Financial Data and Key Metrics Changes - Total organic sales increased by 2% in the third quarter, driven by volume growth, marking the fifth consecutive quarter of volume-led growth [5][21] - Adjusted gross profit margin decreased by 120 basis points due to higher commodity costs and tariffs, with gross margins coming in below expectations [23][24] - Adjusted earnings per share for the third quarter was $0.85, an increase of 2% compared to the previous year [27][35] Business Line Data and Key Metrics Changes - In the Consumer segment, organic sales increased by 3%, primarily driven by volume growth, with a 3% increase in the Americas and a 4% increase in EMEA [21][22] - Flavor Solutions segment saw organic sales up by 1%, with a 2% price contribution but flat volume and mix [22][23] - Asia-Pacific region for Consumer segment experienced a 1% decline in organic sales, primarily due to softness in the food service business in China [22] Market Data and Key Metrics Changes - In EMEA, consumer organic sales grew by 4%, driven by a 1% increase in volume and a 3% increase in price due to commodity cost actions [21] - Asia-Pacific's Flavor Solutions organic sales increased by 6%, with volume growth of 9%, driven by QSR customer promotions [23] - The U.S. market saw McCormick branded unit consumption growth outpacing the broader edible category for five consecutive quarters [10] Company Strategy and Development Direction - The company remains committed to delivering volume growth and investing in brands, technology, and digital transformation [8][10] - Strategic pricing and innovation are key focuses to offset rising commodity costs and tariffs [9][30] - The company plans to leverage its global reach and local brands to meet consumer needs and drive future growth [8][10] Management's Comments on Operating Environment and Future Outlook - The management noted a challenging consumer environment, with low to middle-income households adjusting shopping habits [7] - Confidence in a gradual recovery in the China consumer market for 2025 was expressed despite current headwinds [6][14] - The company expects to maintain volume momentum while managing profitability through strategic initiatives [9][10] Other Important Information - The company revised its profitability outlook to the low end of the range due to rising commodity costs and tariffs [9][31] - Tariff exposure for 2025 is now expected to be approximately $70 million, up from $50 million previously [29] - The company is focused on maintaining a balanced use of cash, funding growth investments while returning cash to shareholders [28] Q&A Session Summary Question: Visibility on positive volume outcome in consumer segment - Management acknowledged a deceleration in volume growth but emphasized strong plans and innovations to maintain positive volume growth in the fourth quarter [42][44] Question: Mitigation opportunities for inflation and tariffs in 2026 - Management indicated ongoing efforts to offset tariff impacts through productivity savings and alternative sourcing, with confidence in mitigating future impacts [47][50] Question: Cost inflation guidance and drivers - Management explained that increased commodity costs and new tariffs were significant drivers of cost inflation, leading to revised guidance [54][56] Question: Gross margin expectations for Q4 - Management confirmed expectations for gross margin improvement in Q4, with a need for sequential growth to meet year-over-year comparisons [58][60] Question: Clarification on tariff offset expectations - Management reiterated the goal to fully offset tariff impacts for 2025 while continuing to work on mitigation plans for 2026 [63][64]

Financial Data and Key Metrics Changes - Total organic sales increased by 2% in Q3 2025, marking five consecutive quarters of volume-led growth [5][22] - Adjusted gross profit margin decreased by 120 basis points due to higher commodity costs and tariffs [24][25] - Adjusted earnings per share for Q3 2025 was $0.85, a 2% increase compared to the previous year [27][36] Business Line Data and Key Metrics Changes - Consumer segment organic sales grew by 3%, driven primarily by volume and mix, with minimal pricing benefit [22] - Flavor Solutions segment organic sales increased by 1%, with a 2% price contribution but flat volume [23] - In the Americas, Flavor Solutions' organic sales rose by 1%, reflecting a strong performance with faster-growing flavor customers [23] Market Data and Key Metrics Changes - Consumer organic sales in the Asia-Pacific region decreased by 1%, primarily due to softness in the food service business in China [22] - EMEA consumer organic sales grew by 4%, driven by a 1% increase in volume and a 3% increase in price [22] - QSR trends in EMEA began to stabilize, marking an improvement relative to recent periods [6] Company Strategy and Development Direction - The company remains committed to delivering volume growth and investing in brands, technology, and digital transformation [9][10] - Strategic pricing and ongoing innovation are key components of the company's approach to mitigate rising costs [10][30] - The company is focused on maintaining a balanced use of cash, funding growth investments while returning cash to shareholders [28] Management's Comments on Operating Environment and Future Outlook - The management noted that the consumer environment remains challenging, with low to middle-income households adapting their shopping behaviors [7] - There is confidence in a gradual recovery in the China consumer market for 2025 [5][15] - The company expects to offset most of the tariff impact through productivity savings and alternative sourcing [30] Other Important Information - The company revised its profitability outlook to the low end of the range due to rising commodity costs and tariffs [10][31] - Total gross annualized tariff exposure is now approximately $140 million, up from $90 million previously [29] - The company plans to implement targeted tariff pricing and monitor elasticities to inform future plans [30] Q&A Session Summary Question: Visibility on positive volume outcome in the consumer segment - Management acknowledged a deceleration in volume growth but emphasized strong sales growth driven by volume and innovation [41][42] Question: Mitigation opportunities for further inflation and tariffs in 2026 - Management indicated that it is early to predict the exact impact of tariffs for 2026 but expressed confidence in current mitigation plans [46][48] Question: Clarification on cost inflation guidance - Management explained that increased commodity costs and new tariffs were significant factors in the revised guidance for 2025 [50][52] Question: Expectations on gross margin for Q4 - Management confirmed that gross margin is expected to improve in Q4 as mitigation efforts take effect [53][54] Question: Comments on reformulation activities and private label growth - Management noted increased reformulation activity among high-growth innovators and private label customers, driven by consumer demand for healthier options [66][68] Question: Acquisition strategy and interest in large companies - Management reiterated a focus on both bolt-on and transformative opportunities, emphasizing interest in flavor-related categories [70][72]