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

We will kick off our next fireside chat. So welcome back, everyone, to our fireside chat with McCormick & Company. With me today are CEO, Brendan Foley; and CFO, Mike Smith. Just a reminder, McCormick will not be doing a breakout as the company is in its quiet period. Welcome, gentlemen. Truly great to be back with you both here in Boston. Brendan, also congratulations on recently becoming CEO of McCormick. I know McCormick prides itself on leadership development, succession planning. I know the Board takes a very thoughtful and deliberate approach in thinking about succession over a multiyear time frame, proof of which can be seen in you having been named President last year. So we appreciate you being here.

Great.

Maybe to start off, Brendan, you've been in McCormick for almost a decade, but it's really been, I think, less than 10 days since you've taken on the CEO role. Can you give us a sense of how you're approaching the opportunity, where you're currently spending your time and sort of what you're most focused on?

Thank you, Andrew, for the introduction. And just to sort of first start off, I'm really honored and humbled to be leading what is a great company. I have been at McCormick almost a decade and part of the management committee since 2015. And I've worked really closely with both Lawrence and Mike, really shaping our strategies, the decisions that we've made across the business that kind of lead us sort of over the last couple of -- sort of last decade of performance has really been quite strong. And so you should see, in my opinion, just a real streamline -- seamless streamline into sort of this next period of time for McCormick. What you will see, and I think this is kind of important to really lay out is a measure of consistency in who we are and how we go about things. Our strategic pillars remain the same. They're about growth, performance and people, and we'll remain a global leader in flavor. That's our focus is the flavor segment categories, et cetera. And we're also continuing to invest in and support the 2 segments we operate in, which is both Consumer and Flavor Solutions. We'll continue to capitalize on the right opportunities out there, especially with regard to staying consistent with consumer trends overall. We'll also remain very disciplined from the standpoint of long-term financial performance and discipline in our capital allocation overall. I also want to reinforce McCormick's objectives -- long-term objectives are going to remain the same. And just to remind everyone what that is, is on the top line, it's 4% to 6% in net sales, dropping down to operating profit of 7% to 9% operating profit growth. And then it will drop down with some leverage into earnings per share growth of 9% to 11%. And compared to most CPG and flavor company peers, it's best-in-class performance, and those remain still our long-term objectives. I'm really passionate about our 2 segments, both Consumer and Flavor Solutions. This is what really differentiates McCormick out in the marketplace and what really gives us that competitive advantage in the industry. It's our scale, our insights, our technology. What we've seen, and I've seen this firsthand, just over time, it creates meaningful difference and competitive advantage, I think, for us out there in the marketplace. The key areas that I'm going to focus on moving forward are I think, really important as we go into this next period of time. The first is we're going to continue to focus on expanding our system of competitive advantage, and I'll probably get a chance to tell you more about that later today. But that's going to be an important element, is we keep building that competitive moat on our business. The second is, is that we need to strengthen our global leadership in our core categories. And that's going to be an important priority, especially as we look to drive both volume and market share growth. That impacts our Consumer business. We drive it with more innovation and renovation and even more continued sort of best-in-class levels of brand advertising and category management. But it'll also extend over to our flavor business, too, is we really increase our scale at the global level to compete as a top flavor house overall. And you'll kind of see us talk a little bit more about heat. Maybe we'll get the chance to talk about that today. The other things that I would say is we're going to also focus a lot on accelerating our own digital transformation. This is a great opportunity for us to just operate even more effectively, operationally, get our work done faster, et cetera, but that's going to be important priority as we look ahead. And then 2 other things just to wrap it up, that would be driving profitable growth and continuing to drive even higher returns from our investments. And then lastly, it kind of really is all foundationally about people. And so we're going to lean into what is our strength and that is our culture, to really build that next generation of leaders behind Mike and myself and also capabilities as we look ahead. But I'm really excited and confident about sort of the long-term outlook on McCormick. It's been strong for the last decade. I continue to expect it will be and moving forward in the next. That's really because we're going to continue to kind of be consistent with the things that are working for us and also add these new areas of focus.

Great. So McCormick started '23 with strong results following a more difficult 2022. I guess were there any fundamental changes entering the year? How do you feel the business is performing overall at this point, including where you stand in your recovery in China?

I'll take that, Andrew, and thanks for having us again.

Sure.

What a difference a year makes.

That's for sure. In many ways.

Yes, in many ways. You're right. We're really happy with our strong start to this year. From a fundamentals perspective, as Brendan has just laid out, really no major changes. If anything, during COVID and during last year, we really reinvested in the capabilities in our brands. We didn't cut costs like that. We -- for growth investments, we wanted to keep driving those because we know that pays off in the end. But what we did do is really kind of double down on cost. And we -- as we talked last year at the conference, we identified -- during COVID, we added a good chunk of supply chain cost to service our customers, and we went through a systematic way to attack that. You heard us talk about the Global Operating Effectiveness initiative, where we identified $125 million of cost, both in our supply chain, but also our SG&A optimization. This really helped us get off to a great start in 2023. We also implemented our pricing, as we said. We were -- we have low to mid-double-digit inflation this year. We took pricing to address that and also caught up with the cost inflation, which was near 20% last year. So really, a lot of changes in the environment there. So we really have had a good first half, strong sales growth, margin expansion, which we really like. We're only 5 days into the fourth quarter now, so we're reporting results in a couple of weeks. But as you've seen from scanner data, our U.S. Consumer business continues to have solid results in the categories we're in. Europe continues to be very strong for us, which is great. China, as you've read in the headlines, continues to have a softer recovery than most people, including us, have expected. However, we've been in China for 40-plus years and are really bullish long term on there, has scale over there. It's a very profitable country for us also. But no change in fundamental strategy, really focused on profit utilization and cash.

Yes. Great. Maybe we can dive into Consumer a bit in terms of consumer behavior anyway, especially in the Americas and what you're seeing and expecting in terms of volume trends and when we should expect a return to positive volume growth.

Well, I'll make a number of comments here, and Mike, jump in if you have anything to add. First speaking, just broadly in terms of what we're seeing, we still see a very pressured, financially stretched consumer. And in many ways, they're really driving towards value in a lot of their decisions across the store. But we're also seeing, though, at the same time, just an elevated element of cooking at home. It's still there compared to pre-pandemic levels. It's really driven by a lot of positive healthy things, whether people are just trying to eat healthier and cook with more -- healthy, flavorful cooking, we're seeing still a lot of that. And overall, I would say that those attitudes remain really positive. What's interesting though is over the course of the last 4 years, people have indicated they actually have more fun cooking right now. And I think part of it is because they just learned new skills, and they're finding new ways of doing this at home. So that's been great. And then we'll also talk about, while we don't call it a trend, it's more of like a flavor profile, we see more and more acceleration in spicy and hot foods. And so that's kind of broadly how we might look at sort of consumer trends. Now though, more specifically, if you think about from a macro level across center-of-store categories, you are definitely seeing still declines in unit volume. And they've been going on for some time, and that's inclusive of private label. And our research and all of the insights -- and we do this every quarter, we're doing sort of omnibus surveys with our consumers, what you see is definitely consumers are making more trips to the store, but they're buying less categories per trip. And you see it happen out there. And they're buying mostly what they need. It's a lot less stocking up than what you would have seen in the past, especially compared to last 2 years. And in some numbers, I've seen it's down quite a bit overall. And the other dynamic that we're seeing is there are just pure items in consumers' pantries overall. And so that's kind of the condition and the behaviors that we see just from a purchasing standpoint. But the consumers are favoring those categories which really expand a meal, sort of stretch that dollar and also for a lower cost per serving. And so this is what we're seeing, I think, from sort of across a lot of center-of-store categories. As it relates though to McCormick and the categories we compete in, we think we really benefit, and we're advantaged in this regard overall. Our categories tend to really benefit because this is what consumers use to really -- they're not going to sacrifice on flavor, but they do want to expand that meal, but do want to do it for a lower cost. And McCormick has a real advantage here in terms of delivering that flavor and those brands that consumers seek and also do it for pennies per serving. So we really think we have a real value message, that we've been driving quite a lot in the last year, and we think it's resonating. And you see that overall in category performance. Now moving specifically to our own performance, what you'll see is that just in this last quarter since we reported, I think it's the second quarter, we continue to see on a consumption basis sequential improvement in dollars, units, volume and also TDPs. And so we really believe this is a function of just a lot of our strategies and our brand marketing and our category management taking a real effect out there on the shelves. And also in our spices and extracts part of our business, which tends to get a lot of attention from everyone, we're seeing the same sequential improvement overall. Just back up to like unit volume just across our category or a portfolio or even just in spices and extracts, we're just seeing it continue to improve quarter-to-quarter overall. And so that's something that we really are pretty happy about in terms of the...

Like we said on the quarter call, we still believe that we're going to have sequential improvement in volume. We think in the second half, plus 1% to minus 1% overall, not a material difference between the segments, but we still feel good about that.

Yes. What we also see, as many of you know, we launched a lot of new packaging around our core line. It is starting to flow through on shelf. We're starting to see that. What's great is we're already starting to see velocities increase where it is. And that's before we turned on national advertising, which actually just started in August. So we're liking what we're seeing in the early indicators in terms of the performance of that package or what we thought. We've also launched this new Lawry's line in the spices and extracts. And as we continue to build out distribution, this even includes the discount channel. Every place it goes into, we start to see unit and share growth coming from that. And so we're really encouraged, I think, by the performance of that in this context of that pressured consumer. And so we like how that's performing. And I would say overall, we're really happy with our innovation and how it's performing on shelf right now. We talked about doing more innovation than we did in the prior year, and we're seeing the benefit of that overall. Overall, I would say is those accounts that are executing, both our category management plans as well as our innovation, are seeing better trends than even we are at a national level. So it gives us real encouragement and we're happy with that overall. And just like Mike said, we do expect our volume trends in the second half to be improved versus the first half. And I would say we're happy with those trends overall. We believe they reflect what is advantaged categories. But also, it's about our execution in the marketplace, brand marketing, category management, innovation, all those levers are really working in the right direction. So we feel like we're moving in the right direction overall.

McCormick is bringing the heat, so to speak, by building a global heat platform that really spans across both segments. I guess what unique advantages do you have to win in heat? How will it support your long-term growth objectives?

This is a lot of fun to talk about. First of all, it's really -- heat is more than just hot sauce for us. And if I would ask you to take one thing away today, that would probably be it. But it's also a growth accelerator in our entire portfolio, both in Consumer and also in Flavor Solutions. Another way to think about heat is it's another reason to believe in our long-term algorithm, because it really does drive that increased growth rate. It's also -- we're not looking at it as a trend, it's a flavor profile. And it's really driving accelerated trends, obviously, in categories that are exclusively defined by heat like hot sauce. But even in categories like spices and seasonings, where you see an item that's defined, let's say, by heat like red pepper flakes or something like that, it's also growing at an accelerated rate, too. So we see that in more than just one category overall. And across the store, what you'll see is that over the last 3 years, we've kind of done a lot of research around this is that spicy edible units are going 10x faster in center-of-store categories than non-spicy. So it isn't just a fad. This thing's been going on for a while and something that we've been focused on for well over a decade. Now we have meaningful expertise in heat. And it stretches everything from our global sourcing to supply chain and manufacturing to R&D technology. And just to illustrate with an example, I'll kind of jump to maybe a sort of part of our Flavor Solutions business. We have a technology called FlavorCell and it allows us to sort of do this controlled release from an encapsulation standpoint. And we're able to time and deliver flavor and heat based on when the customer wants it to come through in their product. And so we're able to really apply not only just, I think, the science of technology, but directly to what customers are coming to us for. And we tend to get a lot of [ briefs ] when it comes to heat. We also had strong performance overall in this part of our business. What I would tell you is that when we take a look at that which we're defining as heat across our portfolio, it's growing 3x faster in those categories or those products that we would call nonheat overall. So you see an accelerated growth rate. And the other thing is it's really stretching across both segments. We've estimated around 20% of our total net sales are really derived with something that's kind of influenced by heat, and only half of that is hot sauce. So it really kind of gives you kind of the breadth of our portfolio that's really influenced by heat is more than just something that would seem, obviously, incredibly obvious. And what we're also seeing is just even over the last 3 years, whether it's in our Consumer segment or in our Flavor Solutions segment, we've been driving about a 12% compound annual growth rate just from heat overall. So it has a real, I think, significant impact as we're looking forward to the future, and it's a tailwind for us. And this will only continue to -- sort of continue driving growth because it is really being driven by younger generations. We believe these are categories with a tailwind for us, and we just plan to continue to execute against it. And I would tell you that I'm really energized by what our organization is doing right now to kind of really build out that heat platform. So it's pretty exciting, and we look forward to talking more about it.

Within Flavor Solutions, I guess, what differentiates McCormick from other flavor houses? And how does it help you win business and drive volume growth? I know you've got some really big aspirations in what you can do in Flavor Solutions going forward.

I think the best way to describe what makes us different than other players out there is we're 100% focused on flavor and only flavor, which is unlike a lot of other flavor companies. So that remains our sole focus. But the differentiation kind of goes beyond that. We're culinary based on everything that we do and have been. That's our legacy. And our legacy isn't that culinary foundation, but also it's a combination which is our experience with the natural ingredients that we source. And that together, I think, gives us a real advantage in understanding in terms of how to deliver that flavor experience through food. We also have just unmatched breadth and reach sort of at a global level. We deal with a very broad base of customers as well as a broad range of applications at a global level. And we're also diversifying sort of our approach into this side of our business. And we're really learning and gaining share with a lot of new customers, especially in categories like alcoholic beverage, performance nutrition and savory snacks. And these are areas that add to our growth rate because they're also growing in the categories they're in within center of store. So we see that breadth and reach as really being an advantage for us overall. The one thing is when you see this combination of both our Consumer and our Flavor Solutions segment, it really gives us the advantage of consumer insights. And we see this play out day to day as an advantage overall in the marketplace because that combination and that connection of insights between both sides of our business, not only do we leverage it for our own Consumer business, but also for our customers' brands. And so that gives us, I think, a sort of leverage when we talk with customers overall. We also have a passion for a real differentiated customer experience. A lot of our customers in flavor, and this is true of the industry, are looking for speed, agility and be able to bring forward solutions that allow their brands in the marketplace. And so we've been really successful with doing that. And we have a whole sort of our team from R&D to sales to the operations are forward facing the customer there. So they have real access to every one of our experts overall. And so as we take a harder look at this customer experience, what we've been doing, and we've learned this as a best practice with some of our acquisitions is we regularly survey our customers in terms of their own experience. And we did another recent version of the survey, and approximately 90% of our customers would recommend us to someone else within the industry. And they know that we're going to come forward with that market and also that product knowledge that allows to help their brands grow, too. So this has been an important area for us. And then I think all -- the foundation of our technologies really supports and kind of closes out this level of differentiation that we have. And this is something we're really proud of, and we have a number of them. And often in these conferences, we try to give you sort of a taste of 1 or 2 of them just so that you can get the sense of what we're talking about. One of it that I'll mention today is called FlavorReal. And it's our answer to what customers are looking for in terms of clean flavor technology. And it's our ability to kind of really find a key attribute of a flavor, international ingredient and then translate that as something that can really be applied to an ingredient label as a great flavor. I'll use an example, for cinnamon, for example, if a customer wants a cinnamon note in their product overall, we can take a look at -- because we source that natural ingredient and look at those key attributes to pull out what we need as an extract. And they'd be able to put that into the customers' product. And then on the label, it's going to say something like extractive of cinnamon as opposed to cinnamon flavor. And so that's the difference in terms of what the clean technology looks like on the shelf. The other one that we have is called TrueTaste. And this one is something that's a little bit newer for us, but it's really a proprietary global patent that we have in terms of converting liquids into powders and typically called spray drying overall. And what happens in that process usually is you tend to lose flavor with color because of the amount -- the high amount of heat that you have to apply through the process. We've solved for that very safely in this technology that we're bringing forward, which allows us to really retain more flavor and retain more color because we're able to do that at lower temperatures overall. And there's also a nice side benefit from that, that allows to also use less energy, so the customer can use less energy and lower their costs, and it also creates a weaker emissions. So now you have a Scope 3 benefit when you think about it from a sustainability standpoint. So these are some of the technologies that we have. In your gift bag, there's a product in there called Stubb's Black Pepper & Smoke. It's a rub. I just used it 2 weekends ago on a rack of ribs. We loved it, and it really retained that flavor and came through. Also, if you have to show off that Jalapeño, too. I love that, too. [ Rub that ] on pork baby back ribs and like if you know how to eat. But it was -- I wanted to try it on all of our flavors. And really, it's tremendous. And I think that technology really kind of shines through in a product like that.

Getting hungry already. From a high-level standpoint, maybe you can share just some thoughts around how you think about what a healthy margin trajectory looks like from McCormick.

Going up. Actually we're very pleased with our margin trajectory this year. A lot of the actions we've taken, I've mentioned for the GOE program, getting through pricing, recovering last year have led to the first 6 months to about 110 basis point improvement year-on-year through the first 6 months. So we see that continuing for the year. Actually, in the last earnings call, we called up our guidance for the year from 25 to 50 basis points improvement to 50 to 100 basis points improvement. So we feel good about that. One of the things -- it's been such a dynamic environment the last couple of years with double-digit inflation, cost recovery, things like that. Kind of the natural sequential pattern of gross margins have been a bit disrupted. What we've seen this year through the first 6 months, we've had a gross margin about 36.5%. Interestingly, the second quarter, it was 37.1%, 300 basis points higher than the previous year due to our really great price realization and the timing of some cost recovery. For the second 6, we've called for the midpoint of our guidance, about 36.6%, so a slight improvement up to the high point of 37.1%. So we're hoping to have some improvement in the second 6 there and continuing to drive those cost savings that will help us going forward. One point I want to make sure that -- and people think about this -- or 2 points actually, one is our GOE supply chain-focused program really has tailwinds into next year, too. It's a multiyear program, and we do think there are savings across the supply chain. Just like our CCI program, we're very focused on driving those cost savings. But our long-term financial algorithm, which -- I was about to say Lawrence -- which Brendan mentioned, 4% to 6% net sales growth drops down to 7% to 9% operating profit growth, that implies a 40 to 50 basis point operating profit improvement, which a lot of that is going to be your most [ distinct ] gross margin improvement. So longer term, we still feel real good about the algorithm.

Got it. Right. I guess, Brendan, what would be your strategic priorities over the course of your tenure? And what do you think McCormick looks like sort of 5 years from now?

Well, we remain very well positioned in the marketplace. The global demand for flavor is really the foundation of our growth and why we are an attractive company, I think. And also part of that is we're in great categories. And these categories are naturally fast growing. They've got great tailwinds behind them. And so we really like the quarter that we have and that we're in. We still see quite a bit of growth coming from that. And as we've said before in an earlier question, it will really align with consumer trends, whether it's healthy and flavorful leading or people really kind of searching things and kind of moving more to our digital platforms overall. And even as you look at what people are doing from the standpoint of value, et cetera, we are really moving, I think, in line with those trends out in the marketplace. So that gives us a reason to believe that we're really well positioned. Our business model is really fundamentally strong overall. And the value of our brands and our capabilities really kind of underpin that. But even it's just our path to market and what really drives, I think, our success in terms of global sourcing, manufacturing, supply chain, et cetera. These are things that have been working for us. And we think that they continue to remain fundamentally strong overall. As I look ahead though, I think, and you think about that -- the outlook in the future, we are going to deliver on that long-term algorithm. And we'll do that because of all these areas that I'll mention in a second here, but they're very consistent with maybe what I said at the beginning of this session overall. We will expand the system advantages that we have. And for us, we feel like the system advantages is unique, particularly in the categories in which we play in. But it's foundation is people and culture, for our company overall. And this extends from global sourcing to supply chain to R&D technology, which we spoke a little bit about here, the category management and even just that exceptional level of brand marketing support that we give our entire portfolio, Those are the things that we're going to continue to build on and expand on. And that's one of the things that I've asked the company that we focus on overall. We talked about this earlier, but we'll also strengthen our global leadership in the core categories in which we play in. And we are going to -- as the environment starts to normalize, we do see volume growth and share growth across our categories, and that will be important for us. But we'll do it because we'll be doing more innovation, more renovation, we'll be driving even higher levels of brand marketing across our portfolio. But also as we collaborate more with customers, we'll expand distribution. Also in the Flavor Solutions side of our business, we're going to increase global scale that will really build us up to be a top flavor house. And you heard about the things that differentiate us earlier this morning. And then we talked a lot about heat. And heat is one of the elements to kind to really drive, I think, that ability to grow at that level and differentiate us in our performance within our categories. I talked also about sort of accelerating digital transformation. For us, this is the way that we enhance as we look at this -- every company is probably focused on this in some way, but for us, it's about how we enhance our connection with customers, with consumers. It's also our ability to get our work done with more speed and operational efficiency, which also lowers costs overall. And it's also really important for our employees, too. The employee experience, how you get the work done, is also enabled by the digital transformation across the company overall. And so I see a lot of upside and opportunity there. And overall, I would tell you that this is just about keeping with the speed of change going on everywhere around us. So that's going to be an important element. But driving profitable growth, driving our margins and continue to drive higher returns from our investments is also going to be a key priority for Mike, myself and this entire management team that we've got. And that will be -- it's been a focus obviously here in '23, but it will be ongoing throughout the fiscal year. And I always like to close it out with really the strength of our culture. And that's important to McCormick. We call it the power of people. And in this, we do see an ability for us to really try to build that next generation of leaders that's going to take over from Mike and myself someday. And that's a real top priority for us, including adding even enhanced capabilities in terms of how we operate out there in the marketplace. So I would tell you that's pretty big. I'm very optimistic about how we're performing out there, very confident in our future and the long-term overall performance of the company. And this is something that I think we're really excited about. As you can see, I think, even during a year like this where there's a lot going on, we like where we're trending. And we like the direction of our business right now, and we believe we'll continue to get stronger.

Just got a couple of minutes left. I know takeaway ultimately is the ultimate arbiter, but you've got a big seasonal fourth quarter, but you generally have a pretty good view at least on going in, what your merchandising opportunities look like that you've built in with your key retail partners. And you've got some new packaging and things of that nature. I guess what can you say about at least what you can see so far with respect to at least what the programs look like and how that compares maybe to a year ago? And then the consumer will ultimately tell the story.

Well, I'll kick off with a couple of thoughts and ask Mike to add to them. We like the look of our pipeline of activity. And I mentioned a number of them, new packaging, the lines and the innovation that we're launching. We had a good season on grilling, and that's all about merchandising and execution and turning back on what you would normally see during that period of time seasonally. And so we're really -- this is the kind of performance that we see in grilling. We see it also extending into the holiday season. And we're able to perform really across our business. We don't have any supply chain issues that we have to be concerned with. That allows us to really just sort of be fully in effect from a promotional standpoint and the season -- holiday seasonal volume holiday. We're working very close with customers. A lot of those plans are already starting to be locked in by this point in time. And so we feel good about our holiday outlook.

Yes, I think we've also -- we're always updating our portfolio. We've exited some low-margin sales. So that -- look through that when you look at third and fourth quarter results. But we feel good about the pipeline and then as you view the new products and also the innovation of -- in the U.S., the [indiscernible] exciting as that rolls through because we're getting a lot of great comments from customers but also consumers, too.

Yes. And to answer -- my comment about pipeline, you're not just surprised with the announcement of '23 but as we look to '24 and '25.

And then maybe a good portion of Flavor Solutions is applying ingredients and flavor technology to other packaged food manufacturers. What are you hearing from some of your key customers in that realm? You started off the comments a little bit with some of what you're seeing out there from a consumer behavior standpoint, but maybe what are you seeing from some of your larger packaged food customers to whom you supply Flavor Solutions?

Well, I think what we're hearing about in the marketplace versus what we're seeing for our own portfolio might be slightly different overall. But I would say what we're hearing broadly is you're seeing that the trends on unit volume kind of sort of -- sort of near to what's happening maybe in an overall flavor company, the performance from a volume standpoint. We think we're performing a little bit better than that. And I think a lot of that has to do with the performance of the categories that our customers are in. And so that tends to influence our own performance...

Nutrition and things of that nature as you talked about...

Well, even the categories like performance nutrition or snacks, savory snacks or even alcoholic beverages, they have nice growth rates. And so on top of that, we're also gaining share in these categories because we're winning new customers all the time. So that gives us, I think, a fairly positive outlook on what we're seeing, even though you are seeing overall unit volumes kind of be softer in the industry. But comparatively, we think we're doing okay. You want to add to that, Mike?

I think you said it very well.

And then, Mike, where are we on -- obviously, there's been dramatic improvement versus last year around supply chain and service levels. Where are we at this point? Is there still some more room to go as we go forward to get back all the way to bright, if you will?

I think for us, we're in the top tier, and we get measured by customers and see our peers, too. So we feel really good. There's always going to be spotty outages and things like that. But globally, we feel real good about where we are from an efficiency perspective, though, that we know we can get better and have a more stable environment. It's [ honestly ] really logistics costs, manufacturing, supply chain costs across the whole chain, that's really been where we spent a lot of time while we've kept the service levels high. It allows us to have been more normal promotional programs, things like that too, which we really like.

Maybe lastly, Brendan, you mentioned earlier the launch of the Lawry's brand in kind of a value brand within core sort of spices and seasonings. And I think one of the debates early on in that when you first talked about it was, is there a risk of having consumers trade down from core red cap? Or we ultimately bring folks up that want a brand and aspire to a brand that might have purchased private label before that, which would improve, obviously, your economics, your retail customers' economics and such? I guess what have you learned? It's early on, but what have you learned going on in that dynamic so far with that launch?

What we've been learning from that, from the very first time we launched it even up through today is in those accounts that are carrying Lawry's, no one's trading out from the McCormick brand. And in fact, they're really trading up from private label. And so what you'll see is a corresponding decline or deceleration in private label units as the Lawry's items come in there. So going back to what was the purpose of this? Well, price pockets kind of separated and widened. And it kind of created a price pocket for us to naturally go in there with a branded proposition that resonates with consumers. And that therein was born the idea. Let's really hit this price point, and it allows people to trade up in private label because their consumers really do want brands, and they find a lot of trust in them. And so this -- the addition of Lawry's in our line is performing as expected, and it's getting reinforced as we get into new accounts overall. So I think that overall original narrative is really staying true.

It really, I think is one of the things we found out about some of our brands that are maybe not the McCormick brand. We've talked about French's having late power globally. Lawry's is another brand to really resonate with a certain segment of customers, and we see it really performing well right now.

Great. All right. Well, I think with that, we'll have to close it out there. Brendan and Mike, thanks so much. Appreciate it. Good. Thank you.