengthening across major markets and core categories. We have a number of initiatives in flight that will continue to drive this performance and differentiation, and I look forward to sharing more details on these plans at our upcoming Investor Day in October.

Let's now move to our growth plans on slide six which are supporting our second quarter performance and we will continue to drive our success in 2024 and into 2025.

Mike: Our base business is strengthening across major markets in core categories, and we have a number of initiatives in flight that will continue to drive this performance and differentiation and I look forward to sharing more details on these plans at our upcoming Investor day in October.

Brendan Foley: Brand marketing, new products, and packaging innovation, category management, proprietary technologies, and customer engagement continue to be the levers that drive our growth. For today, I'd like to take the opportunity to highlight one of these levers, innovation, on slides 7 and 8. First, it's important to recognize that we are one of the few, if not the only, company that operates in end-to-end flavor, with both our consumer and flavor solution segments. We are in a unique position with our portfolio's breadth and reach.

Mike: Brand marketing, new products, and packaging innovation and category management proprietary technologies and customer engagement continue to be the levers that drive our growth.

Mike: For today I'd like to take the opportunity to highlight one of these levers innovation on slides seven and eight.

Mike: First it's important to recognize that we are one of the few if not the only company that operates in end to end flavor with both our consumer and flavor solutions segments. We are in a unique position with our portfolio's breadth and reach our shared insights give us a strong understanding of consumers flavor needs prep.

Brendan Foley: Our shared insights give us a strong understanding of consumers' flavor needs, preferences, and trends, and we have the ability to translate this into innovation, making McCormick a global leader in flavor trends and flavor innovation. Innovation is a priority for us. It drives one third of our long-term strategy.

Mike: Frances and trends.

Mike: We have the ability to translate this into innovation, making Mccormick, a global leader in flavor trends and flavor innovation.

Mike: Innovation is a priority for us it drives one third of our long term algorithm. It meaningfully contributed to our results for the first half of 2024, and we expect it to drive strong performance in the second half.

Brendan Foley: It meaningfully contributed to our results for the first half of 2024, and we expect it to drive strong performance in the second half. As a management team, we discussed the latest trends and insights and how those might translate into innovation in both sectors. We are continuously leading the pursuit of what's next in flavor. In our company, everyone is engaged in innovation.

Mike: As a management team, we discussed the latest trends and insights and how those might translate into innovation in both segments. We are continuously leading the pursuit of what's next in flavor in our company everyone is engaged in innovation.

Brendan Foley: In the first half of the year, our results benefited from new products and packaging, and the performance of these launches continues to improve. Importantly, our pipeline for the remainder of the year remains robust. In our consumer segment, our renovated U.S. everyday herb and spice portfolio is fully shipped, and roughly two-thirds of our new packaging is currently on shelf, driving double-digit velocity gains and contributing to our strong volume improvement in spices and seasonings.

Mike: In the first half of the year, our results benefited from new products and packaging and the performance of these launches continues to improve importantly, our pipeline for the remainder of the year remains robust.

Mike: In our consumer segment, our renovated use everyday urban spice portfolio is fully shipped and roughly two thirds of our new packaging is currently on shelves driving double digit velocity gains and contributing to our strong volume improvement in spices and seasonings.

Brendan Foley: New products within our spices and seasonings portfolio, including Lowry's new seasoning blends, Flavormaker blends, and our exciting grilling portfolio of Stubbs rubs and new grill-made seasoning blends in partnership with Max the Meat Guy, fuel first-half results and are expected to accelerate our performance in the second half. In fact, in 2024, we are launching nearly four times more grilling rubs and seasonings compared Importantly, our grilling season, which kicked off at the end of the second quarter, is off to a great start. In addition to our grilling blends and rubs, we are excited about early results from Frank's Red Hot dips and sauces and popular flavors in a squeeze bottle format that we launched this year.

Mike: New products within our spices, and seasonings portfolio, including lotteries, new seasoning blends flavor maker blends and our exciting grilling portfolio of stubs rubs and new grill mates seasonings blades and partnership with Max the meet Guy fuel first half results and are expected to accelerate our performance in the second half.

Mike: In fact in 2024, we are launching nearly four times more drilling rubs and seasonings compared to 2023.

Mike: Importantly, our grilling season, which kicked off at the end of the second quarter is off to a great start.

Mike: In addition to our grilling blends and rubs. We're excited about early results for Frank's Red Hot dipping sauces, and popular flavors and the squeeze bottle format that we launched this year.

Brendan Foley: We are energized for the grilling season and expect our Flamin' Flavor marketing campaign that launched in the second quarter to drive incremental consumer demand. Our Cholula Salsas and Recipe Mixes that launched in 2023 are driving new buyers to the category and continue to exceed our expectations since launch. Cholula Salsas are driving strong incremental category growth with their high repeat buy rates, and our Cholula Recipe Mixes are a top recipe mix brand after just one year in the market. They are driving the second-highest unit growth within the category. We continue to build U.S. distribution, and we are launching both formats in Canada this year.

Mike: We are energized for the grilling season, and expect our flame and flavor marketing campaign that launched in the second quarter to drive incremental consumer demand.

Mike: Our cholewa solstice and recipe mixes that launched in 2023 are driving new buyers to the category and continued to exceed our expectations since launch <unk>.

Mike: Lula sources are driving strong incremental category growth with our high repeat buy rates and our cholewa recipe mixes are a top recipe mix brand. After just one year in the market.

Mike: They are driving the second highest unit growth within the category. We continue to build U S distribution and we are launching both formats in Canada. This year.

Brendan Foley: In EMEA, growth for new product sales is accelerating, and we expect it to drive significant growth in the second half of the year. In the UK, across recipe mixes and seasonings, our Schwartz range with Nadia Hussain, restaurant-branded partnerships, and a range of classic American recipe mixes with Frank's, Old Bay, and French's are driving our innovation performance and expanding household penetration with younger consumers. In France, we are collaborating with Juan Arbelaez, a celebrity Colombian-French chef, to drive engagement with younger households. And recently, we partnered with him to launch a range of unique and delicious Ducro barbecue seasonings in time for the summer barbecue season.

Mike: In EMEA growth from new product sales is accelerating and we expect it to drive significant growth in the second half of the year.

Mike: In the U K across recipe mixes and seasonings R. Schwarz range with not enough Hussein restaurant branded partnerships and a range of classic American recipe mixes with Franks obey and French's are driving our innovation performance and expanding household penetration with younger consumers.

Mike: In France, we are collaborating with one of our lives a celebrity Colombian French chef to drive engagement with younger households.

Mike: And recently, we partnered with him to launch a range of unique and delicious to Crow barbeque seasonings in time for the summer barbecue season.

Brendan Foley: Moving now to our flavor solution segment, we continue to leverage our proprietary technologies to support our innovation in flavors, to win new customers, diversify our customer base, and drive share gains across our portfolio. Our momentum, with our high-growth innovator and consumer products customers, continues to be strong and fuel our new product pipeline. As we look to our innovation pipeline that we support for our customers, we expect a pickup in the back half of the year. We are collaborating with many customers to heat up their products, from snacking to beverages to performance nutrition.

Mike: Moving now to our flavor solutions segment, we continue to leverage our proprietary technologies to support our innovation in flavors to win new customers diversifying our customer base and drive share gains across our portfolio.

Mike: Our momentum with our high growth innovator in consumer products customers continues to be strong and fuel our new product pipeline.

As we look to our innovation pipeline that we support for our customers, we expect to pick up in the back half of the year.

Mike: We are collaborating with many customers to heat up their products for snacking to beverages to performance nutrition, our win rate with heat briefs are strong across our regions and we continue to dedicate resources to where we have the right to win.

Brendan Foley: Our win rate with heat briefs is strong across our regions, and we continue to dedicate resources to where we have the right to win. In branded food service, our 2023 launches, including Frank's Mild Wingsauce and Frank's Nashville Hot, are delivering strong results in the first half of the year. Our early 2024 launches are also contributing to our growth and include a number of e-products like GrillMate's Fiery Habanero and Cholula Chili Lime.

Mike: In branded foodservice, our 2023 launches, including Frank Smiled wing sauce, and Frank's Nashville Hot are delivering strong results in the first half of the year.

Mike: Our early 2024 launches are also contributing to our growth and include a number of new products like grill mates fiery habanero <unk> literally line.

Brendan Foley: Looking ahead to the second half, we expect new products to meaningfully drive our top line and, importantly, we have a strong innovation agenda, including launching Frank's Garlic Buffalo and Mango Habanero in the Americas, as well as Frank's Red Hot Mayo in the UK and France, and we are further extending McCormick Mayonesa, which has had great performance in our consumer segment, into the food service channel. Overall, we are very excited about our innovation plans for 2024.

Mike: Looking ahead to the second half, we expect new products to meaningfully drive our top line and importantly, we have a strong innovation agenda, including launching Frank Scott like Buffalo, and Mango Habanero, and the Americas as well as French Red Hot Mayo in the UK and France, and we are further extending Mccormick my MSR, which has had great.

Mike: Performance in our consumer segment into the foodservice channel.

Mike: Overall, we are very excited about our innovation plans for 2024, we expect new product performance to be in line with our long term objectives and to drive a meaningful portion of our volume growth.

Brendan Foley: We expect new product performance to be in line with our long-term objectives and to drive a meaningful portion of our volume. In addition, in the second half of the year, sales from new products are expected to nearly double compared to the first half, and a meaningful portion of this innovation is in heat. Heat-infused products span our portfolio.

Mike: In addition in the second half of the year sales from new products are expected to nearly double compared to the first half and a meaningful portion of this innovation is in heat.

Mike: Keith infused products expand our portfolio.

Brendan Foley: Across both segments, we expect HEAT to continue to be a long-term growth accelerator globally for Total McCormick. We are uniquely positioned to win in heat with our global iconic brands, deep consumer insights, and our meaningful scale, technology, and expertise that we have been building for decades. As we look ahead, we are maintaining our outlook for 2024. Mike will share more of the details. At a high level, we continue to expect our top line to be at the mid to high end of our guidance range, given the momentum we saw in the first half of the year, particularly in our consumer sector. We are confident in our initiatives, and we have provided proof points of where they are working.

Mike: Across both segments, we expect heat to continue to be a long term growth accelerator globally for total Mccormick.

Mike: Uniquely positioned to win in heat with our global iconic brands deep consumer insights and our meaningful scale technology and expertise that we have been building for decades.

Speaker Change: As we look ahead, we are maintaining our outlook for 2024, Mike will share more of the details at a high level. We continue to expect our topline to be at the mid to high end of our guidance range given the momentum we saw in the first half of the year.

Speaker Change: Particularly in our consumer segment.

Speaker Change: We are confident in our initiatives and we have provided proof points of where they are working that said, we also remain prudent and continue to reflect the uncertainty in the consumer environment and our outlook for 2024.

Brendan Foley: That said, we also remain prudent and continue to reflect the uncertainty in the consumer environment in our outlook for 2024. To wrap up, let me reiterate three key points. Long-term trends that fuel our categories, consumer interest in healthy, flavorful cooking, flavor exploration, and trusted brands continues to be very strong, and importantly, consumer interest in cooking remains strong. We remain dedicated to accelerating our volume trends. We refine and adapt our plans as needed, and we are prioritizing investment to drive impactful results and return to sustainable volume-led growth.

Speaker Change: To wrap up let me reiterate three key points.

Speaker Change: Long term trends that fuel our categories consumer interest in healthy flavorful cooking flavor exploration and trusted brands continues to be very strong and importantly, consumer interest in cooking remained strong.

Speaker Change: We remain dedicated to accelerating our volume trends, we refine and adapt our plans as needed and are prioritizing investments to drive impactful results and return to sustainable volume led growth and you should continue to expect improvement over the coming year and into 2025 and beyond.

Brendan Foley: And you should continue to expect improvement over the coming year and into 2025 and beyond. We believe the execution of our growth plans will be a win for consumers, customers, our categories, and McCormick, which will continue to differentiate and strengthen our leadership. Now, before Mike's remarks, I'd like to speak to the management transition. As you likely know, last night we announced Mike's decision to retire at the end of February.

Speaker Change: We believe the execution of our growth plans will be a win for consumers customers or categories, and Mccormick, which will continue to differentiate and strengthen our leadership.

Speaker Change: Now before Mike's remarks, I'd like to speak to the management transition as you likely know last night, we announced Mike's decision to retire at the end of February.

Brendan Foley: Mike has been an exceptional leader at McCormick for more than three decades. His strategic leadership and focus on value creation have been instrumental in driving top-tier organic growth as well as our successful acquisition agenda. His deep knowledge of McCormick and effective execution of RCCI initiatives helped fuel our growth investments to deliver profitable growth. Mike is the embodiment of McCormick values and teamwork. He helped build a world-class global finance function.

Speaker Change: Mike has been an exceptional leader at Mccormick for more than three decades, his strategic leadership and focus on value creation have been instrumental in driving top tier organic growth as well as our successful acquisition agenda.

Speaker Change: His deep knowledge of Mccormick and effective execution of our CCI initiatives helped fuel our growth investments to deliver profitable growth.

Speaker Change: <unk> is the embodiment of Mccormick values and teamwork. He helped build a world class Global finance team. He will be missed by me and employees throughout the organization Mike.

Brendan Foley: He will be missed by me and employees throughout the organization. Congratulations on your successful career and your upcoming retirement. In the same announcement, Marcos Gabriel was named Executive Vice President and CFO, effective December 1st. He will serve on our Management Committee and lead the company's finance organization and global business services. Marcos is a proven global leader with over 25 years of experience in the consumer products industry. His expertise across major multinational companies in several geographies will be instrumental as we continue to execute our growth plan. I have worked with Marcos for the last seven years.

Speaker Change: Congratulations on your successful career and your upcoming retirement.

Speaker Change: And the same announcement Marcus Gabriel was named Executive Vice President and CFO effective December one marker.

Speaker Change: <unk> will serve on our management Committee and lead the company's finance organization and global business services team.

Speaker Change: Marcos is a proven global leader with over 25 years of experience in the consumer products industry.

Speaker Change: His expertise across major multinational companies in several geographies will be instrumental as we continue to execute our growth plans I.

Speaker Change: I have worked with Marcos over the last seven years. He has served in key senior leadership roles at Mccormick contributing meaningfully to our profitable growth and improved productivity Marcos congratulation on this promotion and I look forward to working with you in this new role.

Marcos Gabriel: He has served in key senior leadership roles at McCormick, contributing meaningfully to our profitable growth and improved productivity. Marcos, congratulations on this promotion, and I look forward to working with you in this new role. Thank you, Brendan.

Marcos Gabriel: I'm honored to serve as the CFO of McCormick and excited to continue to partner with the entire team to deliver long-term, profitable growth and drive shareholder value. It has been great to work closely with Mike and the management committee for the past year to transition into this new role. Mike, I want to thank you for your mentorship and offer my congratulations on your retirement. Thanks very much for those remarks, Marcus. Joining McCormick more than 30 years ago was one of the best decisions I've ever made.

Marcos: Thank you Brennan I'm honored to serve as a CFO of an apartment and excited to continue to partner with <unk> to deliver long term profitable growth and drive shareholder value. It has.

Speaker Change: It's been great to work closely with Mike and the management Committee for the past year to transition into this new role Mike I want to thank you for a minute and offer my congratulations on your retirement.

Brandon: Thanks, very much for those remarks markets I'm, Brandon joining mccormick more than 30 years ago was one of the best decisions I've ever made this is a great company and it continues to get better I am proud of the progress we have made over the years, we significantly grew our top line generated fuel for growth through improved productivity and continued to deliver solid <unk>.

Michael Smith: This is a great company, and it continues to get better. I am proud of the progress we have made over the years. We significantly grew our top line, generated fuel for growth to improve productivity, and continue to deliver solid results despite the complexity and uncertainty we experienced the last few years. I am so proud of and grateful for our entire team here at McCormick and appreciate all of their contributions and efforts. My decision to retire in February is based in part on Marcus's readiness to move into the role.

Brandon: Despite the complexity and uncertainty we experienced for the last few years I am so proud of and grateful for our entire team here at Mccormick and appreciate all of their contributions and efforts.

Brandon: My decision to retire in February.

Speaker Change: In part our markets is readiness to move into the role I've had the privilege of working with him for several years and witnessed his strong financial leadership and ability to drive results I am confident that Marcus in partnership with Brendan and the rest of our leadership team has the capabilities and vision to continue to advance our leadership and differentiation and capture all the.

Michael Smith: I've had the privilege of working with him for several years and witnessing his strong financial leadership and ability to drive results. I'm confident that Marcus, in partnership with Brendan and the rest of our leadership, has the capabilities and vision to continue to advance our leadership and differentiation and capture all the great opportunities that are ahead for McCormick. Lastly, I look forward to partnering with Brendan and Marcus to ensure a smooth transition over the next... Now, moving to our results for the second quarter.

Brandon: Great opportunities that are ahead for Mccormick lastly, I look forward to partnering with Brandon markers to ensure a smooth transition over the next few months.

Michael Smith: Starting on slide 11, our top-line constant currency sales declined 1% compared to the second quarter of last year, including the impact of the canning divestiture, and reflect flat pricing, all set by a 1% volume and product mix decline. As expected, volume declines were primarily driven by lower customer demand and the timing of customer activities in the labor solution cycle. In our consumer segment, constant currency sales declined 1%, driven by pricing investments. However, volumes were slightly positive and reflect a substantial sequential improvement from the first quarter. On slide 12, consumer sales in the Americas declined by 2% versus the second quarter of last year.

Brandon: Now moving to our results for the second quarter.

Brandon: Starting on slide 11, our topline constant currency sales declined 1% compared to the second quarter of last year, including the impact of the <unk> divestiture and reflect flat pricing offset by a 1% volume and product mix decline.

Brandon: As expected volume declines were primarily driven by lower customer demand and the timing of customer activities in our flavor solutions segment.

Brandon: In our consumer segment constant currency sales declined 1% driven by pricing investments volumes were slightly positive and reflect a substantial sequential improvement from the first quarter.

Brandon: On slide 12 consumer sales in the Americas declined 2% versus the second quarter of last year. This decline reflects pricing investments at 1% and flat volumes.

Michael Smith: This decline reflects pricing investments of 1% and flat volume. Volume growth in spices and seasonings was offset by volume declines in prepared food categories, including frozen and aged. In terms of pricing, we continue to take a surgical and data-driven approach to managing price gaps, and our investments are still expected to impact about 15 percent of our America's consumer sector. Cost of currency consumer sales increased 4%, driven entirely by volume.

Brandon: Volume growth in spices, and seasonings was offset by volume declines in prepared food categories, including frozen in Asia.

Brandon: In terms of pricing, we continue to take a surgical and data driven approach to managing price gaps and our investments are still expected to impact about 15% of our Americas consumer segment.

Brandon: In EMEA constant currency consumer sales increased 4% driven entirely by volume sale.

Michael Smith: Sales growth is broad-based across product categories in our major markets. We are pleased with the volume growth we delivered in the EMEA and expect the momentum to continue through 2024. Constant currency consumer sales in the APAC region were down 1%, driven by a 2% volume decrease, primarily due to the macro environment in China.

Brandon: Sales growth was broad based across product categories and our major markets. We are pleased with the volume growth we delivered in the EMEA and expect the momentum to continue through 2024.

Brandon: Constant currency consumer sales in the APAC region were down 1% driven by a 2% volume decrease primarily due to the macro environment in China.

Michael Smith: Outside of China, we delivered volume-led growth in the mid-teens that was broad-based across categories and markets. Turning to our flavor solution segment and slide 15, second quarter constant currency sales declined 1%, reflecting a 1% contribution from price offset by a 2% decline in volume and the impact of the divestiture of the canning business. In the Americas, Flavor Solutions' constant currency sales declined 1 percent, reflecting a 1 percent contribution from price offset by a 2 percent decrease in volume driven by the timing of customer activities, as well as softness in quick-service restaurant and packaged food customer volume.

Brandon: Outside of China, We delivered volume led growth in the mid teens that was broad based across categories and markets.

Brandon: Turning to our flavor solutions segment, and slide 15 second quarter constant currency sales declined 1%, reflecting a 1% contribution from price offset by a 2% decline in volume and the impact of the divestiture of the Canning business.

Brandon: In the Americas flavor solutions constant currency sales declined 1%, reflecting a 1% contribution from price offset by a 2% decrease in volume driven by the timing of customer activities as well as the softness in quick service restaurant and packaged food customer volumes. This was partially offset by volume growth in our branded food.

Michael Smith: This is partially offset by volume growth in our branded food service business, as Brendan and Amy A. Constant currency sales decreased by..., including a 3% impact from the divestiture of the canning business, lower volume and product mix of 4%, reflecting the impact of QSR on packaged food customers' volumes and the timing of some customer activities. In the APEC region, labor solution sales grew 10% at constant current.

Speaker Change: Service business as Brendan mentioned.

Speaker Change: In EMEA constant currency sales decreased by 8%, including a 3% impact from the divestiture of the Canning business lower volume and product mix up 4%, reflecting the impact of <unk> and packaged food customers volumes and the timing of some customer activities.

In the APAC region flavor solutions sales grew 10% in constant currency volume grew 9% driven by customers' promotions limited time offers and new products, while pricing contributed 1%.

Michael Smith: Volume grew 9%, driven by customers' promotions, limited-time offers, and new products, while pricing contributed 1%. As seen on slide 19, gross profit margin expanded by 60 basis points in the second quarter versus the year-ago period, driven primarily by the benefit of our Comprehensive Continuous Improvement Program, or CCI. As we look ahead, we continue to expect higher margins in the second half compared to the first half of the year. Now moving to slide 20, Selling General and Administrative Expenses, or SG&A, increased versus the second quarter of last year, driven by brand marketing investments, which were partially offset by CCI cost savings.

Speaker Change: As seen on slide 19, gross profit margin expanded by 60 basis points in the second quarter versus the year ago period, driven primarily by the benefit of our comprehensive continuous improvement program or CCI.

Speaker Change: As we look ahead, we continue to expect higher margins in the second half compared to the first half of the year.

Speaker Change: Now moving to slide 20, selling general and administrative expenses or SG&A increased versus the second quarter of last year, driven by brand marketing investments, which were partially offset by CCI cost savings.

Michael Smith: As a percentage of net sales, SG&A increased 40 basis... As expected, brand marketing increased significantly compared to the prior year. Our investments are yielding results, and we can anticipate continuing to invest behind these. Adjusted operating income was flat compared to the second quarter of 2023 with minimal impact from currency as gross margin expansion was offset by higher SG&A expenses. Adjusted operating income in the consumer segment declined 3%, or 2% in constant currency.

Speaker Change: As a percentage of net sales SG&A increased 40 basis points as expected brand marketing increased significantly compared to the prior year. Our investments are yielding results and we anticipate continuing to invest behind these efforts.

Speaker Change: Adjusted operating income was flat compared to the second quarter of 2023 with minimal impact from currency as gross margin expansion was offset by higher SG&A expenses.

Speaker Change: Adjusted operating income in the consumer segment declined 3% or 2% in constant currency while.

Michael Smith: While on labor solutions, adjusted operating income increased 6% with minimal impact from current. We remain committed to restoring Flavor Solutions' profitability, and in the second quarter, as expected, we drove margin expansion versus prior year in this sector. Our performance this quarter reflects our commitment to increasing our profit realization and positions us well to make continued investments in 2024 to fuel top-line growth. Turning to interest expense and income taxes on slide 21, our interest expense was up slightly versus the prior year. However, the reduction in average debt was more than offset by higher short-term interest rates.

While on flavor solutions, adjusted operating income increased 6% with minimal impact from currency.

Speaker Change: We remain committed to restoring flavor solutions profitability and in the second quarter as expected we drove margin expansion versus prior year in this segment.

Speaker Change: Our performance this quarter reflects our commitment to increase our profit realization and positions us well to make continued investments in 2024 to fuel top line growth.

Speaker Change: Turning to interest expense and income taxes on slide 21, our interest expense was up slightly versus the prior year. The reduction in average debt was more than offset by higher short term interest rates.

Michael Smith: And touching on taxes, our second quarter adjusted effective tax rate was 13.6% compared to 22.3% in the year-ago period. Those periods were favorably impacted by discrete tax items with a more significant benefit this year. Our second-quarter adjusted rate benefited from a discrete tax item primarily due to the recognition of a deferred tax asset related to an international legal entity reorganization. We continue to expect our tax rate to be approximately 22%.

Speaker Change: And touching on tax our second quarter adjusted effective tax rate was 13, 6% compared to 22, 3% in the year ago period.

Speaker Change: Both periods were favorably impacted by discrete tax items with a more significant benefit this year.

Speaker Change: Our second quarter adjusted rate benefited from a discrete tax items, primarily due to the recognition of a deferred tax asset related to an international legal entity reorganization.

Speaker Change: We continue to expect our tax rate to be approximately 22% for the year.

Michael Smith: Our income from unconsolidated operations in the second quarter reflects strong performance in our largest joint venture, McCormick New Mexico. We remain the market leader with our McCormick-related mayonnaise, marmalade, and mustard product lines in Mexico, and the business continues to contribute meaningfully to our net income and operating cash flow results. At the bottom line, as shown on slide 23, our second quarter 2024 adjusted earnings per share was $0.69.

Speaker Change: Our income from unconsolidated operations in the second quarter reflects strong performance in our largest joint venture Mccormick de Mexico, we remain the market leader with our Mccormick branded mayonnaise marmalades and mustard product lines in Mexico, and the business continues to contribute meaningfully to our net income and operating cash flow results.

Michael Smith: That's compared to $0.60 for the year-ago period. The increase was primarily due to the discrete tax benefit and higher income from consolidated operations, as I just mentioned. On slide 24, we've summarized highlights for cash flow and the quarter end balance. Through the first half of 2024, our cash flow from operations was $302 million, compared to $394 million in 2020. This decline was primarily driven by increased incentive compensation payments and the timing of cash tax cuts.

Speaker Change: At the bottom line as shown on slide 23 second quarter 2024 adjusted earnings per share was <unk> 69.

Speaker Change: As compared to <unk> 60 for the year ago period.

Speaker Change: The increase was primarily due to the discrete tax benefit and higher income from non consolidated operations I just mentioned.

Speaker Change: On slide 24, we've summarized highlights for cash flow in a quarter end balance sheet through.

Speaker Change: Through the first half of 2024, our cash flow from operations was $302 million compared to $394 million in 2023.

Speaker Change: This decline was primarily driven by increased incentive compensation payments and the timing of cash tax payments.

Michael Smith: We've returned $226 million of cash to our shareholders through dividends and used $130 million for capital expenditures. As a reminder, capital expenditures include projects to increase capacity and capabilities to meet growing demand, advance our digital transformation, and optimize our cost structure. 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. Importantly, we remain committed to a strong investment-grade rating and continue to expect 2024 to be another year of strong cash flow, driven by profit and working capital.

Speaker Change: We've returned $226 million of cash to our shareholders through dividends and used $130 million for capital expenditures. As a reminder, capital expenditures include projects to increase capacity and capabilities to meet growing demand advance our digital transformation and optimize our cost structure.

Speaker Change: 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 importantly, we remain committed to a strong investment grade rating and continue to expect 2024 to be another year of strong cash flow driven by profit and working capital initiatives.

Michael Smith: Now turning to our 2024 financial outlook on slide 25. Our outlook continues to reflect our prioritized investments and key categories to strengthen volume trends and drive long-term sustainable growth, while appreciating the uncertainty of the consumer environment. Turning to the details, first, currency rates are expected to unfavorably impact sales, adjusted operating income, and adjusted earnings per share by approximately 1%.

Speaker Change: Now turning to our 2024 financial outlook on slide 25.

Speaker Change: Our outlook continues to reflect our prioritize investments in key categories to strengthen volume trends and drive long term sustainable growth, while appreciating the uncertainty of the consumer environment.

Speaker Change: Turning to the details first currency rates are expected to unfavorably impact sales adjusted operating income and adjusted earnings per share by approximately 1%.

Michael Smith: At the top line, we continue to expect constant currency net sales to range between a decline of 1% and growth of 1%. Given the momentum in our first half, we expect to be at the mid to high end of our guidance range. In terms of pricing, we expect the favorable impact related to the rapid last year's pricing actions, realized primarily in the first quarter, to be partially offset by our price cap management investments that will drive volume growth. As we look to the second half of the year, we expect total pricing to be flat relative to the prior year.

Speaker Change: At the topline we continue to expect constant currency net sales to range between a decline of 1% to growth of 1%.

Speaker Change: Given the momentum in our first half we expect to be at the mid to high end of our guidance range.

Speaker Change: In terms of pricing, we expect the favorable impact related to the wrap of last year's pricing actions realized primarily in the first quarter to be partially offset by our price gap management investments that will drive volume growth.

Speaker Change: As we look to the second half of the year, we expect total pricing to be flat relative to the prior year.

Michael Smith: And segment trends are expected to be similar to the second. We expect to drive improved volume trends as the year progresses through the strength of our brands and the intentional and targeted investments we are making. As we noted, our initiatives will take time to materialize, and we continue to expect to return to total volume growth during the second half. There has been no new macroeconomic. We expect to continue to prune lower margin business throughout the year as we optimize our portfolio, the impact of which will be reflected within the natural fluctuation of sales.

Speaker Change: And second trends are expected to be similar to the second quarter.

Speaker Change: We expect to drive improved volume trends as the year progresses through the strength of our brands and the intentional and targeted investments we are making as we noted our initiatives will take time to materialize and we continue to expect to return to total volume growth during the second half of the year absent any new macroeconomic headwinds.

Speaker Change: We expect to continue to prune lower margin business throughout the year as we optimize our portfolio the impact of which will be reflected within the natural fluctuation of sales.

Speaker Change: In China, our food away from home business, which is included in APAC consumer was impacted by slower demand in the first half of the year and we continue to expect China consumer sales to be flat to 2023 for the full year. While we recognize there has been volatility in demand in China. We continue to believe in that long term growth trajectory of the China business.

Michael Smith: (Inaudible) While we recognize there has been volatility and demand in China, we continue to believe in the long-term growth trajectory of the China-Pacific region. Finally, the divestiture of the Giotti canning business will impact us through the third quarter.

Speaker Change: And finally, the divestiture that <unk> business will impact us through the third quarter.

Michael Smith: Our 2024 gross margin is projected to range between 50 to 100 basis points higher than 2023. This gross margin expansion reflects favorable impacts from pricing, product mix, and cost savings from our CCI and GOE programs, partially offset by the anticipated impact of low single-digit increases in cost inflation and our increased investment. 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. Moving to adjusted operating income, we expect 4% to 6% constant currency growth.

Speaker Change: Our 2020 for gross margin is projected to range between 50 to 100 basis points higher than 2023.

Speaker Change: Gross margin expansion reflects favorable impacts from pricing product mix and cost savings from our CCI and <unk> programs, partially offset by the anticipated impact of low single digit increases in cost inflation and our increased investments.

Speaker Change: 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.

Speaker Change: Moving to adjusted operating income, we expect 4% to 6% constant currency growth. This growth is projected to be driven by our gross margin expansion as well as SG&A cost savings from our CCI and <unk> programs, partially offset by investments to drive volume growth, including brand marketing.

Michael Smith: This growth is projected to be driven by gross margin expansion as well as SG&A cost savings from our CCI and GOE programs, partially offset by investments to drive volume growth, including brand marketing. We expect our brand marketing spend to increase by high single digits in 2024, reflecting a double-digit increase in investments, partially offset by QCI savings, and we continue to expect our increased investments in brand marketing to be concentrated in the first half. Our 2024 Adjusted Effective Income Tax Rate projection of approximately 22% is based upon our estimated mix of earnings by geography as well as factoring in discrete items.

Speaker Change: 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.

Our 2024, adjusted effective income tax rate projection of approximately 22%.

Speaker Change: Based upon our estimated mix of earnings by geography, as well as factoring in discrete items.

Michael Smith: We expect a mid-teens increase in our income from unconsolidated operations, reflecting the strong performance we anticipate in McCormick, D.C. To summarize, our 2024 adjusted earnings per share projection of $2.80 to $2.85 reflects a 4% to 6% increase compared to 2020.

Speaker Change: We expect a mid teens increase in our income from unconsolidated operations, reflecting the strong performance, we anticipate and Mccormick de Mexico.

Speaker Change: To summarize our 2024 adjusted earnings per share projection of $2 80 to $2 85.

Speaker Change: It reflects a 4% to 6% increase compared to 2023.

Michael Smith: As Brendan noted, we continue to prioritize our investments to drive impactful results and return to differentiated and sustainable volume-led growth. We are moving in the right direction, and we remain confident in the underlying fundamentals of our business and delivering on our 2024 financial outlook and long-term objectives over time. Thank you, Mike.

Speaker Change: As Brendan noted we continue to prioritize our investments to drive impactful results and returned to differentiated and sustainable volume led growth. We are moving in the right direction and we remain confident in the underlying fundamentals of our business and delivering on our 2024 financial outlook and long term objectives over time.

Brendan Foley: Before moving to Q&A, I would like to close with our key takeaway on slide 26. First half results and volume performance in the consumer segment demonstrate that we are making the right investments to drive long-term sustainable organic growth and reinforce our confidence. We are executing on proven strategies and investing behind our business with speed and agility and in alignment with consumer behavior and capitalizing on our advantage categories across sectors. We're able to do this and continue to make great progress on managing costs, led by our cost-saving programs to support our increased investments in the business and drive margin expansion.

Speaker Change: Thank you, Mike before moving to Q&A I would like to close with our key takeaway on slide 26.

Speaker Change: First half results and volume performance in the consumer segment demonstrate that we are making the right investments to drive long term sustainable organic growth and reinforces our confidence.

Speaker Change: We are executing our proven strategies and investing behind our business with speed and agility and in alignment with consumer behavior.

Speaker Change: And capitalizing on our advantage categories across segments.

Speaker Change: We're able to do this and continue to make great progress on managing costs led by our cost saving programs to support our increased investments in the business and drive margin expansion.

Brendan Foley: Our performance for the first half, coupled with our growth plans, gives us confidence in achieving the mid-to-high end of our projected constant currency sales growth for 2024. Finally, I want to recognize McCormick employees around the world for their dedication and their contributions, and reiterate my confidence that together we will continue to drive differentiated results and shareholder value. Now, for your questions. Thank you. If you'd like to ask a question at this time, please press star 1 on your telephone keypad and the confirmation tone to indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue.

Speaker Change: Our performance for the first half coupled with our growth plans give us confidence in achieving the mid to high end of our projected constant currency sales growth for 2024.

Speaker Change: Finally, I want to recognize Mccormick employees around the world for their dedication and their contributions and reiterate my confidence that together, we will continue to drive differentiated results and shareholder value now.

Speaker Change: Now for your questions.

Speaker Change: Thank you.

Speaker Change: We'll now be conducting a question and answer session if.

Speaker Change: If you'd like to ask a question at this time. Please press star one from your telephone keypad, a confirmation tone will indicate your line is in the question queue you.

Speaker Change: You May press star two if he like to remove your question from the queue.

Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we poll for questions. Thank you. And our first question comes from the line of Andrew Lazar with Barclays. Please receive your question. Great. Thanks so much.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker Change: One moment, please when we poll for questions.

Speaker Change: Thank you and our first question comes from the line of Andrew Lazar with Barclays. Please proceed with your questions.

Andrew Lazar: Mike, congratulations on your retirement announcement. Glad we have you around for another couple of quarters. And Marcos, congratulations on your new role.

Andrew Lazar: Great. Thanks, so much Mike Congratulations to you on your retirement announcement glad glad we have you around for another couple of quarters and Marcos Congratulations to you on the new role.

Brendan Foley: Thank you, Andrew. We'll see you at Investor Day. Thank you, Andrew. Sure thing. I guess first off, looking at the sequential improvement in volume in the consumer segment, particularly in the Americas, certainly seems like the investments are starting to yield results. Maybe you could unpack that for us a bit and speak to the levers that are driving the performance and what gives you the confidence that that will continue through the back.

Speaker Change: Thank you Andrew we'll see you at Investor Day.

Speaker Change: Okay. Thanks I.

Speaker Change: I guess first off looking at the sequential improvement in volume in the consumer segment, particularly in the Americas certainly seems like the investments are starting to yield results. I was hoping maybe you can unpack that for us a bit and speak to the levers that are driving the performance and what gives you the confidence that that will continue through the back half.

Brendan Foley: Thanks Andrew and good morning. You know, just to maybe open up with a couple points to reinforce. We did have a good quarter, and sales do continue to strengthen, which gives us confidence in that mid-to-upper end of our range. But this also includes that short-term weakness that we felt with flavor solutions in the quarter. I think, you know, one of the important things I want to make sure we get across is that we did drive volume growth in our global consumer segment.

Speaker Change: Thanks, Andrew and good morning, just to maybe open up with a couple of points to reinforce.

Speaker Change: We did have a good quarter.

Speaker Change: Sales do continue to strengthen which gives us confidence in that mid to upper end of our range.

Speaker Change: But it also includes that short term weakness that we felt in flavor solutions in the quarter I think.

Speaker Change: An important things I want to make sure we get across is that we did drive volume growth in our global consumer segment.

Brendan Foley: And it does reflect kind of, in many ways, the additional program that we talked about. We're also driving strong sequential volume improvement in Americas, as you just called out in the consumer business, and specifically in spices and seasonings. You know, we delivered volume growth across all major markets, and that included driving unit share growth in the U.S. So we said this was a year of investment, and we further executed those programs that we've been talking about. And at the same time, we still expanded our margins.

Speaker Change: It does reflect kind of in many ways I think that that additional program that we talked about we're also driving strong sequential volume improvement in Americas like you just called out in the consumer business and specifically in spices and seasonings.

Speaker Change: <unk> volume growth across all major markets and it included driving unit share growth in the U S. So we said this was a year of investment and we further executed those programs that we've been talking about and at the same time, we still expanded margins. So we're pretty pleased with the results at this point. It is the halfway point in the year and we do like the progress that we're making.

Brendan Foley: So we're pretty pleased with the results at this point. It is the halfway point in the year, and we do like the progress that we're making. If I were to add more context in unpacking those levers that, you know, we've been talking about on this call and previous calls, a lot of it is that we did ramp up brand marketing in the first half, and it wasn't just in the first quarter.

Speaker Change: If I were to add more context, and unpacking those levers that we've been talking about on this call and previous calls.

Speaker Change: A lot of it is we did ramp up brand marketing in the first half and it wasn't just in the first quarter. We also saw a significant ramp up in the second quarter too.

Brendan Foley: We also saw a significant ramp-up in the second quarter, too, and, you know, a lot of that investment was going more against our core categories to drive demand and support our initiatives. And we continue to expect healthy levels as we go into the second half of the year on brand marketing. New products were also a big part of that too in the first half, and they contributed pretty meaningfully. I would say it was more pronounced in the second quarter than even in the first, just because of the build of getting items on the shelf and beginning to ship them. And we expect to double that innovation when you compare the second half to the first half. So that lines up nicely as we go into the balance of the year.

Speaker Change: And in a lot of that investment was going more against our core categories to drive demand and support our initiatives.

Speaker Change: And we continue to expect healthy levels as we go into the second half of the year on brand marketing.

Products was also a big part of that too in the first half and that can treat contributed pretty meaningfully.

Speaker Change: Especially a lot of that build happened in the second quarter I would say it is more pronounced in the second quarter than even in the first just because of the building getting items on shelf and beginning to ship them.

Speaker Change: And we expect to double that innovation when you compare the second half to the first half so that lines up nicely as we go into the balance of the year and then we expanded distribution in certain categories are new.

Brendan Foley: And then we expanded the distribution in certain categories. New products are gaining strong retail acceptance, and so that's obviously one of those levers that helps. And in terms of pricing, in the second quarter, we activated many of our price gap management programs. And we expect this to continue into the second half.

Speaker Change: New products are gaining.

Speaker Change: <unk> retail acceptance and so that's obviously one of those levers that helps in terms of pricing in the second quarter. We activated many of our price gap management programs and so we expect this to continue into the second half.

Brendan Foley: Because we know the performance that we're seeing from that, but it's still only a portion of our strategy. You know, as we said before, it impacts about 15% of our America's consumer business. But it is yielding the results that we were expecting to get.

Speaker Change: Because we know the uptick with the performance that we're seeing from that.

But it's still only a portion of our strategy as we said before it impacts about 15% of.

Speaker Change: Our Americas consumer business.

Speaker Change: But it is yielding the results that we were expecting to get and so all of these growth levers are contributing and driving I think really healthy outcomes as we think about the performance of our business. So by the way we operate in great categories to the categories are performing well also and so that obviously is.

Brendan Foley: And so all of these growth levers are contributing to and driving, I think, really healthy outcomes as we think about the performance of our business. And, by the way, we operate in great categories too. So the categories are performing well also. And so that obviously is, you know, a nice tailwind as part of that.

Speaker Change: A nice tailwind as part of that.

Brendan Foley: Thanks for that and for the quick follow-up. Mike, you had called out some weakness in flavor solutions volumes several weeks ago. The result today, I guess, was at the sort of more favorable end of that range you provided for volume in the quarter, and I guess I'm just trying to get a sense of sort of what the exit rate of sort of volume, America's and Europe's, sort of look like coming out of this, to get a sense of maybe it's sort of weakened from what we saw in the U.S. and Europe as we move further. No, that's no problem.

Speaker Change: Great. Thanks, Thanks for that and a quick follow up on Mike you had called out some weakness in flavor solutions volumes several weeks ago.

Speaker Change: The results today, I guess was it sort of more favorable end of that range. You provided in terms of flavor solutions volume in the quarter and I guess I'm, just trying to get a sense of sort of what the exit rate of sort of volume in flavor solutions in the Americas, and Europe sort of looked like kind of coming out of fiscal <unk> just to get a sense of maybe sort of weakened from what we saw.

Speaker Change: In the <unk> results or maybe if we can expect some sequential improvement.

Speaker Change: In the U S and Europe as we move further into fiscal <unk>. Thanks, so much.

Speaker Change: That's no problem, Yeah, I mean, we did say on the call. We are expecting some sequential improvement in Q3 and Q4.

Michael Smith: Yeah, I mean, we did say on the call that we are expecting some sequential improvement in Q3 and Q4. It was, you know, we had talked about about a month ago, low single digits and mid single digits. So we did come in at the low single-digit phase, which we're happy with; we're always happy with those results. You know, as you get down into some of the customer activity timing, which we have more clarity on, some of the partnership that we're working with, getting more information on customers' activities.

Speaker Change: We had talked about about a month ago low single digit to mid single digit. So we did come in at the low single digit fees, which we're happy with we're always happy with those results.

Speaker Change: As you get down into some of the customer activity timing, which we had more clarity to some of the partnership that we're working with.

Speaker Change: And getting more information on activities of customers now some of those are second half related to some will carry into 2025. So I don't want to get too far ahead of ourselves, but we feel good about.

Where that sequential improvement we're seeing in addition to the great consumer performance that frankly, just alluded to.

Michael Smith: Now, some of those are second-half related, some we'll carry into 2025, so we don't wanna get too far ahead of ourselves, but we feel good about that sequential improvement we're seeing in addition to the great consumer performance that Brendan just alluded to. Our next question is from the line of Peter Galbo with Bank of America. Please proceed with your question. Hey guys, good morning. Congratulations on your retirement, and congratulations to Marcos as well.

Speaker Change: Thank you.

Okay.

Speaker Change: Our next question is from the line of Peter Galbo with Bank of America. Please proceed with your questions.

Speaker Change: Hey, guys good morning.

Speaker Change: Congrats Mike.

Speaker Change: On your retirement and congrats to Mark us as well.

Peter Galbo: Maybe just to pick up on Andrew's question just around kind of consumer confidence and in the back half of the year and that acceleration. Brendan, I think in your prepared remarks you mentioned a bit more, you know, you're seeing consumers shopping the perimeter of the store relative to center store, and maybe that explains why you might be bucking the trend relative to some of your peers. But maybe you could just unpack that a bit more what you're seeing from that consumer perspective and again what kind of drives the confidence that you get into the back half.

Speaker Change: Maybe just to pick up on on Andrew's question, just around kind of consumer confidence in the back half of the year.

Brennan: And that acceleration Brennan I think in your prepared remarks, you mentioned a bit more.

Speaker Change: Youre seeing consumer shopping the perimeter of the store relative to center store and maybe that explained why you might be bucking the trend relative to some of your some of your peers, but but maybe you could just unpack that a bit more what youre seeing from the consumer perspective, and again, what kind of drives the confidence that you get into the back half.

Peter Galbo: Yeah, I think what drives our confidence is we look at our business, you know, at the brand and sort of the, you know, sort of the key category and unit level. We think the programs are having a strong impact, coupled with where we think consumers are moving within the store and what they're doing. As people tend to, you know, when they feel like it, when you think about the inflation through the way from home, we're definitely seeing people shift more to, you know, eating at home.

Speaker Change: Yes, I think were trust our confidence as we look.

Speaker Change: At our business.

Speaker Change: The brand and sort of.

Speaker Change: The key categories in unit level.

Speaker Change: We think the programs are having a strong impact coupled with where we think consumers are moving within the store and what they're doing.

As people turn to.

Speaker Change: When they feel like.

Speaker Change: If you think about the inflation in food away from home, we're definitely seeing people shift more to.

Speaker Change: Eating at home and that certainly benefits our business as we've always mentioned.

Brendan Foley: And that certainly benefits our business, as we've always mentioned. But, you know, as people shop the perimeter, I think they're looking for opportunities in terms of how they flavor their meals, and so that really does benefit our categories. I think about it broadly, though, Peter, just, you know, the overall consumer outlook.

But as people shop with Premier I think theyre looking for opportunities in terms of how they flavor their meals and so that really does benefit our categories. When I think about broadly, though Peter just the overall consumer outlook.

Brendan Foley: It hasn't really changed a lot since our last guidance or even on our last call. I mean, we're pretty confident in our initiatives and we think they're working, but our outlook assumes the consumer is kind of where they are or where they were in the fourth quarter of 23 and the first half of 24, and so we continue to take a cautious view on our outlook. I think that just reflects what might be uncertainty or inconsistency that we tend to see in the environment.

Speaker Change: It hasn't really changed a lot since our last our last guidance or even on our last call I mean, we're pretty confident in our initiatives and we think they are working.

Speaker Change: Our outlook assumes the consumer is kind of where they are or they have been like in the fourth quarter of 'twenty three in the first half of 'twenty four and so we continue to take a cautious view on our outlook I think that just reflects what might be uncertainty or inconsistency that we tend to see in the environment.

Brendan Foley: But we believe, you know, even in that environment, we plan for our plants to kind of deliver this type of performance. We see the consumer moving around and shifting channels. That's definitely happening, and I think that shows up in the numbers, but it tends to benefit our business, whether it's in food service or whether it's at meals at home. We're catering for all those occasions. So we really believe that when we're an end-to-end provider of flavor, we tend to benefit depending on where the channel shifts. Got it.

Speaker Change: But we believe even in that environment, we plan for our plants to kind of deliver.

Speaker Change: Performance.

Speaker Change: <unk>.

Speaker Change: We see the consumer moving around and shifting channels, that's definitely happening and I think that pops up in the numbers.

Speaker Change: But it tends to benefit our business, whether it's in foodservice or whether its at meals at home.

Speaker Change: Flavoring all those occasions, so we really believe that.

Speaker Change: When there is an end to end provider of flavor, we tend to benefit.

Sending out wherever channel shifts into.

Michael Smith: And Mike, I think you at www.thevenusproject.com. Yeah, absolutely. There are a number of factors that kind of impact the difference between our shipments and consumption. And just to give you some context around that, I'll just share with you three points to kind of consider. First of all, our consumption is strengthening. And if I were to think about how that progressed through the second quarter, I think more of it we saw in the back half of the second quarter than in the front half.

Speaker Change: Got it and Mike I think.

Speaker Change: Depending on whether you look at the IRI or I'm sorry, Mr. Connor with the Nielsen data there was maybe a gap just in Americas consumer relative to the I think you gave some of the factors, but just anything you can dimension there on kind of the gap in terms of ship to consumption.

Speaker Change: Yes, absolutely.

Speaker Change: There is a number of factors that kind of impact the difference between our shipments and consumption and just to give you some context around that and maybe I'll just share with you three three points for.

Speaker Change: So kind of consider it first of all our consumption is strengthening.

Speaker Change: If I were to think about how that progressed through the second quarter I think more of it you saw in the back half of the second quarter than in the front half so that would reflect as we started to really get execution of our programs.

Michael Smith: So that would reflect as we started to really execute our programs in retail, we were seeing stronger consumption. So it started to pull up, you know, in Q2 across the total portfolio, we drove almost the full point of unit growth. And so, you know, that gave us reason to feel confident. And that included those declines in prepared foods that we talked about, like those frozen and frozen and Asian category declines. But it was a substantial improvement from Q1 and driven by that, you know, increased programming.

Speaker Change: In retail we are seeing stronger consumption. So it was starting to pull up.

Speaker Change: Q2 across the total portfolio, we drove almost a full point of unit growth.

Speaker Change: And so that gave us reason to feel confident and that includes those declines in prepared foods that we talked about like that frozen frozen and Asian category to clients, but it was a substantial improvement from Q1, and it's driven by that increased programming I think that is to some degree a condition of sales catching up.

Michael Smith: I think that is, to some degree, a condition of sales catching up to our performance on the shelf. So as retailers start to see, I think our movement, you know, we obviously expect sales to keep up with that. I would expect more strengthening to continue in the second half. The other condition that, in the second quarter, I think it's important to call out is that we were lapping increased shipments that came ahead of the 2023 pricing actions of the prior year. And we also had a similar condition in 22 compared to 23.

Speaker Change: Up to our performance on shelf, so as retailers start to see I think our movement.

Speaker Change: We obviously expect sales to keep up with that.

Speaker Change: I would expect more strengthening to continue in the second half.

Speaker Change: Other condition that in the second quarter I think it's important to call out as we were lapping increased shipments that came ahead of the 2023 pricing actions of the prior year and we also had a similar condition in 22 compared to <unk> 23, So that did play a little bit of impact I think when we look at shipments versus consumption.

Michael Smith: So that did have a little bit of an impact, I think, when we look at shipments versus consumption. And then, in terms of, you know, retailers, they're always looking to be more efficient. That's not new.

Speaker Change: And then in terms of retailers.

Speaker Change: We're always looking to be more efficient that's not new it's always I think our focus are there, but overall we are not seeing at this time any unusual activity.

Michael Smith: It's always, I think, a focus there. But overall, we are not seeing, at this time, any unusual activity. So I think just to give you a little bit of context on, you know, consumption has an impact, what was going on in the prior year, and then how retailers are behaving, I think that would be the perspective I would want you to, you know, think about with McCormick. Great. Thanks very much, guys. Our next question is from the line of Kenneth Goldman with J.P. Morgan. Please let me receive your question. Hi, thank you. And Mike and Marcos, congratulations to both of you.

Speaker Change: I think just to give you a little bit of context on consumption has an impact.

Speaker Change: What was going on in the prior year and then how are retailers behaving I think that would be easy to prospective I would want you to.

Speaker Change: Think about with Mccormick.

Speaker Change: Great. Thanks, very much guys.

Speaker Change: Our next question is from the line of Ken Goldman with Jpmorgan. Please proceed with your questions.

Kenneth Goldman: Hi, Thank you and Mike and Mark Congratulations to both of you and Mike. Thank you for all of your help over the years I know you're not done yet but.

Kenneth Goldman: And Mike, thank you for all of your help over the years. I know you're not done yet, but it's appreciated. I wanted to ask a little bit about, you know, you have a pretty confident tone, I think it's fair to say, about, you know, the direction of trends into the second half. You beat this quarter on the bottom line by a decent amount. You beat the first quarter by a decent amount.

Speaker Change: It's appreciated.

Kenneth Goldman: I wanted to ask.

Kenneth Goldman: <unk> about.

Speaker Change: You have a pretty confident tone I think it's fair to say about.

The direction of trends into the second half.

Speaker Change: You beat this quarter on the bottom line by a decent amount you beat the first quarter by a decent amount. It sounds like you are implicitly you are implicitly guiding for the tax rate to be.

Brendan Foley: It sounds like you're implicitly, well, you are implicitly guiding for the tax rate to be, you know, closer to 24% in the second half, roughly. I guess putting that all together, were there any thoughts of raising guidance? I realize, you know, it's a pretty unpredictable environment right now, but I just want to get a little bit of a sense for, you know, how you view the second half in terms of, you know, we use the word prudence, you know, in relation to just how well the first half performed, I guess, at least versus external expectations.

Speaker Change: Closer to 24% in the second half roughly.

Speaker Change: I guess, putting that altogether were there any thoughts of raising guidance I realize it's a pretty unpredictable environment right now, but I just wanted to get a little bit of a sense for how you view the second half in terms of group.

Speaker Change: We use the word prudence.

Speaker Change: In relation to just how well the first half performance at least versus external expectations.

Speaker Change: Yes.

Brendan Foley: Yeah. I'll leave it off with a couple of comments, Mike, and I mean, Ken, we felt like we had strong consumer performance and our investments are working, you know, doing what we said we would do. And so that does give us confidence going into the second half, and perhaps that's why you're hearing a little bit of confidence in our tone. But given how the first half performed, we expect those growth levers in the consumer part of our business to continue to operate and work well.

Speaker Change: Doing good.

Speaker Change: I'll lead off with a couple comments pricing.

Speaker Change: Do think Ken.

Speaker Change: It felt like we didn't have strong consumer performance and our investments are working.

Speaker Change: Doing what we said we would do so.

Speaker Change: That does gives us confidence going into the second half and perhaps that's why you're hearing a little bit of confidence in our tone.

But given how the first half performed.

Speaker Change: We expect this growth levers in the consumer part of our business to continue to operate and work well.

Brendan Foley: As we said on Flavor Solutions, we expect sequential improvement versus what we saw in the second quarter, because there's many of the things that I think, as Mike said earlier in the questions here, it does give us confidence as we think about how we might look at the Flavor Solutions business. But, Mike, if you want to talk a little bit about what drives our prudence probably has to do with... Well, I think as we think about where we are on the life cycle of the year, and we talked about Q2 being an important quarter for us, because it was the pivot quarter, where pricing goes... We lose some of the protection of pricing, which we saw in the first quarter and last year, the shift of volume, and particularly what makes us happy is that consumer volume going positive, which is great.

Speaker Change: As we said on flavor solutions, we expect.

Speaker Change: Sequential improvement versus what we saw in the second quarter, because theres. Many of the things that I think as Mike said earlier in the questions here. It does give us confidence as we think about what how we might look at the flavor solutions business, but Mike if you want to talk a little bit about.

Speaker Change: What drives our prudent probably with the back half is a big part of that.

Speaker Change: We think about where we are in the lifecycle of the year and we talked about Q2 being an important quarter for us because it was the pivot quarter where pricing goes.

Speaker Change: Some of the protection of pricing, which you saw in the first quarter and last year, the shift of volume and particularly what makes us happy at that consumer volume given the positive which is great. There's some back half assumptions on volume growth in consumer which we're very.

Brendan Foley: There's some back half assumptions on volume growth in consumers, which we know the programs are working, but you still have to assume that the second half of the year is the biggest half, the biggest quarter, the fourth quarter. So while we're really pleased with the results, we realize the second half is important to continue that momentum, and we believe we will. We're always looking at the guidance. I mean, you referenced tax, so I'm kind of chuckling because I think on my first earnings call, we had a big tax adjustment, and we talked about guidance for the year versus these things happening lumpily in the quarter or half. I'll take that one right off.

Speaker Change: We know the programs are working but you still have to assume that the second half of the year is the biggest the biggest biggest quarter in the fourth quarter. So while we are we're really pleased with the results. We realized the second half is important to continue that momentum and we believe we will.

Speaker Change: We're always looking at the guidance I mean.

Speaker Change: You referenced tax from kind of chuckling, because I think my first earnings call, we probably I think we had a big tax.

Speaker Change: Adjustments.

Speaker Change: Similar.

Speaker Change: And we talked about guidance for the year versus these things happened Luckily in the quarter or half. So I'll take that one write off 24% in the second half as our underlying rate, 24% to 25% of that.

Michael Smith: Twenty-four percent in the second half is our underlying rate, 24 to 25 percent, so that's roughly where we'll probably land. I mean, we do have the second half, if you think about built-in operating margin growth. We have volume growth, things like that, so we feel like we've called it prudently. Obviously, if there are opportunities, if things change, we want to keep our financial flexibility to make investments in some of these growth drivers that we're really seeing positive results on. I think we're really pleased going into the third quarter.

Speaker Change: Roughly what we'll probably land.

Speaker Change: We do have the second half you could think about built in operating margin growth, we have volume growth things like that so we feel like we've called it prudently obviously, if there is opportunities as things change we want to keep our financial flexibility to make investments in some of these growth drivers that we're really seeing positive answer we want to be.

Speaker Change: That flexibility too, but I think we're really pleased going into the third quarter, we talked a bit about some of the consumer uncertainty, which impacts some of our flavor solutions business, we're always cautious there too, but I'd say, we'd call it pretty much down the middle with hopefully a lean in to the positive.

Michael Smith: We talked a bit about some of the consumer uncertainty, which impacts some of our flavor solutions business. We're always cautious there, too, but I'd say we've caught it pretty much down the middle, with hopefully, a lean-in to the positive. Sounds good.

Speaker Change: Sounds good thank you I'll pass it on.

Speaker Change: Yeah.

Kenneth Goldman: Thank you. I'll pass it on. Our next questions are from the line of Alexia Howard with Bernstein. Good morning and congratulations, Mike, and welcome or congratulations, Marcos.

Speaker Change: Our next questions are from the line of Alexia Howard with Bernstein.

And with your questions.

Speaker Change: Good morning, and congratulations Mike and welcome all congratulations Marcos I guess, we'll see Ya.

Alexia Howard: I guess we'll see you both at Investor Day coming up in October, and thank you. Can I pick up on Andrew's question around flavor solutions and maybe think about the longer-term strategies for building resilience in that segment? You have a lot of exposure to QSRs, and quite focused on one particular customer in the salty snack segment. Are there plans to diversify, and how quickly can you take up those new opportunities, and which kinds of categories that are faster growing can you go after? Alexia, thanks for the question and good morning.

Speaker Change: The Investor day coming up in October.

Speaker Change: Thank you.

Speaker Change: Can I pick up on Andrew's question around flavor installations, and maybe think about.

Speaker Change: The longer term strategy for building resilience in that segment.

Speaker Change: You have a lot of exposure to <unk>.

Speaker Change: <unk>.

Speaker Change: Quite focused on one particular customer in the salty snack segment.

Speaker Change: Hum.

Speaker Change: <unk> plans to diversify and how quickly can you get asked about new opportunities, which calling the terms agreed.

Speaker Change: Foster growth can you go off.

Alexia Howard: Alexia Thanks for the questions and good morning.

Brendan Foley: I think as you think about the core of your question is that long-term outlook as you think about our customer space and portfolio and flavor solutions. I would go back to things that we've said in prior discussions. If we think about the flavor solutions businesses, there is constantly an activity of continuing to shape that portfolio of higher value-added products and technologies and a customer base. So as we continue to shape that portfolio, it continues to go in the direction of sort of our flavors business, which includes seasonings, as we think about our portfolio.

Speaker Change: I think you should think about.

Speaker Change: As part of your question is that long term outlook as you think about our customer space and portfolio of flavor solutions.

Speaker Change: I would go back to the things that we've said in prior <unk>.

Speaker Change: Discussions if we think about the flavor solutions businesses.

Speaker Change: Constantly and activity have continued to shape that portfolio to higher value added.

Speaker Change: <unk> products and technologies and customer base. So we.

We continue to shape that portfolio. It continues to go in the direction of sort of our flavors business, which includes seasonings as we think about our portfolio.

Brendan Foley: And in many ways, some of the fastest-growing areas of that portfolio happen to be those small, highly innovative, emerging customers that are operating in categories like performance nutrition or non-alcoholic beverages where, like this quarter, we continue to see real strength.

Speaker Change: And in many ways some of the fastest growing areas of that portfolio happened to be the smallest highly iterative data is emerging customers.

Speaker Change: That are operating in categories that like performance nutrition or non alcoholic beverages were like this quarter, we continue to see real strength.

Brendan Foley: That is foremost looking at how we diversify our customer base, but we're also operating where we think there are strong areas of growth. And this really, I think, is kind of the central point that we've talked about, that we'll continue to shape that part of our flavor solution segment and that portfolio to that higher value-added sort of product and technology sale that we have. And this is, I think, what you see quarter to quarter is a reflection of that.

Speaker Change: That is.

Speaker Change: Foremost looking at how we diversify our customer base, but we're also operating where we think there are strong areas of growth and these this really I think is kind of a central point that we've talked about is we will continue to shape that part of our site.

Speaker Change: The flavor solutions segment net portfolio to that higher value added.

Speaker Change: Product and technology sale that we have and this is I think what you see quarter to quarter is a reflection of that.

Brendan Foley: I think, too, people sometimes forget the brand and true service business, which has really good margins. We like that part of the portfolio, and we're continuing to gain share. We keep coming up with opportunities.

Speaker Change: Thank two people, sometimes forget the branded foodservice business, which.

Speaker Change: No.

Speaker Change: Really good margins, we like that.

Speaker Change: And we're continuing to gain share gain share.

Speaker Change: Coming up with opportunities, we talked about expanding the gourmet <unk> into that category things like that so there's really lots of opportunities on that side, which we like on the flavor solutions side.

Michael Smith: We talked about expanding McCormick Mayonnaise into that category, things like that. So there's really lots of opportunities on that side, which we like on the flavor side. I think the message is we continue to diversify and optimize, and move toward more higher-margin products. Great, thank you very much.

Speaker Change: It's a diversified.

Speaker Change: I think the message and we continue to diversify and optimize.

Speaker Change: Move towards more higher margin product lines.

Great. Thank you very much can I just do a quick follow up on.

Alexia Howard: Could I just do a quick follow-up on the highlights of the remaining cost-saving opportunities? You've talked a little bit about getting rid of costs that were incremental through COVID. What are the major buckets of cost savings remaining for you over the next couple of years? Oh, gosh.

Speaker Change: The highlight Turkey remaining cost savings opportunities.

Speaker Change: You talked a little bit about getting rid of call that were incremental to converge.

Speaker Change: What are the major buckets of cost savings.

Speaker Change: <unk> seen realized in the next couple of years.

Michael Smith: We could talk a whole earnings call on that one. Our CCI program has a long history of generating sustainable cost savings. We talked a little bit on this call about finalizing the transition to our new UK flavor solutions business in the second half, which will give us some tailwind into next year, which is great. But our CCI program targets all levels of the P&L. A lot of times, programs will just look at cost of goods sold, raw materials, things like that, which is an important part of our portfolio. We're looking at optimizing SG&A. AMP; We talk about AMP a lot this year.

Oh gosh, we're actually going to talk a whole earnings call on that one it means our CCI program. There has a long history of generating sustainable cost savings, we talk a little bit on this call about the exit.

Speaker Change: Finalizing the transition to our new UK flavor solutions business in the second half, which will give us some tailwind.

Speaker Change: Into next year, which is great.

Speaker Change: But our CCI program.

Speaker Change: We target all levels of the P&L I mean, a lot of times programs with just look at cost of goods sold raw materials things like that which is an important part of our portfolio. We're looking at automated from optimizing SG&A.

Speaker Change: A&P when you talk about E&P loss this year were actually spending A&P.

Michael Smith: We're actually spending AMP; our guidance is high single digits. But from an effectiveness perspective, we're actually spending low double digits and getting CCI savings as we optimize spend to touch more customers more effectively. There are examples everywhere along the P&L.

Speaker Change: Guidance is high single digits, but from an effectiveness perspective, we're actually spending.

Speaker Change: Low double digits and getting CCI savings as we optimize spend to touch more customers more effectively so those are examples.

Michael Smith: I'd say it's a program that's special because ideas come from the bottom up in our organization as part of our culture to drive that because we want to use it as fuel for growth, so we can drive the growth leverage that we talked about this year at Cagney and help drive that volume. I think there's a lot more opportunity, and I look forward to Marcus helping drive that into the future too. Thank you very much. I'll pass it on.

Speaker Change: Everywhere, along the P&L I'd say.

Speaker Change: As the program is special because the ideas come from the bottom up in our organization as part of our culture to drive that because we want to use it as fuel for growth. So we can drive the growth levers that we talked about this year at Cagny and helped drive that volume. So I think there's a lot more opportunity.

Mark: Mark that's helping drive that into the future too.

Speaker Change: Thank you very much I'll pass it on.

Stephen Robert Powers: The next question is from the line of Steve Powers with Deutsche Bank. Hey guys, good morning, and Mike Marcos, congratulations from me as well. Hey, so Brendan, I wanted to talk a little bit about the price gap management initiatives you've put in place in consumer. With the commentary on year-over-year pricing in the back half expected to resemble what we've seen in the second quarter, it doesn't sound like you expect a whole lot more in incremental unit price investment over the course of the year.

Speaker Change: The next question is from the line of Steve Powers with Deutsche Bank. Please proceed with your question.

Stephen Robert Powers: Hey, guys, good morning, and Mike Marcos Congrats from me as well.

Brendan: Hey, Brendan I wanted to talk a little bit about the price gap management initiatives.

Brendan: Put in place in <unk> and consumer.

Speaker Change: With the commentary on year over year pricing in the back half expected to resemble what we've seen in the second quarter. It doesn't sound like you expect a whole lot more of incremental unit price investments over the course of the year and I guess I just wanted to kind of test that that assumption and then in the context of what you were saying around just the Val.

Stephen Robert Powers: And I guess I just wanted to kind of test that assumption, and then, in the context of what you were saying around just the value-seeking behavior and the consumer financial pressures that you're observing across the consumer landscape, just what gives you the confidence that you've kind of done enough at this point, and you've got in place what you need for the duration of the year? Thank you, Steve.

Speaker Change: Are you seeking behavior and the consumer financial pressures that you're observing.

Speaker Change: Across the consumer landscape, just what gives you the confidence that that kind of you've kind of done enough at this point and you've got in place what you need for the duration of the year. Thank you.

Brendan Foley: I think, you know, in the two questions you asked there, let me address your first one first. Yeah, you can make the assumption that as we think about the rest of the year and that price gap management activity, you know, what we've implemented here today largely reflects how we're thinking about carrying it through the rest of the year. Having said that, we're looking at performance all the time, and so we might make some tweaks.

Stephen Robert Powers: Thank you Steve.

Speaker Change: Thank you.

Speaker Change: And the two questions you asked there let me address your first one first.

Speaker Change: You can make the assumption that as we think about the rest of the year and that price gap management activity.

Speaker Change: What we then implemented year to date largely reflects how we're thinking about carrying through the rest of the year.

Speaker Change: Having said that.

Speaker Change: We're looking at performance all the time and so we might make tweaks we might.

Speaker Change: Look at.

Speaker Change: The performance of programs and decide whether or not we want to make adjustments but.

Brendan Foley: We might, you know, look at the performance of programs and decide whether or not we want to make adjustments. But as we look at it today, we feel like we're positioned for, given the performance so far, that these programs are operating the way we want them to. And that should continue into the second half, I think, with a strong level of confidence.

Speaker Change: As we look at it today, we feel like we're positioned for given the performance. So far that these programs are operating the way we want them to that should continue into the second half I think with the strong level of confidence so I think.

Brendan Foley: So I think, just to kind of hit that first area first on how you should think about that program activity as it relates to, you know, the consumer and how they're operating and, you know, what might be the way to think about consumer behavior today in the store. I would just maybe add a couple thoughts there. You know, we have the broadest portfolio in the category, particularly in spices and seasonings, and that really does differentiate us.

Just to kind of hit that first area first and how you should think about that program activity.

Speaker Change: As it relates to.

Speaker Change: The consumer and how they're operating in.

Speaker Change: What might be the way to think about consumer behavior today in the store.

Speaker Change: I would just maybe add a couple of thoughts there we have the broadest portfolio in the category, particularly like in spices, and seasonings and that really does differentiate us that allows us to do is we're operating across all channels. We.

Brendan Foley: But what that allows us to do is, you know, we're operating across all channels. We have products at every price point, whether it be premium or lower price points. And we even explored, like we did with Dilawri's opening price point, you know, launching that item in there was to really take care of another price point here that we felt like we needed to operate in. But this broad, diversified portfolio allows us to meet consumer needs, and we become part of the solutions for what consumers are looking for. Cooking at home does remain elevated right now, and our price points are really a small percentage of the cost of a meal when you think about the most enjoyable part of the meal, which is flavor.

Speaker Change: We have products at every price point, whether it be premium or lower price points and we even explored like we did with lotteries opening price point launching that item in there was to really take care of another price point area that we felt like we need to operate in.

Speaker Change: But this broad diversified portfolio allows us to meet consumer needs.

Speaker Change: Become part of the solutions for what consumers are looking for.

Speaker Change: Cooking at home does remain elevated right now and our price points are.

Speaker Change: A really small percentage of the cost of a meal. When you think about the most enjoyable part of the deal which is flavor and so as we see consumers increasingly shop the perimeter.

Brendan Foley: And so as we see consumers increasingly shop the perimeter and continue to cook at home, our categories really play an even more important role, including condiments and sauces, and we're seeing a benefit from that. One thought is just to show you how consumers are responding in this current environment. In the second quarter, spices and seasonings were the top category in the center of store growth across measured channels.

Speaker Change: To Cook at home our categories really play an even more important role.

Speaker Change: Including condiments, and sauces, and we're seeing a benefit from that I mean, one part is just to show you how consumers are responding in this current environment in the second quarter spices and seasonings were the top category in the center of store.

Speaker Change: Growth across measured channels. So that tells you something that this is a tool for consumers to really deliver on what they are looking for and.

Brendan Foley: So, you know, that tells you something about this being a tool for consumers to really deliver on what they're looking for. And, you know, of course, we're the leading branded player, but we're also driving category unit growth in that context, too. When consumers are pressured, I think, in this environment, regardless of maybe their level of income, you know, in their cooking at home, they will lean in on flavor and might even splurge on it.

Speaker Change: Of course, we're the leading branded player, but we're also driving category unit growth within that context too.

Speaker Change: When consumers are pressured I think in this environment, regardless of maybe their level of income and our cooking at home they will lean in on flavor they might even splurge on it.

Brendan Foley: You know, one example that we would share, or at least a couple, is when we look at what's driving younger consumers right now, interestingly, they're going to our gourmet line. In buying more of our gourmet line, as they cook more at home, we know they want to explore and really kind of explore flavor overall, and that gourmet line, I think, really kind of suits what they're looking for. If you think about the low to mid-income consumer, they're looking for brands with price points closer to the private label.

Speaker Change: An example that we would share or at least a couple is when we look at what's driving younger consumers right now interestingly theyre going to our gourmet line.

Speaker Change: And buying more of our gourmet line.

Speaker Change: As a cook more at home than they do model, we know they want to explore and really kind of.

Speaker Change: Explore flavor overall and our gourmet line I think really kind of suits, what they're what they're looking for if you think about the low to mid income consumer theyre looking for brands with price points closer to private label.

Brendan Foley: That's why we, from an innovation standpoint, we're adding new seasoning blends to our Lowry's line, and that attracts these consumers, and we're seeing the consumer trade up in that particular case because they're looking for brands that they trust. We do see overall consumers shopping smaller sizes than maybe they did this time last year, where we saw a lot of large size purchasing going on. So that means we have to ensure that we have the right price pack architecture in place to meet that demand.

Speaker Change: That's why work from an innovation standpoint were adding new seasoning blends to our Lawry's line.

Speaker Change: And that tracks these consumers and we're seeing the consumer trade up in that particular case, because theyre looking for brands that they trust.

Speaker Change: We do see right now overall consumers shopping smaller sizes than maybe we did this time last year, where we saw a lot of large size purchasing going on.

Speaker Change: So that means we have to assure that we have the right price pack architecture in place to meet that demand.

Brendan Foley: Another example, just to give you even more color, if you will, is in recipe mixes. You know, with a lot of our programs, including, you know, sort of revenue management, price gap management, we're attracting a lot more consumers overall to that category. Recipe Bix is a great value, especially when you just want to buy for a specific meal.

Speaker Change: Other example that just to give you even more color. If you will is a recipe mixes.

Speaker Change: With a lot of our programs, including sort of revenue management price gap management, we're attracting a lot more consumers overall to that category resident VIX is a great value, especially when you just want to buy for a specific meal. It's a great convenience. There is no waste, it's a great way to explore new flavors at low risk. So you don't have to invest in.

Brendan Foley: It's a great convenience. There's no waste, and a great way to explore new flavors at low risk, so you don't have to invest in, you know, let's say, a whole bottle. But what's happened is we've seen household penetration grow for our brands during the second quarter in a category like that, so I think that also gives some context. And then I'll just wrap it up with one other idea.

Speaker Change: Let's say a whole bottle.

Speaker Change: But what's happened is we've seen household penetration growth for our brands during the second quarter in a category like that so I think I'd also give some context and then I'll just wrap it up with one other idea we are seeing a lot of growth.

Brendan Foley: You know, we are seeing a lot of growth in this mini trial size area, and we view that as a pretty interesting tool for, you know, lowering the cost for consumers to try new flavors. And so we're also launching those here in the second quarter and just shipping those now.

Speaker Change: In this many trial size area, and we view that as a pretty interesting tool for.

Speaker Change: Lowering the cost for consumers to try new flavors and so we're also launching those here in the second quarter and just shipping those now, but thats just another opportunity for consumers to explore.

Brendan Foley: But that's just another opportunity for consumers to explore, look at innovation, but it's at a lower price point for them to give it a try in these mini trial sizes. So I wanted to give you a collection of contacts or points to consider when you think about meeting the consumer's needs today. Yes, I appreciate that. Thank you very much. And if I could maybe pivot, Mike, a question on gross margin. I apologize if you have already provided some commentary here, but indulge me anyway.

Speaker Change: Look at innovation, but.

It's at a lower price point, and then to kind of give it a try and these many trial sizes. So I kind of wanted to get any sort of a collection of context or.

Speaker Change: Place to consider when you think about meeting the consumers' needs today.

Speaker Change: Yes, I appreciate that thank you very much and if I could.

Speaker Change: Maybe pivot Mike a question on gross margin I apologize if you already provided some commentary here, but indulge me anyway.

Stephen Robert Powers: You know, in the first half of the year, you're trending towards the, you know, the upper end of that gross margin expansion range. And I guess, just as I extrapolate to the back half, is it fair to assume that you're comfortable with the upper half of the range, at least for the full year? Or is it, are we open to more volatility in the back half, where the full range is kind of in play?

So the first half of the year you are trending towards the.

Speaker Change: Upper end of that gross margin expansion range and I guess, just as I extrapolate to the back half is it fair to assume that you are you comfortable with the upper half of the range at least for the full year or is are we open to more volatility in the back half.

Speaker Change: The full range is kind of in play.

Stephen Robert Powers: Well, I think in the back half, the guide implies almost like five basis points. 100 basis points is, you know, and we stay for the year from 50 to 100. So we realize we had a really strong first half.

Speaker Change: I think in the back half the guide implies almost like five basis points to 100 basis points.

Speaker Change: Safety or 50 to 100, so we realize we had a really strong first half.

Speaker Change: As I said pricing.

Speaker Change: Large in the first quarter for us that's going away in the second half and the key is the volume growth volume growth volume is great for a lot of things and it helps gross margin and mix and all that sort of stopped site I think we're comfortable with the guide we have I wouldn't say right now I'd guide to the higher ends at this point.

Michael Smith: You know, pricing was large in the first quarter for us, but that's going away to the second half. And the key is the volume growth. I mean, volume growth is great for a lot of things. And it helps first margin and mix and all that sort of stuff.

Michael Smith: So I think we're comfortable with the guide we have; I wouldn't say right now that I'd guide to the higher end at this point, and many more. Okay, fair enough. Remember, some of the cost savings programs we had, like GLE, were really first quarter into the second quarter. Some of those are going away also, but it's still, you know, the trends we see in gross margin, the second half is higher than the first half traditionally, which is going to continue again.

Speaker Change: Particular reasons like that yes.

Speaker Change: Okay fair enough.

Speaker Change: Remember some of the cost savings program, we had like <unk> was really first quarter into the second quarter. So some of those are going away also but it still.

Speaker Change: Trends, we see in gross margin. The first the second half is higher than the first half traditionally which is going to continue again and we do see a nice trajectory there for gross margin over time as we continue our multiyear journey of getting back to kind of pre COVID-19 gross margin levels.

Michael Smith: And, you know, we do see a nice trajectory there for gross margin over time as we continue our multi-year journey of getting back to kind of the pre-COVID gross margin level. Okay. I appreciate it. Thank you very much.

Speaker Change: Understood. Okay I appreciate it thank you very much.

Stephen Robert Powers: Our next question is from the line of Adam Samuelson with Goldman Sachs. Yes, thank you. Good morning, everyone. Good morning.

Speaker Change: Our next question's from the line of Adam Samuelson with Goldman Sachs. Please proceed with your questions.

Adam Samuelson: Yes, Thank you and good morning, everyone. Good.

Adam Samuelson: Let me add my congratulations to Mike and to Marcos, so I'm looking forward to working with you. Thank you. Maybe if I could continue on some of the pricing discussion that we just had, and I guess I'm just trying to segregate, if I look at the spices and seasonings category in the more recent months in the scanner data, it does seem like, The whole, your entire portfolio has unit pricing lower on a year-on-year basis, and I guess I'm, maybe, is there a size, it doesn't seem like there's an impact because of size and unit, and price pack architecture necessarily.

Speaker Change: Alright.

Speaker Change: Let me add my congratulations to.

Speaker Change: Mike.

Speaker Change: So mark I'll start with talking with you.

Speaker Change: Yeah.

Speaker Change: Maybe if I could continue on some of the pricing discussion.

Speaker Change: We just had and I guess I'm just trying to segregate if I look at the spices and seasonings category in the more recent.

Speaker Change: <unk> in the scanner data it does seem like.

Speaker Change: The whole your entire portfolio has unit pricing lower on a year on year basis, and I guess maybe.

Speaker Change: Maybe is there a size it doesn't seem like there's impacts of size and unit and price pack architecture necessarily.

Adam Samuelson: Promo percentage is also a little bit lower year-over-year, but I guess I'm trying to just square the notion of more surgical pricing actions on a small part of the portfolio with the spices and seasonings category in total for you that is showing a kind of negative pricing in the last few months of Nielsen data. Yeah, I'm sorry.

Speaker Change: Promo percentage is also a little bit lower year over year, but I guess I'm trying to just square the notion of more surgical pricing actions on a small part of the portfolio with the spices and seasonings category in total for you that is showing kind of negative pricing.

Speaker Change #100: And then Les last few months Nielsen data.

Michael Smith: I mean, at the end of the day, you know, the net sales guidance we give for pricing and the results of what we showed you for the consumer business for the second quarter was down, a little under 1%, which we continue to see in the second half. So that would suggest that the pricing actions we said we were going to do, the surgical pricing actions on a limited part of the portfolio, that's what's showing up in net sales. Now what happens when that gets to the shelves? That's a whole other story, though.

Mike: Yes go ahead, Mike I'll start I mean at the end of the day.

Speaker Change #101: The net sales guidance, we gave for pricing and the results of what we showed you what you have.

Speaker Change #101: The consumer business.

Speaker Change #102: For the second quarter was down.

Speaker Change #102: A little under 1%, which we continue to see that in the second half. So that would suggest that the pricing actions. We said we were going to do the surgical pricing actions on a limited part of the portfolio that's sort of that's what's showing up through net sales now what the what happens when that gets the shell. That's a whole. Another story. In addition to the things that we're doing on some of those.

Michael Smith: And in addition to the things that we're doing on some of those items, there are other retailer actions that are happening too, because, as Brendan said before, this is a category. Our categories are growing. That's where people want to shop on more of the perimeter of the store.

Brenda: There's items, there's other retailer actions that are happening too because as Brenda said before this is a category of our categories are growing that's where people want to shop and more of the perimeter of the store. They are wanting to use products like ours to flavor. These.

Michael Smith: They want to use products like ours to flavor them and manage cost inflation across protein and things like that. So retailers are also contributing to some of these things. It might not be our price adjustments on items; it may be other ones that they're seeing and operating in their stores too. So I think there's a combination of factors that may be skewing a little bit of the data you're seeing versus our internal, kind of what we're actually reporting on these costs.

Brenda: And managed and managed cost inflation across protein and things like that so the retailers also are contributing to some of these things.

Speaker Change #104: It might not be our price.

Speaker Change #105: Adjustments on items that may be other ones that theyre seeing in operating and therefore too. So I think theres a third a combination of factors that may be skewing, a little bit of the data youre seeing versus our internal kind of what we're actually reporting on these calls just to add to that Adam.

Michael Smith: Just to add to that, Adam, when you look just at spices and seasonings and recipe mixes, depending on how you're looking at data, the percentage is still small in terms of the percentage of that part of our portfolio that is kind of receiving that sort of an effort. But let's also not forget we have a broad program in terms of increased brand investment, increased distribution, etc. And so we're driving volume growth, particularly in that, I would say, you know, certainly it's an accelerated area as a part of our portfolio that's driving unit volume growth.

Speaker Change #106: When you look just like spices, and seasonings and recipe mixes depending on how you are looking at data. The percentage. This is still small in terms of the percentage of that part of our portfolio debt.

Speaker Change #106: It's kind of receiving that sort of an effort, but let's also not forget.

Speaker Change #106: We have a broad program in terms of increased brand investment new items.

Speaker Change #106: Increased distribution et cetera, and so we're driving volume growth, particularly even in that I would say certainly it's an accelerated area as part of our portfolio Thats driving our unit volume growth and so we're seeing really good performance and that performance from that.

Michael Smith: And so we're seeing really good performance, net performance from that. Alright, now that's a helpful caller. I thought you were going to ask a clarifying question about guidance. For the JV in Mexico, if I look at the guidance...

Speaker Change #106: Alright.

Speaker Change #107: Helpful color.

Clarifying questions on guidance.

Speaker Change #108: On the on the JV on Mexico.

Speaker Change #109: I look at the guidance it would seem like you've already achieved for the full year the equivalent of mid teens profit growth on the.

Adam Samuelson: It would seem like you've already achieved, for the full year, the equivalent of mid-teens profit growth on income from the Mexican JV, and I just want to make sure I'm understanding if there are expectations of profit declines in the back half, or, because otherwise, you're going to be well above mid-teens profit growth on that line. Remember, if you go back to last year, we're lapping a really strong A lot of the acceleration they've seen and great performance they've shown was really second-half focused last year, so we're lapping a tough one.

Speaker Change #110: On income from the Mexican JV, and just make sure im understanding of their expectations of profit declines in the back half or because otherwise youre going to be well above mid teens profit growth.

Speaker Change #111: One number I could go back to last year, we're lapping a really strong second half a lot of the acceleration there.

Speaker Change #112: <unk> seen and create performance is really second half focus last year. So we're lapping a tough comp I'd say.

Michael Smith: Okay, all right, that's helpful. I'll pass it on, thank you. The next questions are from the line of Tom Palmer at Wood City. Please proceed with your question. Good morning, Mike and Marcos. Congratulations to you both.

Speaker Change #113: Okay Alright, that's.

Speaker Change #114: That's helpful on that front. Thank you.

Speaker Change #115: The next question is from the line of Tom Palmer with Citi. Please proceed with your question.

Thomas Palmer: I wanted to clarify just on the expected volume recovery in the back half of the year in flavor solutions. Are you assuming that industry trends get better, or is this really McCormick-specific initiatives, or maybe it's a combination? I just want to clarify that.

Speaker Change #116: Good morning, Mike and Mark Congratulations to you both.

Thomas Palmer: I wanted to just clarify just on the expected volume recovery in the back half of the year and flavor solutions.

Are you assuming the industry trends get better or this is really mccormick specific initiatives or maybe it's a combo I just wanted to clarify that.

Thomas Palmer: Yes.

Brendan Foley: I don't know that, you know, Tom, as we look at it, we don't say, you know, we're making a call or projection on the industry as a whole. We kind of look at our customer base, and we understand their plans and programs. What might be an innovation that's going to be launching soon?

Speaker Change #118: Yes, I don't know that Tom is we look at it we don't say.

Speaker Change #119: We are making to call our projection on the industry as a total we kind of look at our customer base and we understand their plans and programs.

Speaker Change #119: What might be innovation, that's going to be launching soon how they might be thinking about driving navy and.

Brendan Foley: How they might be thinking about, you know, driving maybe an uptick in their own activity. And so that's really what drives, I think, our thinking more specifically at a customer level as opposed to hearing us make a call and a projection about an industry. I don't know if you want to go deeper on that, but I think just to quickly kind of let you know how we think about it. That's what drives us. Okay, thanks for that.

Speaker Change #119: An uptick in their own activity.

So that's really what drives I think our thinking is more specifically at the customer level as opposed to.

Speaker Change #119: Hearing us make a call in our projections on an industry.

Don't know if you want to go deeper on that but I think just quickly kind of let you know how we think about it that's what drives our thinking.

Thomas Palmer: No, I was just trying to reconcile some of the food service weaknesses with the positive tone, and so that was helpful. Thank you. Well, I think, let me just add to that, Tom.

Speaker Change #120: Okay. Thanks for that just trying to.

Speaker Change #121: Reconcile some of the foodservice weakness with the positive tone and so that was helpful. Thanks, well I think.

Brendan Foley: I mean, in the branch of food service, though, I mean, just to give you some context around that, we are seeing nice performance there. I think that's a reflection of, You know, we operate in every segment of food service, so it isn't just QSRs. It's fast casual, casual dining, independent restaurants, college and university, etc., etc.

Speaker Change #122: Just then add to that Tom.

Thomas Palmer: In branded foodservice, though let me just give you some context around that we are seeing nice performance there.

Thomas Palmer: Reflection of.

Speaker Change #123: We operate in every segment of the foodservice. So it isn't just <unk>, it's fast casual casual dining independent restaurants, College's college, and University et cetera, et cetera, and so it's a very diverse.

Brendan Foley: And so it's a very diverse, you know, sort of marketplace. And as we look at that, we're doing really well in branded food service because we're driving some really, I think, interesting programming, like with limited-time offers with our brands like Frank's, or we're growing share in a number of categories or performing well in spices and seasonings. We're getting more hot sauce on tabletops. That's what kind drives, I think, our performance right now in branded food service, which operates a little bit differently than maybe the QSR part of the food service marketplace. It may be that additional color might provide some... some additional things to think about.

Speaker Change #123: Sort of marketplace.

Speaker Change #123: As we look at that we're doing really well in branded foodservice because we're driving some really I think an interesting program like with limited time offers with our brands like Franks or we're growing share in a number of categories or performing well in spices and seasonings were getting more hot sauce on tabletops.

Speaker Change #123: That's what kind of drives I think our performance right now with branded foodservice, which operates a little bit differently than maybe the <unk> part of the foodservice marketplace. So.

Speaker Change #124: It may be that additional color might provide some.

Speaker Change #124: Some additional things to think about.

Thomas Palmer: No, that was very helpful. Thank you. Just on the expected margin improvements in flavor solutions, should we be thinking about continued sequential improvement in margin as the year plays out and some of these cost initiatives take hold? You know, we said at the beginning of the year, and I'll go back to that, I mean, one, we were really happy with the margin improvement we experienced last year, and we gave guidance for this fiscal year for the total company of 80 basis points, about 80 basis points of OP margin improvement. And we said at the time, flavor solutions, you know, might be slightly ahead of that, but in the range, you know, that 0.8, you know I'd say that for the whole company, we're really comfortable with 50 to 100 basis points.

Speaker Change #125: No that was very helpful. Thank you.

Speaker Change #126: Just on the expected margin improvements in flavor solutions.

Speaker Change #127: Should we be thinking about continued sequential improvement in margin as the year plays out in some of these cost initiatives.

Speaker Change #128: Take hold.

Speaker Change #129: We said at the beginning of the year and I'll go back to that I mean.

Speaker Change #130: We're really happy with the margin improvement.

Speaker Change #130: Last year, we gave guidance for this fiscal year for the total company.

Speaker Change #130: 80 basis about 80 basis points of op margin improvement and we said at the time flavor solutions might be slightly ahead is evident in our range at that 0.8.

Speaker Change #130: First half flavor solutions was I think at the 80 basis points roughly around there so.

Speaker Change #130: Again.

Speaker Change #130: We're always looking for improvement.

I'd say that for the whole company, we're really comfortable with 50 to 100 basis points.

Michael Smith: A lot depends on the volume numbers, and as I said about a month ago, a lot depends on the volume numbers. The consumer business continues to see volume growth that drives good margin improvement. I mean, flavor solutions, a bit of a dip in the second quarter could put a little bit of pressure on margins, as I said, but, you know, we're expecting sequential improvement in flavor solutions. That's not going to be materially different from what we said at the beginning of the meeting. Thank you. Thank you. Our final question is from the line of Rob Dickerson with Jeffries. Please proceed with your question. Great, thanks so much. I think I always get the final question with McCormick.

Speaker Change #130: And as I said about a month ago, but a lot depends on the volume numbers in the consumer business continues to deal volume growth that drives good margin improvement in flavor solutions a bit of a dip in the second quarter could put a little bit of pressure on margins as I said, but.

Speaker Change #130: We're expecting sequential improvement.

Speaker Change #130: Flavor solutions that is not going to be materially different than what we said at the beginning of the year I'd say.

Speaker Change #131: Thank you.

Speaker Change #131: [laughter].

Speaker Change #132: Thank you. Our final question is from the line of Rob Dickerson with Jefferies. Please proceed with your questions.

Yes.

Robert Dickerson: Great. Thanks, So much you can always get the final question.

Robert Dickerson: Just, I guess, kind of a broader question, you know, around Frozen and Asian, they commented on, you know, it seems like consumers are shopping the perimeter of the store a little bit, you know, understand kind of the desire to kind of cook at home still. Maybe there's some value-seeking in there, but I'm just curious, like, you know, if you step back and you think about that consumer behavior, you know, on the perimeter and on the spice-eating side relative to kind of what you've seen in Frozen and Asian, maybe you can just provide a little bit more color as to how you're thinking about, you know, kind of that relative performance of those two areas and maybe why, you know, parts of Frozen and Asian specifically, you know, aren't performing as well as maybe they have in past economic cycles.

Michael Smith: Mike Mccormack.

Michael Smith: Just I guess kind of a broader question.

Speaker Change #135: Around frozen Asian, they commented on.

Speaker Change #135: It seems like consumers are shopping and promoted the store a little bit.

Speaker Change #135: Understand kind of the desire to kind of cook at home still.

Speaker Change #136: Maybe there is some value seeking in there, but I'm just curious like if you step back and you think about that consumer behavior, the perimeter and the spice season side relative to kind of what you'd seen approach Tunisian maybe you could just provide a little bit more color as to how you're thinking about.

The relative performance of those two areas and maybe why.

Speaker Change #137: Parts of frozen in Asia, specifically aren't performing as well as maybe they have in past economic cycle. Thanks.

Robert Dickerson: Thanks. Well, thanks for the question, Rob. You know, if I go back and I think about half of our portfolio, one of the important things maybe to reinforce, it's a smaller part of our business. But the declines, I think, as far back as, like, the fourth quarter of 23, were steeper.

Robert Dickerson: Well thanks for the question, Rob If I go back and I think about that part of our performance.

Robert Dickerson: Important things maybe to reinforce it's a smaller part of our business.

Robert Dickerson: But the declines I think as far back as like the fourth quarter of 2003.

Brendan Foley: So they were pulling down, I think, the overall view of the portfolio. And that's why we decided to make sure it was kind of called out, because as we were putting more focus and investment, you know, around what we would call, you know, those core categories, you know, that was going to, we felt that would offset that. As we moved through, you know, the rest of the year, I think that we started to see those core categories start to overcome whatever declines might be experienced. In the consumer behavior context that you're asking about, we think that has a lot to do with, it could be the impact of inflation in the marketplace.

Robert Dickerson: Steeper, so they're pulling down I think the overall view of the portfolio.

Robert Dickerson: That's why we decided to make sure it was kind of called out because as we were putting more focus and investment around what we would call those core categories.

Speaker Change #138: Yes that was going to we felt that would offset that as we move through the rest of the year I think that we have to.

Speaker Change #138: You see those core categories to try to overcome whatever declines might be experiencing there.

Speaker Change #139: To the consumer behavior context that you're asking about.

Speaker Change #139: We think that has a lot to do with.

Speaker Change #139: It could be the impact of inflation in the marketplace I think that certainly can have an impact on that.

Brendan Foley: I think that certainly can have an impact on that overall, and we're a relatively small player in a number of these areas, so it's not as if we're operating with the type of scale and competitive leverage that others might be. We certainly see inflation hurting that, but also, I think some consumer trends might have been shifting away a little bit from some parts of frozen food or some Asian categories that we compete in. And so, therefore, I don't know that they're necessarily suggesting a structural impact of change, but rather, this is just a trend that we're working through, and we felt like we were going to experience it most of this fiscal year.

Speaker Change #139: Overall, we're.

Speaker Change #139: A relatively small player in a number of these these areas. So it's.

Speaker Change #139: It's not as if we're operating with the type of scale and.

Speaker Change #139: <unk> competitive leverage that others might be so yes, we certainly see inflation hurting that but also I think some consumer trends might've been shifting away a little bit.

Speaker Change #139: Several parts of whether it be frozen or some Asian categories that we compete in and so therefore.

Speaker Change #139: Don't know that theyre necessarily suggesting a structural impact a change but rather this is just a trend that we're working through and it was we felt like we were going to experience that most of this fiscal year. So.

Brendan Foley: So I would share that as our context. What we're seeing in the primitive store is simply that you need to add flavor in a lot of these situations, whether it be protein or produce or carbs. Our category is going to play an important role in flavoring, or both of our categories, rather. And so we see consumers shifting there, probably because they're looking for healthy eating.

Speaker Change #139: I would share that as our context, what we're seeing in the perimeter of stores simply.

Speaker Change #139: You need to add flavor in a lot of these situations, whether it be protein or produce or cards.

Speaker Change #139: Our category is going to play an important role in flavoring.

Speaker Change #139: Both of our categories, rather and so we see consumers shifting their product because theyre looking for healthy eating.

Brendan Foley: That's not a new trend, and that's something that we think continues to fuel our business. So I think it's probably where I keep it for right now today, Rob, and if there's any other clarification you want, let me know. Yeah, no, that was very helpful. Thank you. And then, Mike, first, congratulations. I'm jealous.

Speaker Change #139: A new trend and that's something that we think continues to fuel our business. So I think it's probably.

Speaker Change #139: Where I keep it for right now today, we are up and is there any other clarification.

Operator: Yeah, yeah, that was very helpful.

Operator: Thank you.

Operator: And then Mike, first congratulations; jealous, will be nice.

Speaker Change #140: Yeah, no that was very helpful. Thank you.

Speaker Change #141: And then Mike.

Robert Dickerson: It'll be nice. You know, I think there was a comment you made, Mike, in the prepared remarks where you said, you know, there might be similar segment trends expected as you get to the back half relative to Q2, and I may have missed that, but I just wanted to clarify because, you know, clearly, everything else we've been talking about in Q&A suggests that things should get better. So, I just want to understand what you mean.

Speaker Change #140: Congratulations.

Michael Smith: You know, I think there was a comment you made, Mike, in the preparatory remarks where you said that you, you know, there might be similar segment trends expected as you get to the back half relative to the Q2, and I may have missed that, but I just wanted to clarify because clearly everything else we've been talking about in Q&A, you know, suggests that things should get better, so just want to understand what you said.

Speaker Change #142: Jos will be nice.

Speaker Change #142: <unk>.

Speaker Change #143: I think there was a comment you made Mike.

Speaker Change #144: In the prepared remarks, where you said.

Speaker Change #143: <unk>.

Speaker Change #143: There might be similar segment trends expected.

Speaker Change #143: As you get through the back half relative to Q2.

Speaker Change #145: May have missed that but I just wanted to clarify because clearly everybody else we've been talking about in Q&A suggest that things should get better.

Michael Smith: Yeah, that wasn't the preparatory remarks because that was really in the reference in that section we're talking about pricing for the remainder of the year, similar segment trends, similar company and segment trends for the remainder of the year. So if you look at the pricing trends in Q2 versus prior year, it's approximately the same by segment and for total company.

Speaker Change #146: Just wanted to understand what that was.

Robert Dickerson: Yeah, that was, yeah, that was in the prepared remarks. That was really in the reference section. We're talking about pricing for the remainder of the year and similar segment trends, similar company and segment trends for the remainder of the year. So, if you look at the pricing trends in Q2 versus the prior year, they are approximately the same by segment.

Speaker Change #148: Yes that wasn't in the prepared remarks, we thought that was really in the reference in that section we're talking about pricing for the remainder of the year at similar segment trends similar company and segment trends for the remainder of the year. So if you look at the pricing trends in Q2 versus prior year approximately the same by segment and for total company.

Michael Smith: Okay, got it. That really helped me a lot with model questions. No, right, right.

Operator: That's a really helpful model question. Yeah, that's right, right; I get it.

Speaker Change #147: Okay got.

Michael Smith: I understand. I appreciate it. Thank you. Thank you. At this time, we've reached the end of our question and answer session, and I'll hand the floor back to management for closing remarks. Thank you. And thanks, everybody, for joining today's call. If you have any further questions on the information we shared today, please feel free to contact me. And this concludes today's conference call.

Speaker Change #149: It really helps you modeled model question.

Speaker Change #150: Yeah, Yeah, right right I got it great. Thank you got it thank you.

Operator: At the time we've reached into our question, answer session, and I'll hand the floor back to management for closing remarks.

Speaker Change #151: Thank you at this time, we have reached end of our question and answer session and I'll hand, the floor back to management for closing remarks.

Operator: Thank you, and thanks everybody for joining today's call. If you have any further questions on the information we share today, please feel free to contact me, and this concludes this morning's conference call. Thank you.

Speaker Change #152: Thank you and thanks, everybody for joining today's call. If you have any further questions on the information we share today. Please feel free to contact me and this concluded this morning on the call. Thank.

Speaker Change #152: Thank you.

Speaker Change #152: Okay.