McCormick & Co. indicated pricing will remain negative for its consumer-facing division through the rest of the year after marking a “milestone” in volume recovery.
The US-based spices, seasonings and hot sauces maker is intent on returning to “healthy volume growth pretty quickly”, president and CEO Brandan Foley said as he presented third-quarter results yesterday (1 October).
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Group volumes climbed 1% in the third quarter, weighed down by pricing, but there was a split between McCormick’s consumer business and what it calls flavour solutions, or foodservice.
Consumer volumes, which supported the recovery, were up 1% based on negative pricing of the same magnitude. Out-of-home pricing, however, was a positive 1%.
While pricing is likely to remain part of the long-term equation, Foley explained his thoughts on the rest of the 2024 fiscal year and beyond.
“As we deal with the near-end 2024 perspective, clearly we’ve made some decisions there in order to make sure that we get back to healthy volume growth pretty quickly.
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By GlobalData“Predicting the future from an inflation standpoint or how it will play out in pricing, I think it’s a bit challenging unless we’re speaking just in broad terms regarding the long-term algorithm.”
Foley and his finance counterpart Mike Smith, along with incoming CFO Marcos Gabriel, suggested they will talk in more depth at the company’s annual investor day on 22 October.
Smith did, however, add: “I think you always have to have that pricing tool in your toolbox because commodities may go up or down, freight costs may go up because of the dock strike. We don’t know that right now – so you have to have that lever.”
Meanwhile, Gabriel gave his thoughts: “I would say that in a little of pricing, we’re going to have slightly negative pricing in consumer going into Q4, partially offset by flavour solutions,” he said.
“But there’s going to be a little bit of that negative impact through pricing as we continue to invest back in the business to drive top-line growth. So there are some elements between Q3 and Q4.”
Top-line growth was flat in the third quarter, with sales coming in at $937.4m. Consumer sales were also stable while flavour solutions saw a 1% decline in sales.
“This quarter, we reached a meaningful milestone by delivering total positive volume growth, despite the challenging environment,” Foley explained in his opening remarks.
“Our volume trends improved sequentially across both consumer and flavour solutions.”
In North America consumer, McCormick “delivered solid sequential volume improvement”, he said, adding that the EMEA region saw positive growth in “major markets” for a third straight quarter.
Volumes in the Asia Pacific were also “strong”, with the exception of China.
“Overall, consumers are resilient but remain challenged. They are exhibiting value-seeking behaviour, making more frequent trips to the grocery store with smaller baskets and shopping just for what they need,” Foley added.
“Foodservice traffic remains soft across most restaurant types, particularly in QSRs.”
