2025 Outlook and Growth Algorithm
Q: Any reason to think you won't be on algo in 2025?
A: Management isn't ready to discuss 2025 guidance but is confident in their plans and investments driving volume growth into next year. They acknowledge economic uncertainties but feel well-positioned and will share more at the upcoming Investor Day. "

China Market Challenges
Q: How is stimulus in China affecting consumer demand?
A: They expect China's environment to remain challenging, anticipating a slight decline in 2024. While unable to predict the impact of recent stimulus measures, past actions didn't materially affect their business consumption. "

Hot Sauce Category Competition
Q: Can you update on U.S. hot sauce challenges and plans?
A: The hot sauce category is attractive but faces increased competition. They're impacted by a competitor recovering from supply issues and by trial-sized offerings boosting unit volumes. Their own mini trial sizes launched in Q3 are performing well, and they expect sequential improvement. "

Gross Margin Outlook
Q: Why not raise gross margin guidance despite improvements?
A: Gross margin is improving sequentially, but factors like normalized product mix in Flavor Solutions, supply chain investments, and slight negative pricing in the consumer segment are impacting Q4 margins. "

Flavor Solutions Margin Sustainability
Q: Is there more runway for Flavor Solutions margin improvement?
A: Management is positive about Flavor Solutions margins, driven by shifts to higher-margin products like Branded Foodservice. They expect continued improvement through CCI initiatives and leveraging growth for operating efficiency. " "

SG&A Increase in Q4
Q: What's driving the SG&A step-up in Q4?
A: SG&A investments shifted from Q3 to Q4, particularly in IT and digital transformation, including digital marketing, data analytics, and manufacturing efficiencies, affecting both segments. " " "

Pricing Power and Long-Term Strategy
Q: Is there room for additional pricing in 2025?
A: Pricing remains a lever in their long-term algorithm, though future inflation and pricing are challenging to predict. They emphasize their CCI program and holistic P&L management to fund growth investments. "

Working Capital and Cash Flow
Q: Will working capital be a source or use of cash this year?
A: They expect a strong cash flow year with the fourth quarter being the strongest. Year-to-date working capital was used to mitigate risks like the port strike, but they anticipate normalization. "

Spices & Seasonings Competition
Q: How is McCormick faring amid competition in spices and seasonings?
A: They're growing share in volume measures and expanding distribution points. While acknowledging competition from smaller brands, they feel confident in their broad offering and category performance. "

Impact of Dock Workers' Strike
Q: How could the dock workers' strike affect operations?
A: They've been contingency planning since April, coordinating with suppliers to mitigate risks. They believe they're broadly covered but are monitoring the situation daily. "

Brand Investment Levels
Q: Did brand investment increase high single digits in Q3 as guided?
A: Investments are discussed in halves rather than quarters. They confirm that investments are moving up in both Q3 and Q4 as planned. "

FX and Tax Benefit Impact
Q: Do FX and tax benefits account for the guidance raise?
A: Due to tax and FX factors, the guidance reflects these adjustments but they didn't quantify an exact benefit. "

Timing Shifts Between Quarters
Q: Should we model customer activity shifts reversing in Q4?
A: Positive impacts from timing shifts in Q3 will normalize in Q4, particularly affecting Flavor Solutions in the Americas. "

Prepared Foods and Customer Trends
Q: Are trends improving in sales to packaged food manufacturers?
A: They saw improvement in Flavor Solutions, with good results in high-growth customer categories and branded foodservice, despite weak QSR traffic. Sequential improvement is expected in Q4. "

Marketing and Advertising Ramp-Up
Q: Is the marketing ramp in Q4 focused on holidays or long-term ROI?
A: Increased investment in Q4 includes ongoing programs driving current results, strong holiday season plans, and everyday marketing initiatives like Frank's hot sauce. "

Unconsolidated Operations Earnings
Q: Any notable factors affecting earnings from unconsolidated operations?
A: Strong performance is noted, but they mention a tougher comparison in Q4 due to strong prior-year results and FX impacts, particularly with the peso. "