McCormick & Company, Incorporated (MKC) Earnings Call Transcript & Summary

All right. Welcome. I hope you all had a good break. Thanks for joining us. For the next session, we have McCormick & Company joining us. And we're thrilled to have with us during the session Lawrence Kurzius, who's Chairman and Chief Executive Officer; as well as Mike Smith, McCormick's CFO; and Brendan Foley McCormick Chef Operating Officer. We're going to run the session that Lawrence is going to open up with a 10, 11, 12 minutes of prepared remarks, and then we'll use the balance of the time for Q&A. I would just like to point out that McCormick is in their quiet period currently, so we'll be unable to take questions from the audience during the session, and McCormick is also for that reason, not holding meetings at the conference. So this will be the 1 opportunity to hear from them. We're looking forward to it. And with that, I'm going to hand it over to Lawrence for him to open up.

Thank you, Steve. Thank you, Steve, for the opportunity to participate today. And thank you, those of you who are joining us in person. It's a nice intimate group and also those of you who are listening into the audio broadcast and rebroadcast. Please take note of our safe harbor statement in today's presentation. As you know, some of today's remarks will include forward-looking statements and non-GAAP financial measures. McCormick is end-to-end flavor with an overarching focus on growth. We're differentiated by our global growth platform and the results we have achieved, and are confident in the long-term trajectory of our business. Today, I hope to leave you with a greater understanding of McCormick, and importantly, that you take away we're driving growth, we're focused on the future, and we're continuously adding value. McCormick is a global leader in flavor, operating in 2 segments: Consumer and Flavor Solutions, providing flavor and inspiring healthy choices across the globe. Our Consumer segment has leading brand shares in our key categories in many markets around the world. We have brands in nearly 170 countries and territories and sell products at every price point, ranging from premium brands to private label. Our Flavor Solutions segment is a culinary-inspired flavor business with a deep understanding of consumer flavor experiences created from real food and natural ingredients, and underpinned by leading technology that develops consumer-preferred flavor solutions for our customers. The breadth and reach of our global flavor portfolio ideally positions us to fully meet the growing demand for flavor around the world and drive continued differentiated growth. Our compelling offerings in our 2 segments for every retail and customer strategy across all channels create a balanced and diversified portfolio to drive growth and consistency in performance over time. It also gives us flexibility to adapt to changing conditions and continue our growth trajectory. We are guided by a commitment to providing our customers and consumers with the highest quality flavor products and solutions with the responsibility to people and the world around us. Our purpose-led performance program reflects the integration of purpose into everything we do from driving top-tier financial results to positively impacting the society in which we live. We continue to be differentiated by our industry-leading growth objectives, comparing our long-term constant currency objectives to our packaged food peers. McCormick is best-in-class for both sales and adjusted earnings per share growth. We're focused on growing long-term sustainable value for both our business and our world. Given there is variability in both our business and the global environment, we evaluate our business performance against our long-term constant currency objectives over several years. Our constant currency performance over the last 10- and 5-year periods ending with 2021 has been outstanding. This growth reflects strong base business performance, as well as contributions from acquisitions and strategic investments such as in-brand marketing and our supply chain. Our compounded annual growth rate for each period highlights the resiliency of our business through a variety of market conditions over the years and our solid track record of meeting or exceeding our long-term objectives. We have a balanced approach to capital allocation. Our priorities are to fund investments to drive growth, both organically and through acquisitions to return a significant portion to shareholders and maintain a strong balance sheet. The strategic investments we have made in both our Consumer and Flavor Solutions segments over the past 5 years have driven the outstanding sales and profit growth I've just reviewed. We continue to use our strong cash flow to grow our dividend, and are proud to be a dividend aristocrat, and our balance sheet is strong. Since 2016, we have increased cash flow, in fact, we've converted 95% of our net income into free cash flow and our return on invested capital currently exceeds our weighted average cost of capital in this market by more than 2x. The successful execution of our strategies has generated a 5-year total shareholder return of 14% as of the end of May. This exceeds the average return for the broader market as well as our flavor house and food peers. Our commitment to ESG is embedded in our overall business strategy and integrated into our daily decision-making. We believe that delivering industry-leading financial performance while doing what's right are not mutually exclusive. They complement each other. We have laid out a series of commitments and clear performance targets for 2025 in accordance with the United Nations Sustainable Development Goals, including our climate commitment goals to achieve a 1.5-degree Celsius greenhouse gas emission reduction by 2030 and a net 0 carbon emission by 2050. We continue to be recognized as a leader in this area, named by Corporate Knights in their 2022 Global 100 Most Sustainable Corporations Index as the #1 most sustainable corporation in the food product sector and #14 overall. We've also been named a DiversityInc Top 50 Company and a United Nations Global Compact Lead Company and awarded the inaugural 2021 Terra Carta Seal for sustainability leadership in our industry. Now turning to our strategies, which are designed to build long-term shareholder value, I'd like to focus on the continued execution of our growth imperatives. We plan to drive undisputed leadership as spices and seasonings accelerate our condiment and flavors global platforms, particularly in areas where we have scale and fuel our growth in emerging markets and channels as well as an on-trend, fast-growing platforms. We plan to strengthen our connection with the consumer, especially through digital, e-commerce and social media, as well as drive growth through differentiated engagement and technology with our flavor solutions customers. Our effective growth strategies as well as our robust operating momentum bolster our confidence in our ability to continue on our long-term growth trajectory. In our consumer segment, through the effective execution of our growth strategies we're driving our momentum by accelerating consumer flavor usage, building confidence in the kitchen and inspiring flavor exploration, including delivering on the global demand for heat and health and wellness. We are strengthening our consumer relationships at every point of purchase. Our brand marketing, new product and category management initiatives are fueling our growth and driving undisputed leadership in our core categories. In our Flavor Solutions segment, we're driving our global leadership by targeting opportunities in attractive, high-growth end market applications and migrating our portfolio to the more technically insulated and value-added flavors product category. Additionally, we're leveraging our broad technology platform to develop clean label, organic and better-for-you solutions that taste great and are expanding our mid-tier customer base, as well as strengthening our leadership in heat. With our culinary inspired innovation and our passion for creating a flawless customer experience, we're accelerating our Flavor Solutions segment growth. In addition to our growth strategies which we've just described, our strategic road map also reflects our steadfast focus on performance and people. Our strategic imperatives underpinned by our McCormick principles are designed to build long-term value for our shareholders as they have throughout our history. Through our strong execution of these imperatives, we have grown and compounded that growth successfully over the years. While we maintain a longer-term mindset and most of today's discussion is longer term, I want to recognize the challenges in the current global environment, which we mentioned during our March earnings call, and which have intensified as our second quarter progressed. Consistent with the rest of the industry, cost inflation and supply chain are continuing challenges. To partially offset cost pressures, we've taken multiple pricing actions, and as we shared in March, we are raising prices again. Inflation has continued to escalate, and we've adjusted our upcoming pricing actions accordingly. While we plan to fully offset cost pressures over time, it is usual to have a lag associated with pricing, and as such, the recent acceleration further weights our 2022 profit to the second half of our fiscal year. In China, there's been a significant unanticipated disruption in consumption and the supply chain due to severe COVID-related lockdowns in cities in which we operate. For perspective, China is our second biggest sales country with operations in Shanghai, Guangzhou and Wuhan, and over half of our business in China relates to away-from-home consumption. In mid-March, we suspended operations in Russia, and our operations in Ukraine were paused to focus on the safety of our employees and their families. These countries account for less than 1% of our overall business. Our second quarter results were impacted by the status of our operations, and we continue to monitor the situation in these countries very closely and adapt accordingly. And the U.S. dollar has strengthened versus several currencies over the last several months, which has created an additional currency headwind. We're continually assessing the dynamics of these external challenges as they evolve. While we have experienced some impact from them, we expect it to partially mitigate later in the year. Importantly, we have a demonstrated history of successfully managing through a volatile environment and using pricing and other levers such as revenue management initiatives, CCI-led cost savings and reducing discretionary spend where possible to offset cost pressures. Our long-term fundamentals that drove our top-tier historical performance remained strong, and our experienced leaders are executing on our proven strategies while adapting to challenges accordingly. We continue to work through the current challenges while keeping our focus on the long-term goals, strategies and values that have made us so successful. To conclude our prepared remarks, with our relentless focus on growth, performance and people, we've driven strong operating performance. The breadth and reach of our portfolio and the successful execution of our strategies give us confidence in driving long-term sustainable growth and our ability to navigate challenging environments. We're confident we are well positioned for continued success delivering differentiated results and driving long-term shareholder value. And now, Steve, I'm looking forward, along with Brendan Foley and Mike Smith, to answering some questions.

All right. Great. Thank you. So maybe just take us off. As you alluded to, McCormick occupies a unique place, the landscape of both food and flavor companies given the leading consumer portfolio as well as a very successful flavor franchise. I guess just can you expand a little bit on how that combination differentiates McCormick in a world seeking the flavor along your lines?

Right, well, first of all, we are what we call end-to-end flavor. And what that means is whether it is the consumer using flavoring products in the home to prepare meals, or the restaurateur in the back of house, front of house or for takeaway, or for complex flavor solutions for the food, beverage, performance nutrition and health industries. We are there anywhere that flavor matters. And that gives us a -- we think that, that tremendous breadth of offer and participation in every retail channel and customer strategy gives us a distinct advantage. We've chosen to be in categories within flavor also that are experiencing strong category growth, so we can benefit from the tailwind of that category growth. Our most legacy categories, herbs, spices and seasonings, have a strong growth trend globally as a category. And our areas of additional focus in condiments, particularly with hot sauce, where we've done some -- we've really entered the business with the acquisition of Frank's, and then have built on it with the acquisition of Cholula recently that puts us into a very growth oriented, highly branded and differentiated category that benefits both of our segments. And then our effort to migrate our portfolio in flavor solutions more and more to the flavor end of the business and away from what people have -- often think as our legacy portfolio also is supportive of growth. The 2 segments together give us enormous scale because there are great synergies between those segments. We source over 15,000 raw materials from over 80 countries globally. And both of the segments share that global sourcing organization that we believe is a competitive advantage and sourcing of these raw materials is definitely a challenge and we're well positioned to do it. In many cases, we have generation long partnerships and sources of origin that give us an advantage there. In our supply chain, our manufacturing facilities tend to produce for both segments as well. And so we get a scale benefit from having the 2 segments. A bit of a hidden scale benefit is that we also get insights from the consumer in both of those segments that we can apply back and forth across our business. We develop our own insights with proprietary research with consumers for our brands. We benefit from the experience and insights that we get through the restaurant industry where a lot of cutting-edge trends and flavor tend to emerge. And we also get the benefit of consumer insights that are developed by our flavor solutions clients. And so we're really at the center where all of those insights come together, which we think gives us a privileged view into the consumer, a well-informed view into the consumer and really an advantaged view into the consumer. So, all of those to work together, I think, to create a differentiated advantage for McCormick. A competitive moat doesn't come from any one advantage. It comes from a system of advantages that work together. And I think that these 2 segments show that we have a real system of advantages.

As you think about the contribution of each of the segments to future growth, profitability, cash generation, is there a way to conceptualize that?

Yes, sure. So first of all, again, we're talking about flavor. There's a growing demand for flavor globally, and that growth in demand for flavor is at the foundation of growth in both of those segments. But ultimately, it's the same consumer, whether that's a consumer for our brands, or a consumer for the brands of our flavor solutions clients. Long term, we expect both of these segments to contribute equally to our long-term growth output. That's a long term. In the short term, of course, there are going to be variances. We've just been through a period of time where there was extraordinary growth in the consumer segment, driven by consumers' needs and behaviors over the last couple of years. And most recently, we're experiencing extraordinary growth on the flavored solutions side of the business, really driven by food service and reopening of food away from home. But over time, we would expect both of these to contribute proper.

I'd point out, too, when Lawrence showed that our long-term guidance and what we've done in the last 5 or 10 years, both segments met our long-term algorithm. So we expect both of them to deliver those too.

On the at home side, as you mentioned, a large number of tailwinds benefited that portion of the business the last several years. Which of those do you expect can endure? And how are you positioning the portfolio for that?

Brendan, why don't I let you take that.

Well, the ever increasing demand for flavor has really been the foundation. As Lawrence has just called out for our growth. And what we see is that demand for healthy and flavorful scratch cooking is certainly present. Consumers are being more intentional and purpose-minded in the choices that they make. It certainly trust brands and there's a lot of digital engagement. And all of that are really trends that were before the pandemic and they remain true today. So I think that is a backdrop I would provide. Embedded in that is the younger consumer and their desire for older and spicier flavors is also a big aspect of that for us. We see that play out even in our categories, the categories which we've chosen to be in, whether they be part of our legacy portfolio or new categories that we've entered into. You see in herbs and spices. It's especially true though in hot sauce. The younger you are the more you're consuming hot sauces and spicier flavors. So those are things that underpin, I think in the future, if I just unpack a couple of them. We capitalize on the long-term trends that we see, the consumer definitely is cooking more at home. And we're doing a lot of proprietary research, and we're doing waves upon waves of these. And they keep coming back to the same answer, which is consumers still plan to maintain or increase, like they're cooking at home like now. And we didn't see that play out in the last several months. It still remains pretty solid and true and they're enjoying cooking at home. Their time with their families. They're getting a lot of enjoyment out of it. I would even say we're seeing a lot of increased confidence with consumers cooking at home. I mean I think 1 of the stats that we have is at least 60% of said, have become more confident cooking at home. And so that is a great, I think, underpinning also from a trend perspective.

And then jumping I think, over to the digital engagement that I see, we continue to see that really pushing forward -- the way we've been sort of activating on that is really a lot through our content and our content really resonates with consumers. And in fact, we think we're also helping to drive that confidence in the kitchen with a lot of our communication because people really do enjoy being -- cooking for the families and really operating out of the home this way. And so that's been something that we've relied upon, I think, in the future, that will continue this for our growth. As part of that, we're really driving a ton of communication. We're having a lot of breakthrough performance on earned impressions, search. Just our advertising is delivering a terrific ROI. And so we continue to see a lot of support there, too. And we're seeing also a lot of success in e-commerce. That continues to be a very strong long-term trend. Over the last 3 years, we've seen our e-commerce certainly grow quite a bit, over 170%, and it's contributed at least 20% of our branded consumer segment growth. I spoke about hot sauce. And on that, that is definitely and certainly an important trend. And I think what's important to kind of note is not only is it the fastest-growing condiment today, it's projected to be the fastest growing condiment in the future. And so that gives us a lot of enthusiasm for the category there. It over indexes with Generation Z and millennials. Our brands also over-indexed with those groups. -- overall. Cholula, which is a new brand that is part of our portfolio right now. It allows us to expand participation in the Mexican cuisine area. It's a very authentic flavor. It's #2 in the category right now behind Frank's RedHot, another one of our brands. And so we see a lot of benefit from that. And so hot sauce is definitely part of our thinking in the future too overall. And part of that also, I think we have to almost point out is there's a lot of health and wellness benefits also with this category and a lot of our products to provide too, a lot of health and wellness sort of benefits from the standpoint of cooking at home, 0 calories, fat, sugar and so that's a great platform to be in, I think, long term. It also kind of carries over into our Flavor Solutions business. Our customers right now are seeking for more heat and spicy and also more health and wellness attributes in their portfolio. And so we have the ability to kind of certainly provide those solutions to our customers. I think last year over 40% of our new product introductions for our customers in Flavor Solutions, were just hot and spicy. So you can see that trend carry through with our customers also. And then we're developing clean flavor organic, better-for-you options also for those customers, too. I'll just wrap up. Our priorities are really about global flavor end-to-end -- and it's really supported by the strategies that you saw in the presentation, undisputed leadership in herbs and spices and also accelerating our platforms globally in condiments and flavors.

So on the Flavor Solutions side, Lawrence, maybe this is, maybe Mike can chime in here. But -- you said you want to be the #1 -- sorry, #3, flavor house. I guess what would take to get there? I'm assuming it requires some degree of investment, how much of that can be self-funded. So for Mike, what is -- what are the implications of -- from a margin perspective, of that endeavor to be #3.

Yes, let me start I'll start this one. So first of all, our Flavor Solutions segment also does include a lot of foodservice and includes some legacy business. I think your question is about the flavor part of it. And that's what I'm going to focus on. And we're already, first of all, one of the leading flavor houses. I think this is something that's underappreciated by investors. I want to get asked the question when the investors not realize is out McCormick, the fact that we're one of the leaders in this space already sometimes is a surprise. If you look at our flavor house peers and you strip out the other ingredients, the fragrances, and you look at us and take out that foodservice and some other unrelated businesses, there is a clear #1 and 2 in the industry. With the recent M&A, there's going to be a clear number #3 as well. But right now, that #3 position is very tightly shared by a number of companies, including McCormick in that group. And this is a business in which we have been competing and winning successfully and driving a tremendous amount of organic growth and in which we've also augmented that organic growth. with some acquisitions, the most recent one being FONA, which gives ourself additional growth, a lot of new capabilities in North America. And then prior to that, Giotti in Italy here that gave us a lot of capabilities here that support natural extractives, beverage and so on. And we've been growing in. Our strength there is, of course, we're huge in snacks and seasoning flavor and application. But we also are having tremendous growth in beverage, particularly alcoholic beverage and in performance nutrition products as well. I think that there are some real differentiators for us. There's some of the scale and insight advantages that I talked about earlier, where we have a lot of insights that we can bring to our Flavor Solutions clients. But in addition to that, I think it's our, first, our basic perspective on coming to the problems. We think -- we come from a perspective of food, a long heritage in food and culinary, in natural ingredients. Most of our peers come from specialty chemicals and perfumers. They just approach problems from a different perspective. And that different perspective often makes us a winner when we're on our clients' flavor supplier list. The other thing is that all we think about is flavor. Our top talent is working on flavor. 100% of the time. I know that others are focused on providing so-called complete solutions. Our clients are asking us for great flavors. We are happy to partner with experts in color, texture, protein to work to create a full product for the customer. But what they look to us for are great flavors. That's what our talent wakes up thinking about every day. They are not dreaming of how they can get on that perfume business and go to the opera with the clients. They're really trying to think of ways in which they can make food and beverage taste great. Mike, you want to comment on the margin?

I worry about finance. So you could ask about margins. And we've been on a great journey in the last 6 or 7 years. since we've been leading the business. Our margins in the Flavor Solutions segment are up 300 basis points in the 6 years ended 2021. Yes, so we've done that and we've talked about migrating the portfolio to more of those flavors and seasonings type technically insulated products. branded foodservice is high margin. We've made acquisitions like Cholula, Frank's RedHot, that's helped us there, too. we've done it both organically and through acquisitions. I think to your point, these acquisitions we made Brand Aromatics a couple of years before that to labor House in the U.S. So we've shown we can do that. Along the way, we've actually been pulling or pruning part of our business too, away from some of those commoditized type things, bulk spices, herbs, things like that, coatings that are lower margin. And then we have a long-standing cost-out program, CCI, we call it, as Lawrence mentioned it. We started it in 2009 and its year-on-year taken out costs. We upped the level of cost reduction in about 2016, and that helps fuel our growth in margins, both in the Consumer and the Flavored Solutions side. Now short term, there hasn't been a little bit of a dip because if you think about 2022 with the rapid cost inflation, and we've priced to match the cost. We don't margin up. So there's a natural dilution on the numerator and denominator happened. We said at the beginning of the year about 250 basis point natural dilution across the whole business. And there is a little bit of a lag this year, but we're committed to offsetting those costs over time, both Consumer and Flavor solutions.

Okay. I guess -- so we have about 10 minutes left. So I just want to prioritize here. So you talked about inflation and some of the pressures that you're navigating currently. From a consumer demand, consumer trends, consumer behavior standpoint, what are you seeing in the market today? Maybe I don't know, Lawrence or Brendan. And I'm particularly interested if you've seen any change in behavior in recent -- year-to-date basically in recent months as we think about the balance of the year, markets obviously concerned about waning consumer demand globally and how that -- and for you, how that may impact your business as we go forward.

Certainly. Well, as I mentioned earlier, we continue to see the consumer sustaining cooking at home, and that's -- it's certainly something that we're seeing through the trends and overall. And it goes back to, again, that increased level of confidence in the kitchen, we see them really enjoying that far more often. And so these are things that I think we rely on. But they're also finding it more economical too overall. And we still see strong consumer spending right now. That's certainly coming through. But at the same time, we know there's significant concerns from the consumer out there on inflation. And so we're going to continue the long-term watch. And obviously, we're doing a lot of our proprietary research to make sure that we're on top of this to see if there are any changing behaviors that happen over time right now. But that's what we're seeing in the marketplace at this moment. So strong consumer spending. Having said all of that though, I think we always talk about our portfolio as being appealing to really all consumers, especially those who are price conscious. And so we have a portfolio that can accommodate that. And that could be coming through smaller sizes and also open price points across our branded portfolio. We also offer [indiscernible] a lot of growth in large sizes that offer more value. That's coming through as well. And we also offer private label for our customers, and we're making those for our customers as well. And so as you take a look at all of that, we believe we have an offering that will appeal to the consumer depending on whatever economic environment we're going to be in. During recessionary times McCormick has done well with the consumer because they continue to eat more at home. And so we performed well during those periods of time. But I go back to we're watching this period of time closely to see if there are any changes to that happen.

Got it. And maybe a question for Mike, and then a kind of a follow on for Lawrence. Just like from -- on the pressures that you alluded to in the cost supply chain and the gap on pricing, I don't know if there are other mitigating factors, other mitigating initiatives you can put in place from a productivity standpoint, but given the opportunity to elaborate on that.

I mean, CCI mentioned before, and in that initiative, we look at all levers on the P&L, cost of goods sold, supply chain for McCormick. But also SG&A, really tightening our belt there. Even the things like A&P. How can we get more efficient in A&P? And we've done a good job in global contracts and things like that, squeezing money everywhere. Revenue management, and Brendan came to McCormick about 8 or 9 years ago, and I think he was really a thought leader on really upping our investment in revenue management. And we added tools, we added people, which is a really, really important thing. It's a talent pool that's really hard to get in the industry. So those type of things working with customers, get the right price points, things like that. We've done a really good job.

And category management in our categories, we're really almost -- we're the only ones with the scale actually to be able to provide those services to the retailer, which is a real advantage.

What we've seen when we bought Frank's and French's, we were able to bring that to the table to that portfolio to really drive volume there.

And Steve, on supply chain, it seems like peak disruption earlier this last year. for us, at least peak disruption, I'd say it was third quarter. The disruptions -- I mean, every month, it gets a little bit better. So there's no watershed moment when it's all fixed. And there are some still discrete areas where acting material and transportation or even where still extraordinary demand pressed up against our capacity is a challenge. But those are much more discrete rather than the general disruption that we felt like we were experiencing third quarter, even the ability to hire people is much better today. To your point, cost inflation as we talked about gas prices, things like that. And there is a natural lag between -- we buy 15,000 items that those lines. It takes a lot of analysis to get that to the consumer. Some of those can't be hedged. So inventory is up a little bit.

Yes. So, how does the team make decisions against all this volatility? And has that evolved during the pandemic?

That's a great -- so on that -- first of all, this leadership team has worked together now for 7 years. And we overlapped with the previous leadership team so there's been great continuity. We know how to work together, and I think that you can't underestimate that the benefit of that chemistry. We do have a structure that we launched called INNOVATE.ALL. It's growth behaviors, I won't tell in the interest of time, I'll keep that short, but we've been training with over 700 managers in the company on things like making faster decisions and rebalancing resources in a dynamic environment using the whole McCormick brain. And our leadership group has a cadence of meetings where we can get information together and make fast decisions about execution. We meet weekly where we hear comp leadership together and the meeting is focused on what do we need to execute on our strategies over the next 90 days. It's that short term to keep a very real time, while that service well through the COVID crisis and continues to do so. And then we also have a monthly cadence of management meetings where we look at longer-term projects, strategy and so forth. And then quarterly, we do a deep dive with the regional business leaders of all of our businesses around the world. That's a good balance short term, long term.

Yes. And on the long term, you mentioned things like sustainability, which is clearly important to the company, the short-term, long-term priority. But it's something that I think can be pushed off potentially as people focus on the short term. So just a little bit of color on that.

No, it's really embedded in the business. And so our sustainability effort started before ESG has become a buzzword and we really launched a formalization of our sustainability program in 2016. But the roots of it are in what's material to our business. The efforts that we've undertaken in carbon reduction have actually turned out to be cost saving measures as well. A lot of the sustainable energy that we put in place a few years ago that it seems like it was expensive, suddenly it looks cheap. The work that we do with farmers contributes directly to our ability to source straight from the source, eliminate middlemen and all of the cost quality disruption that comes from that give us better traceability. And we also are working to develop good agricultural practices and alternative sourcing areas in the world to support the long-term availability of the very iconic ingredients that go into our products that are often growing in areas of the world that are quite sensitive to either climate or social change. We have a program called Grown4Good, where we work with over 23,000 farmers on good agricultural practices, it's technology-enabled. Many of these places, you may not have electricity every day, but everybody's got a cell phone, because they're an app, we can deliver them real-time information on what they should be doing in their fields today. Our goal is to get 35,000 up. When I say farmers, these are not big agro businesses like you think in the West. These are smallholder, often family-owned, women-owned businesses. And on climate, which is just foundational. We've got a lot of great sustainable energy projects that I will not describe right now because the tick or tell, we've got 1 minute.

Yes. So we do have 1 minute left. So let me ask one. So I guess given everything we talked about, right, and all the volatility we're facing. When you think about your long-term algorithm and the building blocks that you've historically thought that lead to that long-term algorithm, are they changing at all?

Just like our strategy did not change toward the pandemic and, frankly, served us well. These long-term algorithms really has been in place for almost 2 decades and has been through 3 management teams at this point. 4% to 6% net sales growth from a broad-based portfolio, 1/3 of that from base business growth, further household penetration further usage, 1/3 through innovation and 1/3 bolt-on M&A. That should drop down 7% to 9% operating profit growth. You have some CCI savings, you invest in A&P, you get about a 40 basis point a year OP margin growth. Then you get some leverage below there to get to 9% to 11% EPS. As Lawrence showed, we've met those over the 5 and 10 years. We've also generated large amounts of cash which speaks to capital allocation, and we've been really driving paying down debt as we bought Cholula, FONA over the last year or 2, which is really focused on dividend the risk that we're really proud of everything else goes in the growth, whether it's capital projects like the U.K. plant we talked about, which is just net 0 to M&A.

And long-term focus on growth. If orders happen quarters that long term, we're going to be here a long time. And we believe we can grow, compound that growth, and continue to do so as we have in the past.

So the answer is yes, steady as a tiller through the storm, McCormick. Broad-based, perfect. Thank you very much.

Thanks, Steve. Thank you, all, for your attention.