Brendan M. Foley
President and Chief Executive Officer at McCormick & Company, Incorporated
Good morning, everyone, and thank you for joining us. Before we begin reviewing our financial results, I would like to address Hurricane Helene. Our thoughts go out to all those impacted by this devastating storm. We continue to monitor the situation closely.
Now moving to our results. Our third quarter performance is aligned with our expectations, especially as we continue to navigate an evolving and complex consumer landscape. Our results demonstrate the success of our prioritized investments in the areas that we believe will drive the most value; and improve unit share trends, drive volume growth and capitalize on our advantaged categories. As we have said, McCormick remains a growth company and our investments in 2024 are yielding results that support our confidence in delivering on our top tier long term objectives. We are excited to share our strategic roadmap and building blocks that support these long term objectives at our upcoming Investor Day.
This morning, I will begin my remarks with an overview of our third quarter results, focusing on the top line drivers. Next, I will provide perspective on consumer trends, highlight some areas of success and the areas that we continue to work on. Mike will then go into 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 Slide 4. In the third quarter, sales were flat in constant currency, reflecting flat pricing, 1% volume and product mix, as well as the impact of our canning divestiture. This quarter, we reached a meaningful milestone by delivering total positive volume growth. Despite a challenging environment, our volume trends improved sequentially across both Consumer and Flavor Solutions. Our results to-date coupled with our proven growth plans fuel our continued confidence in our ability to deliver on the mid- to high-end of our constant currency sales growth guidance.
In our Consumer Segment, in the Americas, we delivered solid sequential volume improvement for the third consecutive quarter, leading to 1% volume growth. Volume growth reflects our continued focus on accelerating innovation, in alignment with consumer trends and expanding distribution. Our pricing reflects the continuation of our price gap management plans to support improved volumes as planned. In EMEA, we continue to drive positive volume growth across our major markets and core categories for the third consecutive quarter. We realized benefits from new product innovation and expanded distribution.
In Asia Pacific, outside of China, we delivered strong volume led sales growth as we continued to benefit from the rollout of our new consumer preferred packaging for our core spices and seasonings portfolio as well as distribution gains. 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. Marcos will provide more color on this when he covers our outlook for the remainder of the year.
Moving to Flavor Solutions, we delivered strong sequential volume improvement, primarily driven by growth in the Americas. In EMEA, our volume trends were impacted by softness in our QSR customers volumes. And in Asia Pacific, our results were impacted by the timing of customer promotions. From a profitability perspective, we delivered strong results relative to the prior year, as the third quarter benefited primarily from the timing of investments which are shifting to the fourth quarter. As we look at the 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.
Let me now share our view on the state of the consumer, which has remained similar since we reported our second quarter results. Overall, consumers are resilient but remain challenged. They are exhibiting value-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. Food service traffic remains soft across most restaurant types, particularly in QSRs. 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.
Consumers overall continue to cook at home and they are increasingly shopping the perimeter for protein and produce. This further reinforces their demand for Flavor, and McCormick's categories included spices and seasonings as well as condiments and sauces. Flavor is not something consumers are willing to sacrifice. Spices and extracts remain the number one center-store growth category.
From a value perspective, we are seeing several trends. Demand for larger sizes remains elevated. At the same time, there is increased demand for small or trial sizes 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.
Gen Z our new and future customers are also cooking at home. They're interested in seasoning blends that make cooking easier and convenient. Interestingly, they are leaning into higher quality and premium flavor items. We're seeing velocity pickup on our gourmet line and it's coming from Gen Z as they seek to recreate restaurant-quality meals.
As we 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 at McCormick. We are strengthening our broad portfolio to meet evolving consumer demands and delighting them with innovation. And we believe we have the right plans in place that are continually informed by what matters most to our consumers and customers.
Moving to Slide 5, let me highlight for the quarter some of the key areas of our success. In our Global Consumer segment, we drove solid unit consumption growth in spices and seasoning across our key markets in the Americas, EMEA and Asia Pacific. In the U.S., we continue to improve on our competitiveness relative to private label as our volume consumption outpaced private label for spices and seasonings this quarter. 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.
In recipe mixes, we continue to strengthen consumption trends in the Americas, driving both unit and volume share and outpacing private label in the U.S. Our Cholula line continues to be a significant driver of growth. We are innovating with Cholula recipe mixes, bringing new consumers to the category, particularly with millennials and younger families. In EMEA, recipe mixes were a significant driver of U.K. volume growth and we realized dollar market share gains for two consecutive quarters.
In mustard, we had a strong quarter as we drove both unit and volume share in the Americas. In addition, our unit and volume growth outpaced private label in the U.S. In 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.
In Americas consumer, the declines we previously experienced in the prepared food categories that we participate in like Frozen and Asian, which represent a small part of our portfolio have now stabilized and we are seeing improved growth. We continue to make progress on total distribution points. We expanded TDPs and gained TDP share in spices and seasonings, recipe mixes and mustard in the Americas.
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.
In Flavor Solutions, we saw strength in both of our technically-insulated high-margin product categories, Branded Food Service and Flavors. In America's Branded Food Service business, despite softness in the overall foodservice market we grew volumes and expanded points of distribution across spices and seasonings and condiments. In addition, we are winning hot sauce tabletop share behind new distribution, packaging and promotion. In Flavors, our consumer packaged foods customers are seeing some improvement in volumes within their own business in both the Americas and EMEA. 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.
Let me now touch on some areas where we are seeing some pressure. In hot sauce, we continue to have underlying strength in our base business and strong consumer loyalty. Our share trends remain impacted by a peer that is lapping their own supply chain disruptions. In the Americas, our unit share trends improved sequentially. However, volumes are impacted by many trial sizes. We are pleased so far with the performance of Frank's minis. Minis are incremental to the category and are driving trial of our new flavors. We expect our innovation, expanded distribution and brand marketing to help improve our trends as we exit 2024.
In Flavor Solutions, our volumes were impacted by slower QSR traffic, particularly and EMEA. We have seen this pressure impact our results for several quarters. It's difficult to predict QSR traffic. However, we are collaborating with our customers as they focus on improving their volumes through innovation and value, aligned with consumer trends.
In Asia Pacific, volume was soft 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. 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.
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 base business is strengthening across major markets and core categories. We have several 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.
To wrap up, let me share three key points. The long term trends that fuel our categories consumer interest in healthy flavorful cooking, flavor exploration and trusted brands continue to be strong; and importantly, consumer interest in cooking remains strong. We are dedicated to accelerating our volume trends. We refine and adapt our plans as needed and are prioritizing our investments to drive impactful results, and return to sustainable volume led growth. You should continue to expect improvement as we close the 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 over to Mike.
