Q3 2024 McCormick & Co Inc Earnings Call
Good morning. This is Faten Freiha, VP of Investor Relations. Thank you for joining today's third quarter earnings call.
Speaker Change: To accompany this call, we've posted a set of slides on our IR website IR. McCormack.com. With me this morning, our Brendan Foley, President and CEO, Mike Smith, Executive Vice President and CFO, and Marco Skabriel, Senior Vice President, Global Finance and Capital Markets, and incoming CFO.
Speaker Change: During this call, we will refer to certain non-gap financial measures. The nature of those non-gap financial measures and the related reconciliation to the gap results are included in this morning's press release and slides.
Speaker Change: In our comment, certain percentages are rounded. Please refer to our presentation for complete information. Today's presentation contains projections and other forward-looking states. Actual results could differ materially from those projected.
Brendan Foley: The company undertakes no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events, or other factors. Please refer to our forward-looking statement on slide two for more information. I will now turn the discussion forward to Brendan.
Brendan Foley: Good morning everyone and thank you for joining us. Before we begin reviewing our financial results, I would like to address Hurricane Colleen. Our thoughts go out to all those impacted by this devastating storm. We continue to monitor this situation closely.
Brendan Foley: Now I'm moving to our results.
Brendan Foley: Our third court performance is aligned with our expectations.
Brendan Foley: Especially as we continue to navigate and evolving in complex consumer landscape.
Brendan Foley: Our results demonstrate the success of our prioritized investments and the areas that we believe will drive in most value and improve the industry trends, drive volume growth and capitalize on our bandage categories.
Brendan Foley: As we have said, McCormick remains a growth company, and our investments in 2024 are using results that support our confidence in delivering on our top tier long-term objectives.
Brendan Foley: We are excited to share our strategic roadmap and building blocks that support these long-term objectives at our upcoming investor day.
Brendan Foley: This morning, I will begin my remarks with an overview of our third court of results, focusing on the top-wide drivers.
Brendan Foley: Next, I will provide perspective on consumer trends, highlights some areas of success, and the areas that we continue to work on.
Brendan Foley: will then go to more depth on the third quarter financial results, and Marcos will review our 2024 outlook. And finally, before your questions, I will have some closing comments. Turning now to our results on SRI4.
Speaker Change: In the third quarter, sales were flat and constant currency, reflecting flat pricing, 1% volume and product mix, as well as the impact of our canning divestiture.
Speaker Change: This quarter, we reached a meaningful milestone by delivering total positive volume growth, despite the challenging environment.
Speaker Change: Our volume trends improved sequentially across both consumer and flavor solutions. Our results today coupled with our proving growth plans, fuel, our continued confidence and our ability to deliver on the mid-tion of our constant currency sales growth guidance.
Speaker Change: In our consumer segment in the Americas, we deliver its solid sequential volume improvement for the third consecutive quarter, leading to 1% volume growth. Volume growth reflects our continued focus on accelerating innovation and alignment with consumer trends and expanding distribution.
Speaker Change: A pricing reflects the continuation of our price gap management plans to support improved volumes as planned.
Ian: and Ian the A, we continue to drive positive volume growth across our major markets and core categories for the third consecutive quarter. We realize benefits from new product innovation and expanded distribution.
Ian: In Asia Pacific, outside of China, we deliver strong volume-led sales growth as we continue to benefit in the rollout of our new consumer preferred packaging for our core spices and seasonings portfolio, as well as distribution gains.
Ian: This performance was tempered by China, slightly more than we had originally expected. As we look ahead to the fourth quarter, we expect the environment in China to remain challenged and this is reflected within our guidance. Markus will provide more color on this when he covers our outlook for the remainder of the year.
Markus: Moving to flavor solutions, we deliver strong sequential volume improvement, primarily driven by growth in the Americas. In E&EA, our volume transfer impacted by softness in our QSAR customers' volumes, and in Asia-Pacific, our results were impacted by the timing of customer promotions.
Markus: From a profitability perspective, we deliver strong results relative to the prior year. As a third quarter benefit, primarily from the timing of investments, which are shifting to the fourth quarter.
Markus: As we look at this second half of the year, operating income results remain largely in line with our expectations, and earnings per share results are slightly ahead due to a discrete tax item benefit.
Markus: Let me now share our view on the state of the consumer, which has remained similar since we reported our second quarter results.
Markus: Overall, consumers are resilient but remain challenged. They're exhibiting values seeking behavior, making more frequent trips to the grocery store with smaller baskets and shopping just for what they need. They are also focused on reducing waste and stretching their budgets.
Markus: Food Service Traffic remains soft across most restaurant types.
Markus: particularly in QSARTS. These trends are starting to benefit growth in food at home. And this shift is driven by older generations as well as lower income households.
Markus: and Sumbers Overall, continue to cook at home and they are increasingly shopping the perimeter for protein and proteins.
Markus: This further reinforces their demand for flavor and the formic scattergories, included spices and seasonings as well as condiments and sauces. Flavor is not something consumers are willing to sacrifice.
Markus: Spices and Extracts remain the number one center store, Groza Category.
Speaker Change: From a valley perspective, we are seeing several trends. The man for larger sizes remains elevated. At the same time, there is increased demand for small or trial sizes.
Speaker Change: As well as one time-use recipe mixes, highlighting that flavor exploration remains important to consumers and our plans need to match that demand with the right product offering.
Speaker Change: Gen Z, our new and future customers are also cooking at home.
Speaker Change: They're interested in the seasoning blends that make cooking easier and convenient, interestingly, they are leaning into higher quality and premium flavor items. We're seeing velocity take up on our gourmet line and it's coming from Gen Z as they seek to recreate restaurant quality meals.
Speaker Change: As you step back and reflect on all these trends, it reinforces the importance of our consumer-centric mindset, which is present across our entire business. It's at the heart of everything that we do with McCormick. We are strengthening our brought portfolio to meet evolving consumer demands and alighting them with innovation.
Speaker Change: and we believe we have the right plans of place that are continually informed by what matters most to our consumers and customers.
Speaker Change: Good to slide five. Let me highlight for the quarter, some of the key areas of our success.
Speaker Change: and our global consumer segment, which are a solid unit consumption growth in spices and seasoning across our key markets in the Americas, the NEA and Asia Pacific.
Speaker Change: and the US, we continue to approve our competitiveness relative to private label as our volume consumption outpaced private label for spices and seasonings this quarter.
Speaker Change: This quarter, our Grilling Portfolio outpaced category growth on unit sales, displays, velocity and distribution, and in the fourth quarter, we are excited to begin the rollout of our new consumer preferred packaging for grill mates ahead of next year's grilling season.
Rezapindix's: In Rezapindix's, we continue to strengthen consumption trends in the Americas, driving both unit and volume share and outpacing private label in the US.
Speaker Change: Auxilula wine continues to be a significant driver of growth. We are innovating with Chalula recipe mixes, bringing new consumers to the category, particularly with millennials and younger families.
Ian: and Ian the A, recipe mixers were a significant driver of UK volume growth and we realize dollar market share gains for two consecutive courts.
Ian: In mustard, we had a strong quarter, as we drove both unit and volume share in the Americans. In addition, our unit and volume growth outpaced private label in the U.S.
Ian: and Poland, mustard consumption continues to grow and we are realizing unit and dollar market share gains. We made great progress over the last two quarters and are pleased to see that our plans are driving the expected improvement.
Ian: In America's consumer that it climbs me previously experienced in the prepared food categories that we participate in, like frozen in Asian, which represent a small part of our portfolio, have now stabilized and we are seeing improved growth.
Ian: We continue to make progress on total distribution points, the expanded TDPs and gained TDP share in spices and seasonings, recipe mixes and mustard in the Americas.
Ian: Finally, in the Americas and EMEA, we drove double digit consumption growth in e-commerce, outpacing the market. E-commerce was a significant driver of our unit consumption growth for the quarter, as consumers continue to seek convenience.
Ian: In flavor solutions, we saw strength in both of our technically insulated high margin product categories, branded food service and flavors.
Ian: It's America's brand-of-food service business despite softness and the overall food service market, regroup volumes and expanded points of distribution across spices and seasonings and condoms.
Ian: In addition, we are winning Hot Sauce Table Top Share behind new distribution, packaging, and promotion. In flavors, our consumer package food customers are seeing some improvement in volumes within their own business, and both the Americas and EMEA.
Ian: In the Americas, our performance with high growth innovator customers remains strong. We delivered solid growth in performance nutrition beverages, as well as alcoholic and non-alcoholic beverages, outpacing category growth.
Ian: Let me now touch in some areas where we are seeing some pressure.
Ian: In hot sauce, we continue to have underlying strength in our base business, and strong consumer loyalty, our shared trends remain impacted by a peer that is laughing their own supply chain disruptions.
Ian: and the Americas are unit share trends improved sequentially. However, volumes are impacted by many trial sizes. We are pleased so far with performance of Frank's Minnes. Minnes are incremental to the category and are driving trial of our new flavors.
Ian: We expect our innovation, expand the distribution, and brand marketing to help improve our trends as we edit 2024.
Ian: and Flavis Solutions are volumes are impacted by slower QSR traffic, particularly in E&EA. We have seen this pressure impact our results for several quarters.
Ian: It's difficult to predict QSAR traffic. However, we are collaborating with our customers as they focus on improving their volumes through innovation and value, aligned with consumer trends.
Ian: and Asia Pacific, volume was solved as it was impacted by slower QSR traffic outside of China, most notably in Australia and Southeast Asia, where some of our customers remain impacted by geopolitical boycotts.
Ian: Looking ahead to the fourth quarter, we are excited about the holiday season, with our promotion and innovation plans we are well positioned entering this season. We are increasing our merchandising levels, supporting our portfolio with holiday brand marketing campaigns, and are expecting a strong holiday season.
Ian: Before I wrap up, let me reiterate our growth plans on slide 6, which support our performance year-to-date and will continue to drive our success in 2024 and into 2025. Our face business is strengthening across major markets and core categories.
Ian: We have several initiatives in flank that will continue to drive this performance into Frenchiation. And I look forward to sharing more details on these plans at our upcoming investor deck.
Ian: To wrap up, let me share three key points.
Ian: The long-term trends that you are categories consumer interest and healthy, flavorful cooking, flavor exploration, and trusted brands continue to be strong and importantly consumer interest and cooking remain strong.
Ian: We are dedicated to accelerating our volume trends. We refine as depth of plants as needed, and are prioritizing our investments to drive impactful results and to return to sustainable volume lead growth. You should continue to expect improvement as we close the year and it's a 2025 and beyond.
Ian: We believe the execution of our growth plans will be a win for consumers, customers, our categories, and McCormick, which will contain the differentiates and strength in our leadership.
Mike: Now, over to Mike.
Mike: Good morning everyone. Today's earnings call is a bittersweet for me as it marks my last one at CFO of this incredible company before I retire. Reflecting on my tenure of more than three decades, I am filled with immense pride and gratitude for our entire team and appreciate all of their contributions and efforts over the years.
Mike: Lastly, I would like to thank all of you, ourself-side analysts and investors, for your time and engagement over the years. The thoughtful questions in insight have been invaluable to me, and they reflect your commitment to understanding our business and long-term strategy.
Speaker Change: Now let's move to our results for the third quarter.
Speaker Change: Starting on slide 8, our top line sales were comparable to the third quarter of last year, including the impact of the tannig divestiture, and reflect 1% volume growth, partially offset by pricing.
Speaker Change: In our consumer segment, the Elves were comparable with the prior year as the 1% impact of pricing investments was offset at 1% volume growth, reflecting solid to quench your improvement from the second quarter.
Speaker Change: On slide 9, consumer sales in the Americas were comparable with the prior year. This reflects 1% going growth offset by pricing investments.
Speaker Change: and this volume growth was driven by our core categories.
Speaker Change: 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 bare fist consumer segment.
Speaker Change: In the EMEA, Concentrancy Consumer Sales increased 3%, driven by volumes of 4%, partially all set by pricing of 1%.
Speaker Change: Steel Road was brought based across product categories in our major markets.
Speaker Change: We are pleased with the volume growth we delivered in EMEA and expect the momentum to continue through 2024.
Speaker Change: Constant Currents, he consumer sales in the eight-pack region were flat, primarily due to the macro environment in China.
Speaker Change: Outside of China, we delivered volume-like growth that was broad-based across categories and mountains.
Speaker Change: Turning to our flavor solution segment, and slide 12, third quarter constant cars you sales work comparable to the prior year, reflecting a contribution from price, which was fully offset by a 1% impact of the debesature of the canning difference.
Speaker Change: In the America, Favourite Solutions, Costs and Currency Sales increased, 3%. Reflecting a 1% contribution from price, and a 2% increase in volume, driven by the timing of customer activities, as well as strength and branded food service.
Speaker Change: In the EMEA, constant currency sales decreased by 9%, including a 3% impact from the debesatur of the canning business, lower volume and product necks of 5%, reflecting the impact of QSR customers' volumes and lower price of 1%.
Speaker Change: and the ATAC region, flavor solution sales were comparable in constant currency, with minimal contributions from both price and value.
Speaker Change: As Brendan mentioned, our volumes in a tax were impacted by slower QSR traffic outside of China. Most notably in Australia and South East Asia, were some of our customers remain impacted by geopolitical boycotts.
Brendan Foley: This was all set by Growth in China due to QSR customer promotion.
Speaker Change: As seen on slide 16, Gross Profit margin expanded by 170 basis points in the third quarter. Versus the year ago period. Due to primarily by stapled mix within our flavor solution segment, and the impact of our comprehensive continuous improvement program for CCI.
Speaker Change: Now moving to slide 17, selling general and administrative expenses, or SG&A, decreased relative to the third quarter of last year, driven by lower distribution costs generated by our CCI program and lower employee-related benefit expenses.
Speaker Change: As a percentage of net fails, SGNA decreased 60 basis points.
Speaker Change: Adjusted operating income increased 15% as compared to the third quarter of 2023 for 16% in constant currency with gross margin expansion and lower SGNA expenses both contributing.
Speaker Change: Operating process benefited from a shift in the timing of our investments, which now will be reflected in our fourth quarter results. Marcus will address this shortly when he reviews our outlook for the remainder of the year.
Speaker Change: adjusted operating income in the consumer segment increased 8% with minimal impact from currency. In flavor solutions adjusted operating income increased 31% or 32% in cost and currency. Reflecting our continued focus on restoring flavor solutions profitability.
Speaker Change: Our performance this quarter reflects our commitment to increase our profit realization and physicians as well to make continuous investments to fuel top line growth.
Speaker Change: and touching on tax are third quarter adjusted effective tax rate with 16.8% compared to 21.4% in the year-go period. The tax rate benefited from the resolutions of an outstanding tax matter dating back several years, as well as our state sales mix.
Speaker Change: As a result, we now expect our tax rate to be approximately 21% for the year, which is slightly better than the 22% rate we have previously provided. And we're flexing the discrete items I just discussed.
Speaker Change: are income from uncassolidated operations in the third quarter reflect strong performance in our largest joint venture. McCormick, the Mexico.
Speaker Change: We are the market leader with our McCormick branded mayonnaise, Marmalades, and Mr. Product Line to Mexico. And the business continues to contribute meaningfully to our net income and operating cash flow results.
Speaker Change: It is important to note that in the fourth quarter we will be laughing strong results in the prior year period for McCormick to Mexico.
Speaker Change: at the bottom line at General's 520, third quarter of 2024 at Justice Attorney's Prishare was 83 cents as compared to 65 cents for the year ago period.
Speaker Change: This increase was primarily due to our increased operating profit, as well as a discrete tax benefit that I mentioned earlier.
Marcos: With that, let me turn the call over to Marcos who will cover our balance sheet and outlook for 2024.
Marcos: Thanks, Mike. I'm glad to meet you with some of my highlights for Keshe Low and the Porter-and-Bamachite.
Marcos: So the first nine months of 2024, our cash flow from operations was $463,000, compared to $660,000 in 2023.
Speaker Change: The benefit from the increasing earnings year over a year was more than offset by the impact of cash use for working capital, including the Census Compensation Payment and Time of Cash Tax Payment.
Speaker Change: We return 338 million dollars of cash to share holders to dividends and use $189 million for capital expenditures.
Speaker Change: With a reminder, capital expenses include products to increase capacity and capabilities to meet growing demand As the Vance of Digital Transformation and Optimizer Cost structure.
Speaker Change: Our priority remains to have a balance with cash by investing through drive growth, with our next significant portion for shareholders through dividend and paying down that.
Speaker Change: Reportedly, we remain committed to strong investment rate breaking, and expect your leverage ratio to be below 3 times 4224, but another year of strong cash flow, driven by profit and working capital initiative.
Speaker Change: Now turning towards 2024 financial outlook on Black 23. Our outlook continues to reflect a prioritizing vastness in key categories to strengthen volume trend and drive long-term sustainable growth while appreciating the infernity of the consumer environment.
Tony Sov: Tony Sov the details.
Speaker Change: First, Coach Racer now expected to have a minimal impact on sales, adjusted, operated income and adjusted earnings per share. A change from the previously anticipated unstable impact of approximately 1%.
Tony Sov: At the top line, we continue to expect constant growth in that safe to range between a 1% to grow also 1%.
Tony Sov: and it's a fit based on those who will be at the need to high-end over guidance range.
Tony Sov: In terms of pricing, we anticipate about a 1% increase for the year, in which what we said not quarter.
Speaker Change: In China, our photohead from all business, which is included in an impact consumer, continues to be impacted by lower demand, and we now expect China consumers to stay as to be down slightly compared to 2022 for the four years, while we present the expected to be flat, and just as very flat within our guidance.
Speaker Change: While we recognize that has been continuing with the many China, the continued to believe in the long-term trajectory of the China business.
Speaker Change: Moving to adjusted operating income, we continue to expect 4% to 6% constant currency growth.
Speaker Change: Our 2024 Rose Margin is projected to range between 50 to 100 basis point higher than 2020.
Speaker Change: It was margin extension reflects favourable impacts from pricing, water mates and cost savings from the CCI NGOE program. Partion of said by the anticipated impact of a low single-dish increase in cost inflation and our increase in investment.
Speaker Change: In addition to our Rosemary Expansion, H&A benefits from costums will be partially offset by investments to drive volume growth, including brand marketing.
Speaker Change: For the year, we continue expecting a brand marketing spendful increase high single dishes, reflecting a double-gest increase in investment, partial of set by suicide savings.
Speaker Change: In terms of facts, we now expect our tax rate to be approximately 21% for the year, which is slightly better than its 22% rate, we had to really provide it and reflect the benefit of this great item, Mike Mason earlier.
Speaker Change: We continue to expect new things in place in our income from unconfolidator operations, reflecting the strong performance of the anticipated performance of the Mexico for the year.
Speaker Change: To some rise, our 2020 Ford adjusted early special projection of $2.85.
Speaker Change: 2 dollars and 90 cents, which likes a 5% to 7% increase compared to 2023. And we anticipate all results will be closed to the high end of the range as we benefit from the improved tax rate.
Speaker Change: As we head into the fourth quarter, lemme summarize some of the puts in text to consider.
Speaker Change: We expect to draw as one of the growth in both consumer and flavor solutions and seek question improvements from the third quarter.
Speaker Change: So I think it's expected to have a slight negative impact, but the price investing that's meeting our consumers' segments only partially offset by flavor solution.
Speaker Change: We expect close margin to sequentially proof through the third quarter and to be flat, Galaxy into the prior year. You're in my prize, a comparable year-to-year flavor solution product mix and blind supply chain in that lead to support growth.
Speaker Change: We expect your investments in brain marketing to rank sequentially from the third quarter, and anticipate an increase in estimated year over year related to IT and digital transformation investment shifting into the fourth quarter. And I would talk more about this investment and our upcoming investor day.
Speaker Change: As a result, our operating profits will likely be comparable with the prior year. Do most of it to the time of our investment. However, this remaining large union line with how we had expect our operating profits to perform for the second half of the year.
Speaker Change: As Brendan noted, we continue to prioritize investments to rise to impactful results. I'll return to volume my growth and this course that we are moving the right direction.
Brendan Foley: and we're running confidence in giving their lines from the months of our business and delivering on our 2024 financial outlook along thermal objectives over time.
Brendan Foley: Thank you, Markos. Before moving to Q&A, I would like to close with our key takeaways on slide 24.
Speaker Change: We are pleased with our results for the quarter, especially as it marks an inflection point for total company volumes turning positive.
Speaker Change: This demonstrates that we are investing in the areas that drive the most value and reinforces our confidence in our plans and long-term objectives.
Speaker Change: We continue to execute our strategic roadmap with speed and agility and in alignment with consumer trends, further capitalizing on our attractive categories across segments. In addition, our plans are yielding the expected results.
Speaker Change: We also continue to expand margins and manage our costs as we are investing in the business.
Speaker Change: He's improvements are led by our favorable product mix in cost savings programs.
Speaker Change: Our results in the third quarter benefited from the timing of these investments and we continue to expect our second half operating profit results to be in line with our expectations.
Speaker Change: Are you today performance 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 all McCormick employees for their dedication and contributions, particularly as we navigate this complex environment.
Speaker Change: and reiterate my confidence that together we will continue to drive differentiated results and shareholder value. Now, for your questions.
Speaker Change: Thank you. We'll now be conducting a question and answer session.
Speaker Change: If you'd like to ask a question, please press star 1 on your telephone keypad and a confirmation tone to indicate your lines in the question queue.
Speaker Change: You may press start too if you'd like to remove your questions from the queue.
Speaker Change: For Pt. Serious and Speaker Equipment, it may be necessary to bring up your handset before facing the star keys.
Speaker Change: and Woodwell, please will we pull for questions.
Speaker Change: Our first question today comes from the line of Andrew Lazard with Bartley. Please visit your questions.
Speaker Change: Break your morning, everybody. Good morning, Andrew.
Speaker Change: I'm Brendan, it's certainly nice to see the continued sequential volume improvement in consumer, especially in the Americas.
Andrew Lazard: I think pricing consumer was down a little less than a point and that was pretty close to where expectations were. But I'm curious if you're seeing the expected magnitude of volume lift from some of these price pricing actions and investments that you've made. And I guess if you are.
Speaker Change: Would there be reason maybe to lean in an even a little bit further, right, to keep the momentum going, giving you got some flexibility this year from things like tax rates and below the line items.
Speaker Change: Yeah, thanks, Andrew. Let me just maybe lead in with a couple little pink slots here. We do continue to make the right progress and we're on track with where we expected to be.
Speaker Change: We turned the corner and our growing volume, which was, you know, our promises. As we started a year ago, the second half of the year. I think importantly, we're outperforming private label and installing him across all of our court categories. And I do like the progress that we're making in the labor solution, especially in this last quarter.
Speaker Change: in the American region.
Speaker Change: You know, having said that, you know, we're never going to be satisfied, so I think that we still see it opportunity to continue strengthening our plans and execution in the back, you know, the rest of 24 going into 25.
Speaker Change: But our programs are working and we believe they're delivering, you know, the growth that we thought that they would, just to add context on all those levers that...
Speaker Change: You know, on top of that presscat management that you refer to, that we think are really driving our business. It is increased investment in brand marketing and MP, just across all of our core categories.
Speaker Change: You know, we've launched an innovation that's really contributed meaningfully to our performance.
Speaker Change: Yeah, that's been an exciting part, because that's...
Speaker Change: A lot more innovation that we launched in 2022 and 2023, which was an important goal that we had here in 2004. We were expanding distribution in our core categories, and I think we had a really good quarter there in terms of performance, as we expected it would start to build.
Speaker Change: and in terms of pricing, we maintain that price gap management program that we've talked about in the third quarter. It will continue to play out as expected in the fourth quarter too. It's only a portion of our strategy, but it is yielding, I think, the results of the expected format.
Speaker Change: and I just put out, we're also operating in great categories, so let's not forget that that's also part of it. I think the strength behind our businesses that we do operate in really strong categories.
Speaker Change: I do want to say broadly at a global level, we also saw a really good performance across the consumer segment at a global level.
Speaker Change: Definitely, you need me a Australia Southeast Asia. We just saw broadly different formats, including our spices and seasoning's category growing volume across the entire consumer segment from a cornering.
Speaker Change: You're having to settle with that.
Speaker Change: I think our guidance is appropriate given the dynamic and tumor environment. So we're confident in our plans and we will be at that mid to high end of our top line range.
Speaker Change: But we also have to really make sure that we reflect what's going on in the environment right now. Hey, China is slightly worse than we expected and it does remain challenging. So we're refactoring that into our thinking. QSR trends.
Speaker Change: You know, continue to be a bit uncertain, and so that's kind of factors into our thinking too. And, you know, as we go into the fourth quarter is all of you know, this is the biggest part of your for us. So we want to make sure that we're balanced and we deliver on our expectations, but it is a big quarter for us.
Speaker Change: Thank you, and then quick one is um
Speaker Change: I think you mentioned that your sort of prepared food business in the Americas, which had been weaker with stabilizing and that...
Speaker Change: Trends in...
Speaker Change: The sales that you make to other sort of package food manufacturers, we're starting to look a bit better. I think you mentioned. So I guess as it relates to the sort of the industry as a whole, right, where the big debate is, you know, when do we start to see some sort of better volume trends recover and whatnot across the space?
Speaker Change: You're viewing to that based on some of the businesses that you've got, it's seem to suggest maybe that's sort of starting to happen. I'll be a gradually, I'm curious to get it your sense on your view into that aspect. Thank you.
Speaker Change: Yeah, I think, and that certainly bridges us off of our second quarter call, more or less our customer plans were performing as expected, which was we were expecting some improvement compared to the second quarter. And so we believe that largely did start to play out, our flavor's business.
Speaker Change: In the Americas region, we saw good results across those areas that we consider like high innovator growth customers. So that plays out in categories like performance nutrition or alcohol, beverages or...
Speaker Change: We're not out for Hall of Beverage, but we believe we have performed the category broadly there, and then we did see strength in our brand-new research business.
Speaker Change: and that also, you know, played into I think some of the improvements that we're seeing.
Speaker Change: Broadly across lay resolutions this second. You know, having said that QSART traffic was weak and slower, then probably we would have expected, but that's speaking back again to that level of uncertainty.
Speaker Change: I'll ever had inside that, you know, we do see our customers, you know, being responsive to what's going on in the market and trying to drive volume growth, et cetera. So we do think it's going to be going to queue for that trend should continue, or broadly that we see because it might be worth proven from the third quarter.
Speaker Change: Thank you so much and see you in a couple of weeks. Great to see you.
Speaker Change: Next question from the line of Ken Goldman, who's JP Morgan.
Ken Goldman: Hi, and Mike, thanks again for everything that we appreciate all your help over the years.
Ken Goldman: Two questions if I can. Number one, I don't think you quantified forgive me if you did.
Ken Goldman: The timing of the activities of your customers, how much that benefited? Three Q. I think it was largely in America's flavor solutions, but just wanted to clarify that. And you did say that shift will be reflected in 4 Q results. Just making sure we should kind of model all of that reversing in 4 Q, and then I have a follow-up.
Speaker Change: Yeah, I'll see this as my cup.
Speaker Change: He, as we said in the last call, there's a bit of a positive that was going to come into the third quarter from Q2 and that happened. It was one of the biggest Brendan talked about the really good flavor solutions underlying performance and brand new service in other areas, but that did have a positive impact in the Q3, which will kind of normalize in Q4 as we think about here on your comparisons.
Speaker Change: Okay, and then for my follow-up, I know you're, it's too early to talk about 2025, but I'll take a quick step anyway. It's the main question.
Speaker Change: Well, give it a shot. Is there any reason to think at this time you won't be on Algo and the reason I'm asking is you have talked about
Speaker Change: You know, volume growth in the next year, you kind of reiterated that a little bit today, you know, you've previously said you have the right level of investments in place, so I don't expect that to rise, you know, you always have great CCI, so just trying to get a sense, you know, is there anything you're seeing? Obviously, there's hot sauce, there's QSR, there's...
Speaker Change: and China and general, I could hold you back, but as other positives happening as well. So just wanted to get that sense. And then while you're answering, and I'm just curious, what is the underlying EPS Algo X M&A? In many years ago, you said that the combination of M&A and repo would contribute around 2%.
Speaker Change: and the average year to EPS, but I wasn't sure how you broke that down today, so hopefully that makes sense. Thank you.
Speaker Change: That last follow-up questions, I don't like it, maybe a few buried in there, so I'm going to do my best to remember everything, but I'm going to ask Mike and Marcus to help me out with this. Yeah, we're not prepared to talk about 25 guidance at this point, so I, you know, although in the best of day we feel like we'll share more context.
Speaker Change: of how we're looking at the future.
Speaker Change: and how we think about new overall performance and what we'll drive our long-term volume growth, which is something that we historically done. And so we'll spend some time talking about our view into what will be those drivers as we look from a long-term perspective.
Speaker Change: and what I think about what's going well in 24 and why should it continue in 25? We believe that these are the right programs and the right things to do in our business.
Speaker Change: and these are things that we believe is part of just...
Mike Mason: and doing a good job in delivering growth in our categories. Mike, do you want to add a little bit? Yeah, I want to add a little bit. I would just say, too, as we can go back to guidance early in January. The thing we talked about making the investment this year to really drive.
Mike Mason: and the second half going growth, which we're attaining, we're happy with the performance, not totally satisfied as Brendan said, we're not to do more, but still that momentum in the 2025.
Speaker Change: there's uncertainty in the economic market as there always is but we feel the like the well position and I think you'll hear more from a Vester deck which would be it for three weeks yet, that's fine.
Speaker Change: Thanks so much.
Speaker Change: Our next question is from the line of Peter Gauble with Bank of America, which is here with your questions.
Peter Gauble: Thank you guys for taking any questions and Mike, thanks again. Maybe to follow up on 10 questions just around this year.
Speaker Change: You know, the gross margin guidance, I think we're getting questions this morning, just you're up 125 basis points here today. Obviously you didn't move the gross margin guidance higher.
Speaker Change: and maybe there's some timing factors there, but just trying to understand if there may be a bit of conservatism in there as well and why that rate of change just wouldn't kind of continue through the fourth quarter.
Speaker Change: Yeah, if you think about it, it's been...
Speaker Change: We talked about this year in half to a lot, the first half, second half.
Speaker Change: because, you know, a quarter can, you know, it's good.
Speaker Change: and such a small unit of measure sometimes you get some moves. So we try to keep it pretty high level and have this year. And we've seen really good sequential improvement first half into second half. And actually by quarter it's going that way too. We see the fourth quarter.
Speaker Change: I actually, you know, hire gross margin than the third court, which is our normal track. So we're really happy with that. You're on year, you always get a little mix sometimes that happens. We can talk about normalizing mix versus last year in the flavor solution side. That necessarily is considered a fourth quarter of this year to last year.
Mark: Mark was highlighted some of the supply chain investing, so I'll let him talk about that in a second. And there's a slight pricing quarter year on the year comparison there that puts a little bit of pressure, not a whole lot. But it's one of the things I'm talking about. Yeah, so you think about it, those margin and the puts in thick between key, key, thank you for, you know, we're thinking about two, four is the more of a normalized labor solutions, the product make, then to face, we think about it that way. We also think about, you know, some of the supply chain investments that we have to land for the year around beauty capacity, particularly around the heat platform that we have, continue to invest in the platform. We'll be impacting to four more so than the rest of the years.
Mark: So that is a, that is an impact there and and also I would say that in a little bit of pricing, I mean, you're going to have a slightly negative pricing in consumer going to Q4 or offset by, you know, partially upset by three resolutions, but there's going to be a little bit of that negative impact through pricing as we continue to invest back in the business, which I thought, top line growth. So there's some elements between Q3 and Q4, it's like that, you know, some important things between the two quarters, I think if you look at the second half of the profitability is very much and I would want to expect that before you're here, you're here, I was pretty talk about investment, about 10 times, but you're this heat investment that we're making to play changing, and you'll be excited to see the potential. As we've talked about it, the past on heat, but it's really driving a lot of our growth.
Mark: is great.
Speaker Change: Okay, great, but thanks for that.
Speaker Change: I wanted to ask you on China specifically, I think maybe you spent some time there earlier this year and the market seems to be rewarding China exposed stocks in the past week or so.
Speaker Change: on the back of some of the macro there. Just curious kind of get your perspectives on, you know, if there is some kind of stimulus policy in China, how you're thinking about, you know, improved consumer demand or improved consumer psyche there at any perspectives would be helpful. Thanks very much.
Speaker Change: I'm trying to, we do expect the environment there, it's going to bring a broadly challenge to expect that this has probably begun slightly in 24 so just to take the clarity, I mean the outlook that we're looking at for the balanced bar here.
Speaker Change: But when you reference, I think this latest news on stimulus, I'm just not in a position to sort of predict the impact of that.
Speaker Change: and we'll say though, in previous actions that have been taken in terms of the country regarding stimulus. I don't know that they've necessarily had a material impact.
Speaker Change: on our in a sort of a...
Speaker Change: and the consumption of our business. And so at this moment, right now, we believe that they'll just continue to make sequentially good progress. It's just not the speed we thought it might happen. And by the way, we didn't plan on a lot.
Speaker Change: I think this year, I'm trying to begin with, so it's more muted than we expected, and I think given the latest economic news out of the country, we're still waiting to see what kind of impact that might have.
Speaker Change: Thank you.
Lexia Howard: Our next question is for the line of the Lexia Howard with Bernstein, which is your dear questions.
Speaker Change: Good morning, everyone!
Lexia Howard: Morning. Morning. Morning.
Lexia Howard: Hi, so, can you ask about the margin recovery in flavour solutions? I think you mentioned that it may have been driven partially by product mix. I'm just wondering how much more runway there is to continue to improve momentum outside, and specifically what the mix that Grider was.
Lexia Howard: Yeah, I like the...
Speaker Change: You know, you think about our long-term journey of flavor solutions, and we've talked about portfolio migration in the past and we're recently in it and you think about the things that are higher margin within that portfolio, brain to feature this as it is.
Speaker Change: and B.M.B.
Speaker Change: and had a really good quarter gaining share, driving growth. There's some of the categories with the flavors, which words were gaining share in a form of succession thing, back that, again, lean to the higher margins out of things.
Speaker Change: is a little indication of a proof point of our vision to move these margins higher as we migrate the portfolio.
Speaker Change: is continuing the CCI. It's someone mentioned CCI before and can another bedrock.
Speaker Change: and we take and you'll be approved for flavor solutions margins the last two years through our CCI and our global operating effectiveness program.
Speaker Change: and continue that CCI journey there and we'll talk about that more in Investor Day 2 so...
Speaker Change: I think we're very positive on flavor solutions longer term. Quarter to quarter is going to, you know, we've talked about this sometimes being lumpy. I think we've got to come up with another word from some of you leaving. But a volatile question. Again, there is a room for margin in terms of material. And also just like to that, Michael, as we continue to build a business, we'll see leverage coming through this canal. That that's also going to be a new type of margin as we forward. But...
Speaker Change: Great, thank you, and then just to follow up.
Speaker Change: You mentioned Francis Food Service being a big driver at the margin improvement on the flight of the solution side. Is that because traffic is improving in the quick service restaurants as their value menus are...
Speaker Change: Making Up, or is it something different that's happening, I think you mentioned Share Games, just trying to get a flavorful for what's happening on the Branded Food Service side and what's driving net. Thank you.
Speaker Change: Alexia, to give you a flavor of the access to repeat the pun who lived it.
Speaker Change: The driver's on the Grandi Prood Service have less to do with traffic transit. We see them quite subdued still.
Speaker Change: at this point in time and they have been for the last even in the second quarter when we reported.
Speaker Change: We saw just the press trends from a traffic perspective in most sort of segments within food service. The driver of our road seems to be... ...or it is.
Speaker Change: Gaining Share, getting more tabletop placement on things like Frank's Red Hot. And just broadly, I think winning in the market place with our full platform of both spices and seasonings.
Speaker Change: and also pondered some sauces and so we'd like there.
Speaker Change: The programs that we drive and that we run and often what you'll see, I think in that business is we're doing a lot of limited time offers with our brand, so brands like Toluba or Frank's Red Hot.
Speaker Change: Tend to be brands that we've seen operators like to use as leverage as ways of driving interest and excitement on their menu.
Speaker Change: because of their obviously flavors that are quite appealing to consumers. And so we're seeing that part of our branded food service business pick up that you're going to a little bit more because we've been running a lot more of those types of programs and promotions with our customer face.
Speaker Change: So, it is really doing well in a tough marketplace, I think it's probably the answer I would give.
Speaker Change: Perfect. Thank you very much. I'll pass it on.
Speaker Change: and questions from the line of Max Calfort with BMP Barabas. Please just see you there, question.
Max Calfort: Hey, thanks for the question, just to follow up on Labour Solutions margin, so you had a very strong quarter of 300 basis points a year over a year. I think it's the highest.
Speaker Change: Margin, we've seen for that segment since the pandemic started.
Speaker Change: and by our math and a few assumptions we're making, it would seem like the guidance for the full year implies you have a pretty big.
Speaker Change: Step back and fork you in favour solutions margins.
Speaker Change: is sounds like product mixes.
Speaker Change: One had when you're seeing on their eyes, and although it wasn't clear to me, if
Speaker Change: You're saying product mix was abnormal in 4Q23 and it's a tough compare or abnormal in
Speaker Change: 3Q24, and we take a step back towards a more normal mix and 4Q24. I'm curious if there's any other factors we're staying on the horizon or this is really just some conservatism for the volatility and lumpiness of the segment.
Speaker Change: Thanks, yeah, I'd say it's more balanced, honestly. I mean, again, quarter to quarter, you're going to get some variability here. If you look back at the fourth quarter last year, as I mentioned before, the kind of compare in next season.
Speaker Change: It's normalizing out.
Mark: You know, supply chain investment, I think honestly, if you think about a supply chain investment, the thing we're doing on heat that Mark has talked about, in fact, labor solutions. It's a smaller sales base too, so you probably get more of a gross margin impact. But for the year, get back to the year comment, you know, we're on planet with happy with the margin improvement there.
Speaker Change: What overall, I mean, our operating profit should margin improve for the full year, as versus last year. So we will continue to make that sequentially primitive in terms of operating margin. So we've increased margin by one of the basic points. Twenty-three versus twenty-two. And that will continue to drive operating margin up for the full year as we had planned before.
Speaker Change: [inaudible]
Speaker Change: Great, thanks. And then turning to hot sauce in the US, it sounds like it remains a challenge you're still seeing pressure from.
Speaker Change: Here's a trial-sized package offerings. It sounds like also that you're pleased with the initial reaction to your own trial-sized packages, but can you just give us an update on what you're seeing there, what you expect from your action plans over the coming quarters?
Speaker Change: Thanks very much all you've had there.
Max Calfort: Max, yeah, thank you for the question on hot sausage. Hot sausage is an attractive category. There's new competition always entering the category. So, you know, that's something that we sort of deal with all the time. And, you know, as I said, in a prepare of remarks, we really do like the underlying health.
Max Calfort: of our base business and just continue to trunk at some royal team.
Max Calfort: and this is also part of our portfolio that's also receiving a fair amount of increase investment. But there is one thing that's really, I think, impacting from a share perspective. Just, you know, two particular things going on in the market. A few of ours is laughing a big supply chain constraint in the prior year.
Max Calfort: which hasn't affected our business as much, but definitely affected theirs. So we're seeing that volume return back under their label. But also we're seeing a lot of surge in unit volume from these many trial sizes, which we were able to participate in or begin to participate in.
Max Calfort: in the third quarter.
Max Calfort: Our units are holding up well in this category too, so there is a fair amount of noise going on.
Max Calfort: and the Hawksaw's category.
Max Calfort: and so when we look at those many, it's just to give you some more perspective around that. We're seeing a lot of pickup and velocity. What it's doing is it's helping us drive trial on new flavors.
Max Calfort: I think we have a Soracha in there, and we also have a creamy Buffalo sauce.
Max Calfort: and both were super good, and at a dollar, these are really low price points for consumers to just, you know, really, it lowers the barrier to trial.
Max Calfort: and so we've seen a nice pickup velocity on those mini trial sizes and expect that obviously to be a positive part of our portfolio or that brand of sort that will have moving forward.
Speaker Change #100: I also got one of draw attention to, we have stronger leexceptions on our overall innovation. Like our Frank's Red Hot Squeeze products that are coming out, Frank's a dill pickle hot sauce.
Speaker Change #100: These are items from an innovation perspective that have been kind of rolling out in the market at the back out of this year and we like performance that we've seen there. So we'll continue to work through that we believe we'll have better performance as we move towards the end of 2024, sequentially improved versus the third quarter.
Blake: Blake, this is an area that we get a lot of attention to and it's an exciting area in the store.
Blake: Thanks very much, very helpful.
Speaker Change #102: Thanks for watching!
Speaker Change #103: The next question is for the line of Steve Powers with Deutsche Bank. Let's just see other questions.
Steve Powers: Hi, good morning. First question.
Speaker Change #105: Hey, good, thank you for the first question on me.
Steve Powers: The plan ramped in marketing and advertising support that you called out in the 4th quarter guidance. I'm curious to sort of how much of that is just...
Speaker Change #106: and more intense programming around holidays and sort of specific to stimulating 4Q demand versus maybe more everyday programming that has maybe more durable ROI in 25.
Speaker Change #106: Well...
Speaker Change #107: We think about the fourth quarter and our posture of walking into the fourth quarter.
Speaker Change #108: I think, maybe good way to think about it is.
Speaker Change #108: We still have the same one with programs and activity.
Speaker Change #108: That's been driving our business results, we expect that will continue in its.
Speaker Change #108: and it's strength going into the fourth quarter, so we're not pulling back or anything like that. But we like the progress and the results that we're getting across the portfolio.
Speaker Change #108: with those investments in those plans and programs.
Speaker Change #108: It's also our big holiday season, quarter.
Speaker Change #108: and we really do believe it's very strong holiday plan and set up with our customers.
Speaker Change #109: and so this is an area that we expect to have really good performance in the Hollywood. So that obviously is it.
Speaker Change #110: You know, a tick-up when you think about it sequentially from the third quarter and, you know, that's something to be expected.
Speaker Change #111: But some of this, as you mentioned, you know, every day we talked about Frank's bad hot dog, early in the year, turned it on every day so that does the chimney made it look like it was a year.
Speaker Change #112: Okay, okay, that's up, that's up, thank you for that. And then, you know, this is very new, but the dock workers strike that's in news this morning.
Speaker Change #113: I guess from your perspective, you know.
Speaker Change #114: I'm assuming that if it's relevant to the short live, the impact is relatively manageable. From the outside, how long before this becomes a more Michelle issue for you based on your current visibility and material levels?
Speaker Change #115: It's the end of the game.
Speaker Change #115: Thank you for the question on this Steve, on the East Coast Portstrike, from an inbound supply planning perspective for us, we've been contingency planning on this, on the potential for this since.
Speaker Change #115: Lakeville at this year. We really haven't been thinking about this as maybe something that could happen. And so we've been planning our actions around that possibility. We've also coordinated mitigation plans with our domestic suppliers because they might be counting on.
Speaker Change #115: You know, inbound supply coming from outside the United States.
Speaker Change #115: So we believe we've mitigated most of those risks, you know, with what's right now officially occurring, but we believe we're broadly covered. We are monitoring it daily though, just to make sure that, you know, we don't have any interruption that's supplied, but we feel like we've planned for this.
Speaker Change #115: Over all that we encourage both sides to work through this is productively as they can and with pace. Because this is something I would say that we don't want to see how long extended event. But that's where I thought right now on on that and we're going to watch you closely like everyone else.
Speaker Change #116: Okay, thank you very much. Appreciate it.
Speaker Change #117: Next question, there's a line of Rob Dickerson with Jeffries. Please just use their questions.
Rob Dickerson: Great, thanks so much. Just two quick ones. I guess first one is they just kind of wanted to get maybe a little bit more color on Q4, because I think kind of around midpoint of the EPS implied guidance.
Speaker Change #119: It looks like it's down about 15% year of a year
Speaker Change #119: The same time.
Speaker Change #120: Sounds like maybe sales could be a little bit better sequentially like relative over seeing Q3 and then...
Speaker Change #121: The comments around gross margins seem like gross margin a little more normalized, but still.
Speaker Change #122: Still better than Q3, maybe flat year, or year, so kind of what's implied, everything we're talking about right is like SGA.
Speaker Change #122: should be up a decent amount.
Speaker Change #122: Um...
Speaker Change #122: and then I guess there is a little bit of implied tax rate headwind.
Speaker Change #123: and then also like income from uncontallity clearly.
Speaker Change #124: I don't know, it's been up like 50% you know, year, year, year, year to date versus the mid-teens guide. So I'm just trying to kind of gauge like what's the core driver of that year, via absolute EPS implied declining Q4, and it sounds like it's us today.
Speaker Change #125: Thanks. Yeah, thank you. You kind of walk with you now very well highlighting kind of the squeeze there.
Speaker Change #126: We talked about the SNA investments we're making and it was a timing shift in some of the supply chain investments just to touch on tax and on facilitate really briefly. And I want to present cover a little bit of the other stuff.
Speaker Change #126: He has a little bit of the Edwin after some pretty large days ago, so we talked about it in the call, which we're timing related. We did call those text rate down for the whole year by 1%.
Speaker Change #127: but on Facility, it's really great performance by making next continues, you know, relaxing.
Speaker Change #127: really great performance in the fourth quarter of the last year, but also the pace that has the value pretty significantly. So I think that's part of the reason that it's made with Wanky to use that.
Speaker Change #128: on that line. Let me go up turn into Parker's to talk about this.
Parker: Yeah, so we talked about the subline and the situation is moving from Q3 to Q4, and we gave the need to hide a sub about the range in terms of...
Speaker Change #130: The full year had me think about it before. It's a very cool, both in consumer and play the solution.
Speaker Change #130: from the Q3. The same applies for Rosmargin and Rosmargin is going to produce the Q3, which is the Q4.
Speaker Change #131: If you compare with our ears, don't be flat.
Speaker Change #132: Given the reasons that I mentioned before, in terms of the investments that were making it supply chain.
Speaker Change #132: The normalization of the mix, the beer and flavor solution side, is from the pricing that you know, within consumer that's going to be partially upset by flavor solution. So that's how we see the Rosemarjun coming into Q4. On H&A, we had some investments that shifted from three into Q4 as well, particularly around IT in digital transformation.
Speaker Change #133: [inaudible] We see some of you guys doing it for a long-distance marketing. They don't have data analytics. You know, putting in a hub around data analytics to serve the business.
Speaker Change #133: As well as some efficiencies across manufacturing, some of the investment that we're making in terms of digital transformation, that is really kind of a landing-much of force, or that a little bit of a landing factor that you see, a good operating process is going to be comparable to last year, so for two four.
Speaker Change #134: and those are kind of the potent things that we see from the kitchen to the floor. Think the other thing, Robin. You get to the fourth quarter, again, is one quarter out of four. There's a big score. You get to a little bit of a squeeze play, so we've already in essence narrowed the sales. I go and bid to hire early in the year. We've kind of said zero to one, it's an asset.
Robin: We've never gone below a 1% of the spread in the fourth quarter, so you get a little bit into that, to get a math exercise, so the range is maybe a little bit more than you'd like. Thank you, you've understood that in the past.
Speaker Change #136: Yeah, yeah, yeah, no, it's all very helpful very clear and maybe just one easy follow up
Speaker Change #137: I just, I heard you kind of mentioned a couple of times, you have to call.
Speaker Change #138: Kind of that, you know, let's call it more a little IT digital transformation spend, right? It doesn't sound like that's like the lion's share of like what, you know, coming in Q4, maybe there's some time in shift.
Speaker Change #139: and I also respect the fact that you're not talking 25 and probably don't even want to...
Speaker Change #140: You know, talk long term, that's for the investor day, but is there is really something more to that, you know, is that like a
Speaker Change #141: Yeah, I mean, there could be a little bit more of kind of an investment program around kind of a bigger piece of kind of where we're viewing the digital IT side and you know that could be ongoing for a little bit or is that like now that's just a Q4 thing
Speaker Change #141: and then we'll see you in the next video.
Speaker Change #141: Yeah, we're going to be talking more about our digital transformation journey at the MSWD, well, and you know, in Q4 particularly around continue to drive the investments that can sustain our top line performance.
Speaker Change #142: This summer marketing is one of them, that we're going to be continuing to do that in two four particularly and others as a nation in the call. So, you know, it's too early to get into specifics for 2025.
Speaker Change #142: We're going to impact the long-term plans as part of the investor day, I'm going to be covering all of our digital transformation programs at that point.
Speaker Change #143: All right, great. See you there. Thank you so much.
Speaker Change #144: Thank you. The next question is an online elaborate mosque out with TD Cowan. Please just see with your questions.
Speaker Change #145: Hi, thanks. Maybe I'll just clean up a couple of things.
Speaker Change #146: The FX no longer being a headwind, and also this discrete tax benefit. When you add all that together, is that like an eight-cent benefit versus your prior expectations? You raise guidance by five.
Speaker Change #147: I'm just wondering if I'm doing the math ride or if it's not material.
Speaker Change #148: Well, yeah, there's a lot of circularity in anything when you look at these things with other programs to a channel content, things like that. So we've kind of moved it in essence due to the tax reason due to FX, kind of that's five inch stamps really reflects that.
Speaker Change #149: Okay. And another question on third quarter, did brand investment increase high single digit in third quarter similar to your guidance for the year? I don't remember hearing about it in the comments.
Speaker Change #150: We talked about this again in half throughout, I mean, the first half heavy investment second half, we talked about moving the dollars up surge in the fourth, which we're doing. So we haven't really talked about it this up quarter on quarter.
Speaker Change #151: Okay, so just the guidance is for the halves, not for the quarters.
Speaker Change #152: yes for ' actually going to mean you're for the year i gi gi that into the hand that yes
Speaker Change #153: Okay, and then finally, um...
Speaker Change #154: You know, as you head into 2025, it would appear that there's not a lot of room for additional pricing, but I believe that the long-term algo includes some pricing assumptions.
Speaker Change #155: and given, you know, we've been in this hyperinflation environment for, you know, for a couple of years and now it's kind of come to a screeching halt. You know, is there any reason to think that the pricing lever is kind of off?
Speaker Change #155: for, you know, until further notice, and, and how do you think about that in terms of your long-term algo? Thanks. But, you know, Rob, I'll open up with maybe a couple of talks here and you ask Mike to wrap it up.
Rob Dickerson: in our long-term algorithm. I think we've always talked about their very well might be a little bit of a price and that's when there's long-term objectives. I don't think we're in a position to say today, like whether or not anything has sort of material to change and are outlook there. But as we deal with sort of the near end, you know.
Rob Dickerson: You know, 2024, you know, perspective, and clearly we've made some decisions there in order to make sure that we, you know, get back to healthy top line and sorry to healthy volume growth pretty quickly.
Speaker Change #156: You know, predicting the future from an inflation standpoint or how we'll play out pricing. I think it's a bit challenging if, you know, unless we're, you know, speaking just a broad terms regarding a long-term algorithm. I'd like to want to add anything to that.
Speaker Change #157: Yes, I think there's been a lot of focus. There's certainly so much things like Christcat Manage that this year, for us and others.
Speaker Change #157: You know.
Marcus: I think of these things as long-term revenue management, category management initiatives. We've early invested it and continued to drive and some of the things Marcus talked about at Fort Corps investment continued to get closer to understanding candlestization of product line, innovation, how it impacts, what price does. So I think we think we're really close to best and class in this area and really going to continue back to next year.
Speaker Change #159: I think you always have to have that pricing tool in your toolbox because commodities may go up or down, you know, free costs may go up because of the doctor, doctor, we don't know that right now.
Speaker Change #159: So you have to have that lever, and we've been really good with our customers about making sure we pass on cost increases versus.
Speaker Change #159: Margin, keeping margin. I think we've worn a lot of trust from both our flavor solutions and consumer customers there. And we'll look at that in the future, I'm sure Marcos will.
Marcos: I'm just curious about that banner going forward. What I would add is that, in addition to that, the pricing is a lever that will continue to be quite a long-term level. I mean, we look at the analysis that we write and we think about a fish type program working for us. I mean, it has been working for us over the last few many years. It will continue to work for us in the future. So, that is kind of the first lever that we go about is like using the success as a way of funding, you know, the investments that we need to contribute to drive top line growth. Thank you.
Marcos: So it's always a mix of all these levers, a little bit of pricing, the CCI coming through, the top line going for the top line volume coming through. So all those levers we kind of manage from a more holistic standpoint, I would say.
Marcos: That's great. Thank you very much.
Speaker Change #160: Thank you.
Speaker Change #160: and the next question to the line of Adam Sandfields with Goldman Sachs.
Speaker Change #161: Susie your third question.
Adam Sandfields: Oh yes, thank you. Good morning everyone.
Adam Sandfields: I'm a lot of groundspin covered. I wanted to maybe come back to spices and seasonings in the US if I may. I think you lose your consumption growth outpacing prime and label in the quarter. But I noticed I didn't necessarily say the category that isn't really what we would see in the Wilson either. And I'm wondering if you could talk about kind of the shared environment.
Adam Sandfields: and that category and...
Speaker Change #163: Maybe upperforming private label, but there's some smaller brands that continue to grow pretty rapidly And just how you think about the competitive positioning and how maybe the sort of end or price points in that category Maybe still have some adjustment to do, or if there's just been needed to
Speaker Change #163: Respond to some of the smaller brands which are growing.
Speaker Change #164: I've had from a perspective of that category, what we're seeing right now is we're doing quite nicely, especially from a volume perspective.
Speaker Change #164: across that part of our business, and not check on the way that we're growing share in that particular metric.
Speaker Change #164: What we're seeing broadly in the category is as we have a very broad offering across the category, we think we compete quite well with all different forms of competitors. And what is in the attractive category for people to enter. And so that is something that I would just get you. We always have.
Speaker Change #164: You know, sort of dealt with smaller competitors in at the same time private label.
Speaker Change #164: So this doesn't feel like we have any sort of really new dynamic going on.
Speaker Change #164: You know, as we kind of take a look at the performance of the third quarter, what you're seeing is McCormick really focused on capturing what is healthy category growth in the consumer.
Speaker Change #164: and make sure that we're growing both unit and volume measures across our business. Now we're also growing TDPs or total distribution points.
Speaker Change #164: Young Cross is part of our, well frankly, across all of our four categories, but we're also seeing a nice distribution point gain across the whole portfolio, so we look at that also our helping us. These are the perspectives I think I would share right now in terms of, you know, our third quarter performance and as we go into the fourth quarter.
Speaker Change #165: Okay, that's helpful. If I guess that's a quick follow-up just on cashflow.
Speaker Change #166: In the last year there was working capital as a big source of cash for the full year. Just the year to date, it's been a piece of advice use of cash I know fourth quarter is generally a big working capital reversal is there. Next expectation that working capital is a source or use of cash for the full year once the book's close.
Speaker Change #167: Yeah, fourth quarters are strongest cash flow quarters you know.
Brendan Foley: He has an interesting, we talked about a couple of other drivers of what we were a little short year to date versus prior. One of those drivers was working capital and Brendan alluded to the pork strike and part of that is do some of our contingency planning that he mentioned to make sure we were ready. That should naturally hopefully not wind, but we're still expecting a strong cash for you.
Speaker Change #168: Alright, that's all I'm going to tell for a pass along. Thank you.
Speaker Change #169: Thank you. Our final question from the line of Tom Palmer, would city. Please see you with your question.
Tom Palmer: Hi, and thanks for the question. I wanted to ask on the SGA step up here coming in for you.
Tom Palmer: Is there a particular segment where we're going to see this most apparently, and I'm really just trying to get to kind of operating profit on a segment basis that you've got a lot of show overalls, but is there one area where maybe we'll see more growth than the other.
Speaker Change #171: I'm not a specific, but it's going to be a cross-volt segment, consumer and service lotion, yeah.
Speaker Change #171: Thanks, and on the, um...
Speaker Change #171: and Consolidate Operations.
Speaker Change #171: What's maybe the answer is just a little conservatism, but the level of growth this year, you know, close to 50%, I know that comparison is a lot tougher in 4 to 2, but when we look at the runway of the past couple of quarters, is there anything notable to call out that it could trigger incremental earnings pressure? Or again, is there reiteration just more with respect to taking about last year's 4 to being so strong?
Speaker Change #172: Well, I think that's what I mentioned before the FX, being the Paces Dance in around 20 now versus 17 and a half this last year, so that's a pretty material impact. As we translate their earnings back to our piano.
Speaker Change #173: Right, thank you.
Speaker Change #174: Thank you, and this time I'll turn the floor by to management for closing your marks.
Speaker Change #175: Thank you. And thanks to all for joining today's call. If you have any further questions regarding today's information, please feel free to contact me. That concludes our conference call for this morning.