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

It is a pleasure to welcome McCormick back to CAGNY -- to the CAGNY stage. Please join me in thanking McCormick for sponsoring the snack break this morning. McCormick recently provided guidance for its fiscal '24 year that provides flexibility to step up brand reinvestment and promotional spend to narrow price gaps and improve volume trends in light of a more value-seeking consumer. And despite planned incremental spend, McCormick still sees higher year-over-year operating margins this year as pricing has now better caught up to costs, and the company has a strong slate of CCI and GOI -- and GOE productivity plans in place. Price cap management, incremental marketing spend and packaging innovation are all enabling the company to continue to sequentially improve its unit and value share in core spices and seasonings line by midyear '24. McCormick would expect to have greater representation of new distribution wins and its packaging innovation on shelf given the timing of retailer shelf resets. With us from McCormick today to discuss this in all -- all in more detail are CEO, Brendan Foley; and CFO, Mike Smith. Brendan, over to you and thanks for being here.

Thank you, Andrew, and -- for the opportunity to participate today. Please take note of our safe harbor statement. As you know, some remarks include forward-looking statements and non-GAAP financial measures. McCormick is a growth company, and I'm committed to advancing our leadership and differentiation. I plan to drive an ambitious agenda with greater competitive posture and more intentionality that capitalizes on our strong business fundamentals as well as the value of our brands and capabilities that have driven our success in the past. 2024 is an important investment year for us, and we are enthusiastic about some early successes, and we are confident in returning to the growth that investors expect from us. The foundation has been laid, the building blocks are in place, and we will share them today. We hope you leave with greater understanding of our breadth, scale and more insight on our prioritized investments to drive volume growth. We will highlight how our 2 segments complement each other, and we'll highlight our heat platform, which is yet another reason to believe in our long-term algorithm. Overall, the key takeaways for today are that we are building on our strong foundation, strengthening our competitive advantages, and we are driving growth and value creation. All over the world, people desire great-tasting foods and drinks with rich authentic flavors, and we deliver flavor across all markets and channels. We serve a wide breadth of customers and operators and operate across every channel from traditional brick-and-mortar to e-commerce and from foodservice to CPG customers. Simply put, at McCormick, we truly flavor every sip and bite. We have a history of driving growth. Since 2015, we have grown total sales by a 6% CAGR, at the high end of our long-term algorithm. Our results reflect industry-leading organic growth complemented by compelling acquisitions that expanded our portfolio in attractive categories and further strengthened our flavor leadership position. The 4% organic growth was driven by new products, brand marketing, category management initiatives as well as our proprietary technologies and differentiated customer engagement. 1/3 of our growth was driven by acquisitions. We have a strong history of success in driving value through acquisitions and are committed to retaining the discipline we have historically demonstrated in this area. We continue to explore opportunities as they are key to our long-term growth strategy. We are confident in driving organic growth, and any potential acquisition would be complementary to our existing portfolio. Now specifically reviewing our volume growth since 2015. Prepandemic, from 2015 to 2019, we delivered an average 2% growth comparatively. And on average, food peer volume was approximately minus 1%. Through the pandemic, despite channel and supply chain disruptions, we continued to drive strong volume growth. Moving to 2022 and the beginning of a 2-year historically high inflationary environment, volumes were pressured as would be expected given the level of pricing actions to offset cost increases. Today, we appear to be moving beyond the macro dynamics of the last several years. As we enter 2024, we are in a position of strength. We can use our 2023 margin expansion to fuel investments in 2024 to drive volume growth. We are focusing our investments where we expect to have the greatest impact on improving volume performance. We expect our volume trends to improve throughout the year and with growth during the second half of 2024 and continued momentum into 2025, notwithstanding any new macroeconomic headwinds. Ultimately, I believe our investments will drive quality earnings growth and put us on a solid trajectory to return to our long-term algorithm. We have a unique system of advantages that work together to create an overall enduring advantage with our people and culture as the foundation. Our advantages are critical to ensuring we deliver on our growth potential, and you will hear more about them throughout the presentation. Let's turn to growth, which is our primary focus. And as we know, it is the most powerful contributor to long-term shareholder value creation. McCormick is a global leader in flavor operating in 2 segments. Our Consumer segment has leading brand shares in our key categories in many markets, and we sell products at every price point, ranging from premium brands to private label. Our Flavor Solutions segment is a culinary-inspired flavor business and underpinned by leading technology that develops consumer-preferred flavor solutions for our customers. We have a passion for how our 2 segments complement each other. The scale, insights and technology that are leveraged between both are meaningful. 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 differentiated growth. Our compelling offerings for every retail and customer strategy across all channels create a balanced and diversified portfolio. We are deliberately focused on attractive high-growth categories across both segments, resulting in significant long-term tailwind. That said, it's crucial that we continue to capitalize on this position of strength and execute on our plans. The long-term trends that fuel our categories, consumer interest in healthy, flavorful cooking, flavor exploration and trusted brands, continues to be very strong. And importantly, consumers' enjoyment of cooking grew through the pandemic. Our connection with the consumer is important, and we frequently conduct proprietary research and mine social media to understand consumer sentiment and align and refine our plans to deliver on what consumers need and want. Our alignment with long-term consumer trends and our connection with the consumer every day generate a sustained tailwind for growth. We know consumers today are challenged. 2 years of steep inflation has had an impact, and they are exhibiting even more value-seeking behavior. Consumer budgets are stretched and resulting in choiceful spending decisions. At the same time, however, they are choosing to splurge in specific areas. They're willing to pay for brands they love, and they're going out to restaurants. The current state of the consumer is not defined by any one behavior. They prioritize value, whether it comes from a lower price point, a larger size, better quality, greater enjoyment or additional benefits. The activation of our plans are continually influenced by what matters most to our consumers and customers and fit within the strategic priorities that matter most to us. Now turning to these strategic priorities. We recently refreshed our 2026 road map. Our strategic pillars, growth, performance and people remain consistent. And I'm energized to further incorporate my mark on our growth plans. In a fast-changing global environment, we need to build on our competitive strengths and opportunities to remain a differentiated market leader. As such, in 2024, McCormick employees are rallying around 5 priorities mapped to our road map. These are: first, strengthen our global leadership in core categories, growing volume and share -- and market share in herbs, spices and seasonings and condiments, strengthening our heat leadership and increasing the global scale of our flavors category. Second, drive profitable growth and higher returns on investments. We want to restore our operating margin, but importantly, do so in a measured way, using cost savings and operating leverage to fuel near-term top line growth that will drive long-term sustainable profit. Third, accelerate our digital transformation to enhance how we serve consumers and customers to work faster and more efficiently and to strengthen decision-making by further leveraging data and insights. Fourth, continue to elevate our power of people culture and build the next generation of leaders and capabilities that will drive McCormick's success well into future years. And finally, all these contribute to our fifth priority, which is to strengthen and expand our system of competitive advantages to make McCormick even more effective in the marketplace. With the successful execution of our strategies and priorities, we are confident in our growth potential. Importantly, we are committed to delivering on our long-term financial objectives. Our commitment is underpinned by our proven track record, which includes strong organic growth and contributions from acquisitions; our broad and advantaged global portfolio anchored by high-growth, profitable categories as well as our differentiated heat platform; and finally, our robust plans have an increased focus and investments on core categories to drive high returns fueled by our proven cost-savings programs. As we move beyond the macro dynamics of the last several years, we recognize the environment we're operating in is not the same as prepandemic. And reflected in this is our strategic road map and our 2024 priorities. Importantly, though, the fundamentals that drove our historical performance remain in place. We have a strong foundation to operate in a new environment and deliver on our financial objectives. We are in a position of strength and are diligent as ever in building value for our shareholders, customers, consumers and employees. Our McCormick employees continue to be the key to our success. We are proud of our high-performing, collaborative and teamwork-oriented power of people culture that empowers employees across the world. We have an experienced leadership team in place, and together, we are harnessing the collective expertise of our talented McCormick team across the world with a renewed sense of urgency and speed to execute on our strategies and deliver on our priorities, resulting in long-term sustainable, profitable growth. Now before turning to our Consumer segment, let's watch a video on the complementary nature of our 2 segments. [Presentation]

Now let's turn to our Consumer segment. Our Consumer segment is approximately 60% of our portfolio, and we are driving leadership in core categories focused on volume growth. Since 2015, we have grown our core categories and further expanded our condiments and sauces product offerings, strengthening our portfolio and our flavor leadership. The brands we acquired contributed to our organic growth following their initial first year addition. Importantly, though, our legacy brands in global spices and seasonings delivered solid organic growth at 3% CAGR and continues to represent over 40% of our portfolio even with the significant increase in condiments and sauces. Across the portfolio, prior to the historically high pricing environment in 2022 and 2023, our organic growth included a robust contribution from volume driven by our proven growth levers, which supports our confidence that our execution of our plans will drive volume growth in the future. As part of our strong foundation, we have proven and powerful brands that differentiate us in the marketplace. Consumers know and love our brands. And as a result, retailers continue to benefit from prioritizing our brands on shelf and implementing our category management recommendations. Highlighting some brand insights. McCormick brands can be found in the pantries of at least 85% of U.S. households. 84% of French consumers say Ducros is an expert in meeting their cooking needs. And Gourmet Garden, whose sales have doubled since our acquisition, is the #1 fresh convenience brand in the U.S. and Australia. We continue to leverage the power of our brands to vigorously drive category growth and household penetration. Before moving to our initiatives, let's review our growth levers, including brand marketing, category management, new products and packaging renovation, which have already proven to strengthen our volume trends in key areas during 2023. Our growth levers work together to fuel the power of our brands, and importantly, meet consumers where they are, whether it's a certain price point, a new flavor, modernized packaging or shopping online. Before I bring these levers to life with our activation plans, I want to highlight on share performance that we are approaching our plans differently with even greater competitive posture and more intentionality towards driving growth in our key categories. Starting with spices and seasonings. We are the global share leader and have had a leading share position in many markets around the world. We are focused on driving volume and share growth globally. We have initiatives underway to win at every price point, whether meeting consumers' demand for value or their demand for premium; further differentiate our brands through our brand marketing, new products and renovation. As an example, we renovated our herb and spice portfolio in Southeast Asia with the same consumer-preferred packaging as in the U.S. and EMEA. Across all regions, we continue to strengthen our distribution channel penetration with our category management initiatives. U.S. spices and seasonings is a priority investment area for us given our category leadership and its profitable growth potential. The continued activation of targeted price gap management, new products, packaging renovation and stepping up brand marketing support is materializing results. Our branded sales volume growth in the second half of 2023 demonstrates we have the right plans to grow in this attractive category. The rollout of renovation of our U.S. everyday urban spice portfolio is increasing our velocity on shelf. Our results to date reinforce our confidence that this will drive strong growth in 2024 as our customers' shelves continue to transition. And later this year, we'll be transitioning Grill Mates seasonings to the same consumer-preferred package. And we are making progress on restoring a majority of the distribution that was lost during past supply issues. We have secured wins in new distribution. We expect to seeing the impact of our actions in mid-2024, coinciding with most of our customers' shelf resets. Overall, we have a robust set of initiatives in flight and expect growth in share gains in units and volume to lead our trends with results building throughout the year. Turning to category management across the regions. In the current environment, we are taking a surgical approach to managing our price gaps to private label and branded competitors. Our spices and seasonings category is more complex than just one portfolio of items. In the U.S., for instance, it is a collection of 14 subcategories with over 600 unique SKUs. The portfolio is extensive, and we analyze the pricing dynamics at the very lowest level. Based on elasticities, we prioritized our efforts on items we believe would be the most responsive, and we are now seeing profitable volume growth. Our efforts in this area are continuing, but it is important to note that the actions are being taken on a small portion of our portfolio. We estimate that less than 15% of our Americas Consumer segment sales. To further strengthen value, we are expanding distribution in the fast-growing discount channel in EMEA, and we are gaining share. And in the U.S., our Lawry's opening price point is expanding across the stores of a leading discounter. And in China, we are expanding small-format stores, which have grown rapidly in recent years as well as in the third- and fourth-tier cities. Within spices and seasonings, we are energized about the high-growth cooking blends subcategory. As the cooking blends brand leader in the U.S. and U.K., we are driving the growth and believe there is an opportunity to reach more households. With our culinary expertise and our consumer insights, we have the right to win in this subcategory and are launching unique blends that will offer consumers convenient ways to explore flavor. And they are leveraging our partnerships with social media influencers to reach their loyal built-in audiences with co-created products. We are excited about the recent launch of our McCormick Flavor Maker line, which is based on our consumer insights, specifically related to Gen Z. They want creative combinations to quickly flavor their eating occasions. And we make it fun with blends ranging from "I'm great in bread" for sandwiches, yes, my team dared me to read that one out loud, "You crack me up" for eggs, and consumers can just shake on the flavor with our toppings just like they're new salt and pepper. Now moving on to another core category, recipe mixes. While this category is tracked in fewer markets around the world, McCormick has share leadership in the markets. In this high-usage category, single-use seasonings provide consumers everyday convenience to flavor meals that become family favorites at a value price point. Our focus on recipe mixes is to fuel growth by reinvigorating the category, reaching new households and inspiring young cooks who want flavor exploration with convenience. With our robust pipeline of new products across all regions, we have opportunities to win more dinner occasions with new cuisine types and reshaping the portfolio. In the U.S., for instance, almost 90% of category offerings are beef-based, although 70% of consumers prefer white meat proteins. And we are modernizing offers to address this gap. Not only were our new products meet consumers' needs for convenient flavor, our plans will address their meeting demand -- meeting their demand for value through our messaging and revenue management execution. Turning to condiments and sauces. We are driving strong performance across our portfolio of global and regional brands. We continue to launch new flavors like Creamy Dill Pickle Mustard to elevate the taste of sandwiches and are increasing advertising and promotions in 2024, especially during the peak grilling season. We plan to win grilling occasions in all regions with our entire portfolio of grilling items, including new launches. And McCormick Mayonesa, which is supplied by our largest joint venture, McCormick de Mexico, is the mayonnaise share leader in Mexico and will continue to drive growth in the U.S. with expanded distribution in over-indexed Hispanic markets and club channels. We are prioritizing brand marketing to connect with consumers and fuel growth and are increasing our investments again in 2024. We have a history of investing -- of increasing our investments again in 2024. We have a history of investing behind our brands across various channels and delivering industry-leading ROIs. Our differentiated brand marketing is driven by a combination of factors. In addition to maintaining a high share of voice, we are committed to having the best content in our categories, content that inspires and educates consumers and reaches them at the right points on their path to purchase and their flavor journey, from flavor exploration and menu planning to shopping and cooking. Let me share a digital example. We're following a proven approach to win with the next generation. The products we created with our Tabitha Brown and Nadiya Hussain partners were initially launched online. They created buzz and are now performing well in bricks-and-mortar. Our Tabitha Sunshine seasoning is one of the most incremental new U.S. seasoning blends we launched recently. And early results from the Nadiya products show the Schwartz brand is gaining new and younger households. The exciting Flavor Maker blends I shared a few minutes ago that target Gen Z consumers launched on direct-to-consumer in early January with great results. They are now also in omnichannel and are selling out. They will begin shipping to some bricks-and-mortar customers by the end of our second quarter. Through our digital consumer connections, we are winning consumers online. Finally, in our Consumer segment, I have mentioned new products a few times already and wanted to show on one page a sample of what we'll launch by mid-2024. We recognize that innovation is not just about the number of new products launched, it is the strength of their performance that matters. In 2023, the average sales per new product launch was more than 50% greater than the same metric in 2022. We will continue to benefit from the 2023 launches into 2024 and are confident in the success of our upcoming pipeline. Following the last several years of disruption, we are excited about accelerating our innovation. Now turning to Flavor Solutions segment, where we focus on targeting high-growth categories, driving our leadership and restoring our margin. Our Flavor Solutions segment is approximately 40% of our portfolio, and we are uniquely advantaged as a global consumer brand leader. We know the importance of brands and make flavors that deliver on our customers' brand promise. Our Flavor Solutions segment has a broad global reach across food and beverage. We collaborate with customers ranging from global CPGs and restaurant chains to emerging high-growth brands. We develop flavors for a wide range of end-market applications, and we flavor all occasions. Since 2015, we have grown sales with an 8% CAGR with strong organic growth complemented by contributions from acquisitions. Notably, this growth also includes the impact of strategic decisions to prune lower-margin business from the portfolio. The execution of our long-term strategy to migrate our portfolio to more technically insulated and value-added categories has proven successful. Focusing on our flavors and branded foodservice product categories, we have delivered 11% growth, approximately 2/3 organically and 1/3 from acquisitions. We continue to see opportunity to shift our portfolio, including within the flavors product category, which is now over half of our Flavor Solutions portfolio. Now expanding on our flavors product category, our most technically insulated. Our portfolio consists of specialty flavors, including flavor modulation and encapsulation, and natural extracts and seasoning blends, which in many cases have our flavor technologies embedded in them. We partner with top packaged food and beverage companies, flavoring their iconic products. We collaborate with regional and local customers, and we continue to diversify our customer base further. We bid on over 10,000 briefs or opportunities to win a new product per year. The flavor industry we participate in is an attractive one. It is technically insulated. Its margin profile is attractive, and the customer experience is critical as most solutions are co-developed with customers. And importantly, flavor is critical for customers. It is the key driver of consumer preference but only contributes a small percentage of the cost of a product. We are well positioned to win in this space, and we are 100% focused on flavor, which differentiates us from most other flavor houses. We develop solutions starting from a culinary foundation and have a deep understanding of the flavor experience for real food and natural ingredients, no perfumes or specialty chemicals. We have a legacy in natural and expertise in developing clean flavor solutions, enabling our customers to deliver on the transparency consumers demand. We are committed to a sustainable sourcing and are recognized as a leader in sustainability. Our heritage in the flavor industry dates back to 1909 when we were a founding member of FEMA, the Flavor Extract Manufacturers Association, which is the national association of U.S. flavor -- of the U.S. flavor industry committed to assuring the safe use of flavors. McCormick's founder, Willoughby McCormick, was the first President and with several McCormick employees following over the years and most recently in the last 2. We are proud of our heritage and believe these areas are growing advantages that will help further drive our Flavor Solutions leadership. Customers turn to McCormick to meet their consumers' increasing demand for the taste that they can trust. We develop culinary and consumer-inspired flavors for a wide range of applications across attractive end-market categories. The consumer-preferred flavors we create drive wins for both McCormick and our customers. Flavor is a key driver for a consumer's repeat purchase. We specifically target opportunities to grow with our customers in attractive, high-growth end-market applications: savory snacks, performance nutrition and alcoholic beverages. The capabilities and expertise we have built related to these categories continue to yield results. We have delivered an outstanding 3-year sales CAGRs in these categories, and we serve many leading and emerging players in them. Our Flavor Solutions proprietary technology platform is a toolbox of technologies we use to innovate and solve our customers' challenges without sacrificing flavor. The platform also includes SAGE, our product development tool that uses artificial intelligence and enables us to create fresher, trending flavors faster, which gives our customers greater speed to market. Let me try to bring to life our technologies and creations of flavor. First, we receive a customer brief. This one is from a global beverage customer who wanted to launch a fruity zero-proof mocktail, low in sugar and full in flavor. The challenge was to create the complex flavor of an alcoholic cocktail and the juiciness of fruit but without alcohol or juice. Next, our mixologists use our consumer preference insights and our technologies developing the mocktail prototype, which combines an authentic apple cider vinegar base to deliver the complex acidity of a typical alcoholic cocktail or cherry and peach flavors. Our Optify technology enhances the juiciness for a fruity and juicy mouthfeel. And as a finishing touch, using our FlavorReal technology, we added a touch of alcohol-free natural champagne extract. And the result is we have met our customers' challenge with a customized winning flavor for a white peach cherry shrub mocktail. In another example, we partnered with an emerging regional health food customer who wanted to launch a Mexican chocolate flavor plant-based protein drink without an earthy off note. And of course, they wanted it to taste really good. The solution included the natural cinnamon extract, our TrueTaste technology and our Optify technology. Our technology platform allows us to create innovative winning flavors which meet customers' demands for clean, natural, authentic and better for you, and do it fast. Being first to bench and scale matters in flavor, and with our platform, we are winning business every day. And importantly, we continue to make investments in our technologies to further drive growth and increase our competitive advantage. In Flavor Solutions, an important success factor is the customer experience. We have an agile end-to-end collaborative approach with unparalleled access to our expert functional talent. We are committed to providing exceptional relationship-driven winning experiences for our customers at the speed they want from ideation to market launch. We are co-creating tailored solutions with our customer that delight their consumers and endure in the market. Our recent customer experience survey in the Americas showed that approximately 90% of customers recommend McCormick as a partner because we have the market and product knowledge to help them grow their business. Now turning to branded foodservice. We continue to strengthen our leadership in branded foodservice. Our sales have grown both because of the business we are winning and because consumers want more flavor away from home, too. We have presence in every segment within the foodservice industry. Since 2019, we have grown sales at a 7% CAGR, and this includes volume growth. We have strong leading brands across our broad portfolio of spices and seasonings as well as condiments and sauces. We are gaining share driven by our innovation and strong culinary partnerships with both foodservice distributors and operators. Building further on our branded foodservice growth plans, we have a strong innovation agenda, including launching a Hawaiian barbecue flavor in the fast-growing specialty flavor segment, expanding our seasonings portfolio with Ducros line extensions, and we are capitalizing on McCormick Mayonesa's great performance in our Consumer segment by launching it in foodservice. We will be launching our new dispensers this summer, which are easier to clean, use and dispense. We continue to increase menu penetration with unique flavor applications, investing in digital marketing to drive brand awareness with operators. Finally, we are amplifying our focus on retail foodservice to grow our presence in the perimeter of grocery and drive trial for our Consumer segment. We are partnering with a number of large retailers and are excited about the growth opportunities. Next is our heat platform, which we will start with a video. [Presentation]

Good afternoon, everyone. Let me share how McCormick is bringing the heat. As the video highlighted, the demand for hot and spicy is strong, which is a significant tailwind to our growth. Gen Z and millennials continue to kick up the demand for heat. They are more experimental and prefer authentic, bold and spicy flavors, outpacing all other generations. Consumers' love of heat is clear across many categories and by the growth of hot and spicy foods and drinks in both at-home and away-from-home channels. Consumer categories that are defined by heat like hot sauce and heat within categories like spices and seasonings and snacking are growing at accelerated rates. Heat is one of the fastest-growing flavor profiles, and it spans across our total portfolio. We estimate that our heat platform was about 20% of our total 2023 sales. And while 42% of this is in hot sauce, our heat portfolio spans all of our product categories and is actually slightly weighted more to the Flavor Solutions segment. Our performance is strong. Both our segments delivered double-digit growth for a combined 13% CAGR since 2020. And our portfolio of hot and spicy products is growing on an organic basis 4x faster than non-heat items with the hot sauce growth rate comparable to the rest of the portfolio. We are well positioned to fully meet the demand for heat and remain focused on expanding our platform further to capitalize on this growing demand. We're uniquely positioned to win in heat with our global iconic brands and our meaningful scale and expertise. Our expertise and capabilities in heat include our unrivaled consumer insights, science and technology advantages and our sourcing and manufacturing expertise. In terms of technology, we can transform heat from one form to another, a spicy chili to a natural extract or a hot sauce to a dry seasoning. And with our patented controlled-release encapsulation technologies, we can time the delivery of heat to create the optimal experience. In sourcing, we have a decades-long presence and knowledge in key areas like in India with sun-dried chilis and to Mexico with peppers. We have the breadth, depth and scale to drive growth in an explosive way. Now let me highlight some of our plans to do that. We are the leading hot sauce company. Through the growth we have driven, we have advanced Frank's RedHot to be the #1 hot sauce and Cholula to be the #1 Mexican hot sauce in the world as well as leadership positions in branded foodservice in the U.S. and Canada. Consumers want flavorful and approachable hot sauces, and we have the perfect blend of flavor and heat in our portfolio. In the U.S., hot sauce is already bigger than ketchup with millennials and Gen Z with Frank's RedHot and Cholula over-indexing with these younger generations. We are reaching the next generation and creating excitement through our brand marketing initiatives. A great example of this was our Super Bowl activation a few weeks ago partnering with NFL player, Jason Kelce. We took a holistic approach. We drove consumers to stock up, inspired them to make Frank's buffalo chicken dip and digitally own the big-game moment with consumers by encouraging them to put Frank's on everything, including ice cream. We gained new buyers, and media and consumer sentiment as well as engagement from other big brands was incredibly positive. The activation was our best Super Bowl campaign ever, capturing 4.6 billion impressions, which is more than 4x last year's campaign. We are winning the tabletop in branded foodservice and continue to expand placement to increase share of Frank's RedHot as well as other brands. We're building on our share momentum with our new packaging, our Frank's always-ready bottle with a mess-free cap, which solves operators' desire for a clean tabletop look. The bottle looks always full and is made with 100% post-consumer recyclable plastic. With our brands on tabletop, we benefit from driving consumer trial in away-from-home and then at home. 54% of consumers are more likely to try new flavors at restaurants and then will make the purchase at home. This is a perfect example of the complementary nature of our 2 segments. We're also leveraging our leadership in hot sauce and the power of our iconic brands and winning placement on away-from-home menus. Our recent co-branded partnerships with McDonald's and Wendy's are a great examples of how we're heating up restaurant menus. In the U.K., McDonald's launched a limited-time offer in February with Frank's RedHot Sauce in their iconic McSpicy sandwich. It is our first-ever branded collaboration with McDonald's. In our deck, there is a link to the launch ad if you want to check it out. In the U.S., Wendy's launched the Breakfast Burrito this January, which is served and marketed with Cholula. The company noted on their earnings call last week that the offering is resonating with consumers. We're excited to continue to leverage our brands and our hot and spicy flavors to further penetrate menus and add the heat in away-from-home channels. Moving beyond hot sauce. With nearly double-digit U.S. growth in Mexican foods and sauces, we expanded into the Mexican aisle last year to provide consumers the authentic Mexican flavor of Cholula in new formats. Our performance since the launch of both the taco recipe mixes and sauces is exceeding our expectations. In fact, our Cholula salsas are bringing new consumers to the category and our brand. We continue to build U.S. distribution and are also launching both formats in Canada this year. Additionally, we're further expanding our U.S. Mexican aisle offerings with creamy heat innovation through the launch of a Cremosa line, which will be in market in the second half of this year. We're accelerating our seasonal growth in both segments with heat. As an example, our Flavor Forecast pinpoints emerging flavors and culinary trends. And many of our predictions have stood the test of time. Last year, our McCormick Flavor of the Year, Vietnamese x Cajun Style Seasoning, had complementary product launches in consumer and branded foodservice. And we expect to see this flavor and products for other Flavor Solutions customers later this year. Our 2024 Flavor of the Year is, again, part of our heat platform. Tamarind & Pasilla Chile Seasoning is launching in both segments. We also partnered with a trendy global burger chain to introduce this flavor with their launch of 2 limited-time menu offerings which feature it. We're inspiring our consumers and customers to experience the combination of heat and flavor with innovation and renovation across our consumer and branded foodservice portfolios. And we're leveraging the power of our hot sauce brands to extend the reach of our iconic flavors through customer partnerships and are thrilled to be heating our customers' iconic brands. And with our proven track record as a preferred heat supplier, our momentum with flavor customers continue to be strong and fuels our important new product pipeline. We continue to accelerate global heat new products to drive further growth. Wrapping up on heat. I hope you have greater insight and appreciation for how McCormick is heating up lives everywhere, the scale we have and the right to win across this flavor profile. As I said earlier, heat is more than just hot sauce. Heat is a growth accelerator across our entire global portfolio, and importantly, another reason to believe in our long-term algorithm. Now for our performance and fueling growth investments. We remain committed to our long-term objectives. And when these objectives are compared to our food peers, McCormick remains best in class for both sales and adjusted earnings per share. Our confidence in our long-term objective stems from our historical growth trajectory. Over the last decade, we delivered steady growth in sales and -- with the exception of 2022, which was an aberration in profit. McCormick is a growth company, and our top priority remains to drive consistent sales growth. From 2015 through 2023, we grew sales at a 6% CAGR, the high end of our long-term growth algorithm. Before and during the pandemic, our organic sales growth was led by differentiated volume growth. In 2022 and 2023, pricing led growth as volume was pressured given the level of our actions to offset cost increases. As we enter 2024 and lap our pricing actions, we have taken a cautious approach to our outlook and are focused accelerating investments to return to volume-led growth. Turning to operating income. We said at the outset of 2023, we were committed to recovering our profitability after a challenging '22 due in part to COVID-related disruptions in China, the exit of our Russia consumer business and the higher-than-expected escalation of cost inflation. In 2023, we met our cost recovery plans, and we're pleased with the margin expansion we have delivered. We expect to continue to improve our profitability in 2024 while also investing in our business to drive volume growth. Now for value creation. We remain focused on long-term value creation. Looking at our historical performance, we created a significant value prior to the pandemic and delivered on our long-term growth objectives. The last 3 years were certainly challenging, which in turn, challenged our performance. Looking over a total of 8 years, our shareholder return exceeded the packaged food index as well as our flavor house peers, highlighting our differentiated long-term value creation. During this time, we have converted 95% of our net income into free cash flow, and our return on invested capital currently exceeds weighted average capital by 2x. As we enter 2024, we're in a strong position to benefit from the virtuous flywheel of margin expansion given the work that has been done across our business. In 2023, we expanded our adjusted operating margin by 100 basis points. We recovered the cost or pricing lag over the past 2 years. We realized favorable product mix as we targeted investments and optimized our portfolio. And we delivered on our CCI and GOE commitments, which will continue to contribute in 2024. Looking to 2024, we're expecting low single-digit inflation. With the combination of lower inflation and CCI savings, we can make balanced choices between investment levels and profit contribution. And as seen in past performance, this has worked, driving both top and bottom line growth. Let me spend a moment on Flavor Solutions margin. We're committed to restoring our margin, which has been pressured in the most recent years. We made a great start in 2023. But moving forward, we expect our historical margin drivers shifting the portfolio to higher-margin products and our CCI program to contribute to margin expansion annually. In 2024, we expect the impact from our GOE program to be a benefit as well as a tailwind of reducing our dual-running costs related to the transition to the new Flavor Solutions facility in the U.K. This tailwind is expected to continue into 2025. Importantly, as we return to volume growth, we expect operating leverage to contribute to margin expansion. In the near term, we're also focused on making continued investments to drive volume growth, and we'll balance these 2 objectives to deliver sustainable volume and profit growth. Let's turn to our 2024 investment plans across both segments. Volume-led means that volumes come first, and that is the mindset we have always had. We're accelerating our investments in '24 to drive the improvement on our volume trends and deliver volume growth during the second half of the year. First, in brand marketing, we expect our spend to increase high single digits in 2024, reflecting a double-digit increase in investments, partially offset by CCI savings. The investments will be concentrated in the first half of the year and weighted more to the first quarter. For category management, which includes managing price gaps, we have expanded our investments versus the prior year. The price gap management efforts are primarily in Americas Consumer. And it's important to note they are focused on a small yet important percentage of our total portfolio. In innovation and research and development, we continue to invest behind our segments to accelerate our new product pipeline. And lastly, we're also investing to drive our digital transformation, as Brendan mentioned in our priorities. Our balance sheet benefited greatly from our actions in 2023. Our cash flow from operations nearly doubled to just over $1.2 billion driven by higher operating income and working capital improvements, including lower inventory. We reduced our leverage ratio and are only slightly above our 2024 year-end target of 3x. We returned $419 million of cash to our shareholders through dividends and are proud to have increased our dividends for the past 38 consecutive years and remain a dividend aristocrat. We expect 2024 to be another year of strong cash flow driven by profit growth and working capital initiatives, and we will continue to prioritize the balanced use of cash. Our balance sheet puts us in a position of strength and gives us the flexibility to continue to invest into the business to support our growth. We're differentiating McCormick for the long term through focusing on more than just our top line, by making capital investments to advance the shape and the effectiveness of our supply chain, accelerating our digital transformation and advancing our cost-effectiveness initiatives. As volume grows, our supply chain will continue to support our flavor freshness and packaging initiatives. We're investing in capacity and manufacturing capabilities to support our robust plans. And we are focusing our resources to drive growth in our key categories. We continue to strengthen our resilience and increase our competitive advantage. In heat, we're investing in projects that support our sustainable sourcing commitments and our ambitious growth plans. This will ensure the quality and availability of our most important agriculturally based raw materials for generations and will provide us a significant competitive advantage. We have successfully piloted global chili-sourcing projects, allowing us to diversify and scale to ensure we are well positioned to meet accelerating global demand. We're also expanding manufacturing capacity for hot sauce and heat seasoning across our global network. All of these investments position us well to meet the growing demand for heat. Now let's move to our guidance for 2024. We reaffirm all components of our 2024 outlook, which we just discussed on our January 25 earnings call. At the top line, we expect constant currency net sales between a decline of 1% to growth of 1%. Our expectation incorporates a reinvestment of margin expansion back into the business, and we maintain the flexibility to accelerate these types of investments if we see a greater opportunity to drive profitable growth. We expect investments to be concentrated in the first half of the year, weighted to the first quarter. We expect operating margin pressure from these investments in the first half and expansion in the second, including leverage from improved volume trends. Our 2024 outlook reflects our prioritized investments in key categories to strengthen volume trends and drive long-term sustainable growth while appreciating the uncertainty of the current consumer environment. We are well positioned with our cost-savings programs to fuel investments for volume growth as well as generate operating margin expansion. This balancing of margin expansion and investments to drive growth is critical to our success not only in 2024 but also into 2025 and beyond. To wrap up, we remain committed to our long-term objectives. Our confidence is supported by our proven track record, broad and advantaged portfolio and our robust plans. We are dedicated to improving volumes. We are prioritizing our investments to drive impactful results and return to differentiated and sustainable volume-led growth. We remain confident in the underlying fundamentals of our business and delivering on our 2024 financial outlook. With the breadth and reach of our portfolio, we are well positioned for continued success, delivering differentiated results and creating long-term shareholder value. I think we're about at time, Andrew. So we'll see you in the next room. Thank you, everybody.