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

All right. I think we're ready to go. Welcome, everybody. Good morning. I'm Steve Powers. I'm the Head of Deutsche Bank's U.S. consumer staples franchise. And I am thrilled to welcome back McCormick & Company to the Deutsche Bank Consumer Conference. With us today are Brendan Foley, President and Chief Executive Officer; and Mike Smith, Executive Vice President and Chief Financial Officer. There is no presentation today. We're just going to have a little chat, run through some of the key aspects of the business. And I will note that McCormick is in the quiet period, so we will refrain from going too deep into current trends as they're set to report earnings in a few weeks.

Let me start off, Brendan, with you. It's been, I guess, 9 months now, almost exactly, since you officially took over as CEO. I mean, as you reflect back, what would you say your key learnings have been? And is there any nuance as to how you perceive the strategic imperatives facing McCormick today versus when you first came into the seat?

Thanks, Steve, and hello, everybody. I guess maybe just to start out, McCormick has really a long history of just really strong performance, I think, in the market and especially in delivering volume growth. And when I did kind of come into the role about 9 months ago, I mean, there are certain things that we were going to be really consistent with. I mean the strategic imperatives of growth performance and people remain the same in terms of how we think about our business. We operate in great categories with certainly great -- nice, long-term tailwinds. And so that remains the same. But we certainly took a look at the business and said, we really want to make sure we get back to that history of volume growth overall in the business. And so that was important, I think, to make sure that we establish that. But looking back 9 months ago, we also said, hey, this is a different time. The environment in terms of how to operate is a lot different than it was pre-pandemic. And we felt like -- we decided we need to just really put a lot more investment into our business to make sure that we were getting back to that long-term, high-quality growth. And it was a lot about focusing our execution on these really core important bases, particularly in our core categories. And so that was a really important element that I'm glad that we really thought through. Reflecting back on that, if I was -- say, okay, over 9 months now we've put that in place, how do we feel about it? We really believe our business is headed in the right direction. We certainly saw that kind of reaffirm itself in the fourth quarter and in the first quarter. And so we feel pretty good about that. And as we thought, the consumer remains pretty challenged just due to the compounding impact of inflation. And we feel like we made the right choice to really invest and meeting where consumers where they are. And that was an important element, I think, of our narrative back in about 9 months ago, and I think it's still playing out true today. And we start to really -- we're seeing in our programs the right business results start to yield. And so we feel pretty good about the direction that we're heading in based on the way we looked at everything about 9 months ago. We continue to refine our plans. We continue to look at our investments to make sure we're putting in the right areas to drive that long-term growth. But as we look at the year, we still have a lot of confidence. As we go into the back half of the year, it's kind of set us up from a volume growth standpoint, particularly going into '25. And so that remains pretty consistent with what we think about things. I would say the other area, just reflecting back in the kind of the context of your question, is just people perspective. First of all, leadership angle. I took a hard look at how we were really organized from a leadership perspective. And what I chose to do is expand the operating committee to include other functions like the Chief Marketing Officer, Chief Supply Chain Officer, Chief Science Officer and IT. And that was a little bit of a shift for us, but I really felt like that was going to be important to really accelerate those voices to the table as we think about the effectiveness, there's a lot of decision-making and the speed at which we're going to move. And looking back, I feel really good about that, too, only because it's really only made us, I think, a little bit more effective. And we're just more agile as a management team because we've done that. The other element of it, we're putting a lot more time into communicating and cascading the organization strategies through the organization. I mean a big priority is just to be visible in every region throughout the year, and I think that's paid off. I'm doing that with our team. We're making sure that we get out to every region, every market and talk about the strategies. And I think spending that amount of time is also really paying off because it just lets people more empowered and more in line with what we're trying to get done for our year. So when we thought about a question like this, I mean those are the big things that came up, people and are we making the right decision to the front end of that first 9 months, and I feel like it's still the right decision today; I think in a lot of ways, they do. When we think about our long-term growth algorithm, the organization is excited. It's elevated, I think, the energy level. And our leadership team is really confident about our ability to hit that long-term algorithm over time. So this is where we stand today.

Okay. Yes. You touched upon this, but there's a number of priorities for '24. And the first of them is to strengthen the leadership position in your core categories on a global basis. If we drill into that a bit, give us some sense of how you're doing against that objective, how you're measuring that leadership strength and, ultimately, how you rate early success?

I think the first thing to call out is -- let's recall, we operate in great categories. So our foundation begins there. And I think it's an important element to just remember because not everyone gets off with great categories than we do. And that's something, I think, we're really making sure that we are not taking for granted. That top priority was to really establish even stronger leadership and differentiation in those core categories in which we operate in. And -- but I would say the nuance was to do so, though, with a lot more competitive edge and investment in those core categories. And that's just sort of been a familiar narrative and theme as we've been talking, I think, externally is to make sure that, that is really well understood. And so that [ became ] a big part of sort of that competitive attitude this year overall in our business. When I look now at some of those core categories that are worth talking about, I think in this context, first one, spices and seasonings, we really like the progress that we're making. But the investment is going into increased brand marketing. We're also driving renovation across that portfolio. And we're also driving a lot more innovation to the marketplace. We're beginning to recapture some of those distribution points that we lost during the pandemic. And also, we're putting more use of either price gap management or price pack architecture into our portfolio. I think the important thing is it isn't any one of those levers that's really driving, I think, the performance of that business. It's really a real -- a comprehensive sort of look towards that. And I think that's been giving us a lot of confidence to the direction that we're headed. We like the path we're on in terms of unit share right now as we look at that part of our business. Those trends will lead our results and then dollars will follow. But when you're focusing on volume, that's kind of an important element, I think, of how we're thinking about things. On condiments and sauces, we have a really strong foundation and base against that part of our portfolio, a lot of strong consumer loyalty. And so we fundamentally feel good about where that part of our portfolio is headed, particularly on the consumer side and branded foodservice. It's also receiving a lot of incremental investment as part of our category, too. I will say in the short term, though, there's definitely a couple of transitionary items that we're dealing with in that part of our portfolio, particularly on hot sauce. I think just more recently, like one of our competitors just finally got back into supply on shelf. And so that kind of messes with the numbers in terms of how we look at it. But from a price pack architecture standpoint, another transitionary element is just a lot more trial size is showing up on shelf. And so that's also played a lot of noise, especially from a unit share standpoint. But fundamentally, actually, our units are holding up year-over-year right now on that part of our business. And so we feel, fundamentally, we're still going in the right direction. And we expect that as we get into the second half, we're going to see the full effect of just increased advertising, a lot more innovation. In fact, we have a lot of strong pickup on innovation, particularly on the Frank's business. And we'll see increased distribution, too. So we really feel like that's also moving in the right direction, probably a little bit behind in pace of spices and seasonings. So that's really reflective of when the investments are actually hitting, I think, overall in the year. And from a supply chain standpoint, it's kind of important to call out we're pretty healthy there. Not everyone in the category is healthy, especially in hot sauce when you think about supply and key ingredients. But we've really done a good job of managing ahead of that overall. I would say on our Consumer business, in summary, in Q1, we [ reached ] progress that we made. We continue to make progress. And as we look towards the back half of the year, we're going to start to see -- drive volume growth during that second half, consistent with anything that we've said before. That leads us into, I think, sort of a strong foundation to '25. On the Flavor Solutions side of our business, we like the progress that we're making there, too, especially on the value-added categories like flavors and branded foodservice. In Q1, what we called out there was on our flavors business. We really like the fact that we're sort of outperforming the category in segments like alcohol, beverage and performance nutrition overall. So that feels like it's moving in the right direction. In branded foodservice, we're gaining share in spices and seasonings, winning more tabletops with Frank's, and that's just part of the process. That's so important to have our brand in front of the consumers in the away-from-home category. And so we like the progress that we're making there. So having said that, though, and it's really been widely reported, there still is, I think, with our CPG customers and QSR customers, a reasonable slowdown and, I think, in just in terms of overall their volumes. So we're working through with them and collaborating on how we navigate through this, but it's not a long-term issue. It's really -- I think we'll be staying in business. So I would just say again, we like the progress that we're making. The early signs that we're seeing are positive. This is a year of investment. We feel really confident about those investments that we're putting to business, and I do think it sets us up for long-term growth.

Great. As you went through the business, you highlighted what you've long described as McCormick being a different kind of flavor company with strength and a strong footing on both the Consumer segment and Flavor Solutions and how those 2 things usually reinforce one another. Can you talk a little bit more about how that works in practice and maybe help make it come to life better for investors in terms of why that is a point of differentiation and a point of advantage for McCormick?

Well, first of all, I always kind of like to point this out, we're probably one of the few, if not the only company that sort of operates end-to-end in flavor from our Consumer segment all the way through the flavor industry. And that's a unique vantage point for core McCormick, and it is kind of one of those things that sort of sets us apart and differentiates us out there. If you want to be in flavor, it's kind of like a good place to go, right, because you're covering the whole range. Personally, I'm super passionate about the complementary -- the way we complement -- or the complementary strengths between our Consumer and Flavor Solutions business. It comes through the scale of the categories in which we operate in, the insights that we're leveraging between both categories as well as the technology and the ideas that we are able to execute to both segments. And that kind of underpins really how to look at it. We're broadly in flavor. In our Consumer business, I mean millions of people kind of look to cook with us in their kitchens and we have brands that they can trust. But also on the Flavor side of our business, that broad knowledge of flavor translates into we power the flavor of some of the most iconic brands in the world. And so we really do have a very firm footprint in both and it's really, I think, profound. It's a business model that allows us to really leverage scale and insights and also scale and sourcing and also technology in a way that we can drive synergies between both. Now I'll give you maybe an example out of each area with that. And this is like one of those things, I think, in our business, Steve, that we're continually looking for those examples that resonate with people because it's often been the kind of the hardest part to understand like why we're so excited about it. One of the areas when I think about insights, and I'm just using a more recent one, it's about how we engage in insights and trends and then kind of move into innovation for both segments. So in our management team, I've made it a priority that we all really engage in trends and innovation directly. And the reason why that's so important is 1/3 of our sales growth algorithm is innovation. So if our leaders aren't engaged in that, then shame on us, right? And so it's really important that we're all really engaged. And so one of the things we do is we often meet and, in fact, we just had this meeting 2 weeks ago, we sit down and we kind of go over the latest trends and insights that we have and think about how those might translate into innovation in those segments. And we view this as a leadership team. That's also happening throughout the organization, but it comes to life as a leadership group. We're talking both segments at one moment behind a particular trend or a particular insight in the marketplace. And this is something that I think really just feel the way you think about the business. So if I could sort of place you in McCormick for a day, that's kind of what we're doing all the time. So we're having conversations about both segments all the time. It's not siloed and separated as one might think it might look like, and we eat really well at McCormick. Yes, we do. But it's important to show that's going to translate innovation for both the Flavor Solutions customer or our Consumer segment. I mean just this last meeting, a lot of it had to do with -- about 3 or 4 years ago, we came out with our Flavor Forecast. We hit really hard sort of the things that we were thinking were going to start to kind of start to mainstream in a couple of years like Korean flavors like gochujang or it might be even Middle Eastern flavors like za'atar. And just in this last meeting, we're talking about how we're seeing those mainstream now in our innovation with both Flavor Solutions customers and our Consumer business. This is how that comes to life for us. Another way when you think about scale and bringing together a platform and making it scalable, think about our heat platform. It's about 20% of our business in terms of sales. The interesting thing is the greater share of that actually happens in Flavor Solutions. You might initially expect, oh, it's all hot sauce; not necessarily. And so this is a platform that we really believe that we're uniquely positioned to win with global brands, our science and technology, just our scale and figure how we operate. And so it allows us to kind of create a scalable opportunity because we have those segments overall. And so that expertise might come through in terms of overall insights. Just in the last 20 years, we probably have announced like 50 hot flavors that have really come about. They're all very different. When we think about science and technology, our scientists are really proficient at being able to kind of transform like a form of heat or one form of heat to another, like from a raw ingredient into something like going to a flavor. Or when you think about scale in terms of sourcing, we've operated for decades in places like India and Mexico, where we're sourcing chilies and peppers. And so we have a deep understanding of that, and it's well before we even did the Reckitt -- the RB acquisition. So these are things that really do come together as a strong synergy in terms of how we operate in heat overall. And we're also a hot sauce company, right? So I say that for last just because it actually -- we kind of perceived that and built up from there. And this is an area in which we really do have a lot of strength. And I'll just throw out one other example because we're trying to also hit technology. There's technology that comes from our Flavor business and one more recent one is called TrueTaste. It actually came from the acquisition that we did with FONA. And not only are we able to use that with our customers, there's a real proprietary element to that because we don't have to use high heat to process the flavor. So it can mean a lot more flavor. But we're also able to use it with some of our Consumer products, too. So there's synergy between both segments where we're using that technology and commercializing with our customers. We're also seeing applications within our own portfolio. Every time we're going to talk -- we're going to try and come up with a new example because it's just stuff that we live every day as we think about how...

No, those examples are helpful, very helpful. So I want to pick up some of the business trend topics that Brendan mentioned with Mike. But before I do, you talked a lot about consumer insights. Kind of looking more near term, one of the questions that I know investors are asking is why we as an industry aren't seeing more -- well, we're not seeing kind of some of the weakness that you talked about at foodservice translating to better at-home demand. Does McCormick have a perspective on that?

We do. First of all, I think we do get a chance to do a lot of proprietary research on our own. It might sort of -- it's probably at least every quarter, we're doing our own surveys at a global level because there's a lot of markets in which we operate in, and we want to see how globally present some of these teams that might be here in EMEA, like the global or in the U.S. It might be global overall. When we think about the consumer today, we still believe that consumer is exhibiting a lot of value-seeking behaviors right now. If anything, I think we've seen it start to pick up. In our latest research, what's starting to kind of show a little bit more stress is that lower- and middle-income consumer. That's definitely come through in a lot of our research more recently. And so we see them sort of really exhibiting far more value-seeking behaviors than we did previously. And so that's kind of like a consumer count. But then you look at the food-away-from-home market and, yes, our traffic seems like it's shrink a little bit compared to where it had been and even happening in parts of the channel. Like QSRs typically are quite strong during this period of time. And so we definitely see a little bit of slowness in the food-away-from-home market. And we do believe some of that volume should be over into retail. But everyone's question is, well, how come [ we're not ] seeing more of it? Our perspective on this is it's really -- it's a slow transition. And the reason why that is, is I think one of the things that popped up in a lot of our research that we did was a lot more financial anxiety in these last couple of months, particularly in the U.S. We didn't see as much globally. It's been more consistent there. But we definitely saw a spike in the U.S. And so I just said, I think consumers are just being that much more careful. I think that transition will happen, but it's just happening, I think, a little bit more slowly would be my judgment based on the data that we're taking a look at overall. But this is not -- this is a view that doesn't necessarily contradict the way we thought about the year. Yes, we thought there would be bumps along the year. I could never predict when they would happen. But we had to go in there and say, it's not all going to be great. And so we kind of took a broad view of how we thought the consumer was going to operate this year. And I think it's largely playing out as we might have expected, even though it feels like these last couple of months may have been a bit more strained, particularly in the U.S.

That's consistent with some of the consumption data, I think. Okay. And that's a good segue, Mike, from your perspective, as Brendan said, Q1 was a great start to the year. Some bumps as we move through the second quarter, but guidance was set prudently from your perspective. That was your -- that was a description of the guidance, I'm sorry. So with all that, like from your perspective, in your seat, how do you think the business is performing across both businesses, Consumer and Flavor Solutions? And how would you assess your confidence in that second half inflection that we've been looking for in terms...

Yes. When you think a little bit about the journey here, I think last year, we did have a nice sequential improvement in volume mix through a couple of quarters. Fourth quarter was a little bit of a challenge, as we talked about. Still had a good 2023, but we intentionally decided we're going to make investments in the business really in the first half to drive volume. The pivot from the pricing environment over the last couple of years, the volume is really critical for us. We've done it in the past, but we wanted to make sure we did in the future with these incremental investments that we're really driving in the first half. From my perspective, and Brendan gave a little bit of insight on where the macroeconomic environment is, the Consumer business is really making good strides. The things that we've done, investments in price gap management, the advertising we spent is really yielding results. And we do see that sequential improvement continuing into the second half as we thought about it even with some of the factors we've seen. In the Flavor Solutions side, we talk about Flavor Solutions a bit as a lot of -- it's a bit lumpy. A lot of it is dependent on when promotions and things that are being done, so you'll have some quarter-to-quarter noise. What we're seeing, though, is additional pressure in Q2 on the QSR business, some of our CPG customers, as we talked about. In the context of the whole year we took, we did prudent guidance. And this is another example of where we kind of looked at the environment and said there's going to be some things that go well, some things that don't go well. Second quarter in the Flavor Solutions is going to be a bit challenged. So just to give you we're in a quiet period now, two days into the third quarter, but when we look at the volumes and that side of the business on a short-term basis probably being down low-single digits to mid-single digits for this quarter. However, as Brendan said, we view this as kind of medium -- in the medium to long term, still really good business. Our customers are acting very quickly to track these things. And you can walk down the street and you see some of the QSR customers with EUR 5 of meals and things like that. So that will drive volumes, we think, later in the year, but it is a bit of a first half, second half story. But broadly, we feel good about our prudent guidance.

Okay. And what's the -- I mean this has been both way on this one. But in terms of the costs to get that volume recovery -- and the cost is not exceeding what's in that prudent guidance. You talked about value-seeking behavior, moments of anxiety in the U.S. consumer, some softness. What -- and obviously, you've been investing to drive that volume. Have your -- has the cost that you think will be required to stimulate volume growth in the near term gone up? How you're thinking about that? And how do you think longer term about the rates of investments, if it's sustainable?

I always like thinking about McCormick in a long term because the last couple of years, and I've been at McCormick over 33 years now, meaning the broad-based, high-level inflation is something [ we've never seen, quite frankly ]. And those 2 years to me are the anomaly, and we had to act quickly, take pricing, get that through. Our CCI or cost savings programs couldn't cover that. So we price the cost. But longer term, if you go back to the 2012, '13 to '19 time frame, we were differentiated through our volume growth. And in those normal-life environments, we might have had low single-digit inflation or mid-single-digit inflation. Our cost savings program drives the ability to grow margins while investing in our brands. So we're an investment company to drive growth. We've invested more and more in A&P over the years because we get a positive ROI. So I look at -- as we pivot back to volume growth, these investments we're making, we've talked about the first half of the year really stepping up things like A&P or price gap management or innovation, R&D support. These are things we need to do to get to the next level. And we're doing -- constantly doing test and learn to make sure they're effective and we're measuring things. But we feel really good about the investments. Some of those will continue, things like A&P. We're at a level now where we're getting to the CPG best-in-class. And we rigorously measure ROI. I just sat through a marketing mix modeling study a couple of weeks ago with our global marketing team. And frankly, I was so impressed with the financial discipline, they're bringing back every incremental A&P dollars. So we're making sure we're getting the bang for the buck there. But some will be part of our just normal ongoing expenses to revenue management and things like that, some of the price gap management activities.

Okay. I mean if there's -- maybe a little bit, if you're able to, just talk a little bit about how you -- because I think you're investing, as you say, I think it's about $80 million in fiscal '24 across marketing and digital investments and innovation support. How are you measuring the ROI on those things? If you -- do you think you can elaborate for us? And then just the belief you have in the capacity for those investments to continue beyond the current...

Yes, if you think about the $80 million we laid out at CAGNY, we've been very discrete about that and talked about how it was really front-loaded to help us pivot to the volume world. In A&P, it was a large one. Obviously, we talked about that and the rigorous methodology we have about measuring ROI, whether it's traditional spend or digital spend. And we've been a leader in digital spend over the year, so continuing to double down on that. Price gap management, Brendan talked about some of the -- we did a bunch of test and learn in the third and fourth quarter, and we've seen success really in the spices and seasonings category, growing volume, growing unit share. Those are things that we haven't had for several years. So that's, again, the ROI on that, we see it be very positive. And we're continuing to test and learn and expand that as necessary. And we talked about ramping that up in the first and into the second quarter. A little pressure on margins in the first half, but you're seeing the fruits more so in the second half. Innovation, I mean, investments in R&D, innovation is 1/3 of our growth algorithm. And during COVID, grocery stores didn't want innovation. Now it's really turned. The consumer, even though they're under pressure, does an innovation. And things like our Frank's squeeze bottles, I mean they're getting huge ACVs, and we see that's a reason to believe in the second half. And again, that ROI you're getting in that investment, keeping the category fresh is really important. So we think those are good investments, some will continue. But we have a history of our CCI program really driving cost out. I mean, frankly, A&P were really -- A&P is up over 10%. But through CCI savings, we're able to optimize A&P spend to high single digits. So we're looking at every line of the P&L to help fuel growth. But that's the way we've done it for a long time.

And just to build on all the points Mike is saying about, just our investment profile, we are investing and putting a lot of focus on what it looks like at shelf overall. And I think it's important that -- a familiar phrase, I think, over the course of like the last 2 years was it's -- you ask, this is lower than historical norms. I'm not sure it's really relevant anymore, and it's not relevant because there's just this compounding impact on inflation and things have really changed. And so when we look at our categories, we're also looking at it in a very refined way. We've got a really sophisticated category management and revenue management. We're always trying to benchmark ourselves by what everyone else is doing out there. And so we get a lot of good feedback there, but probably at a really strong leading edge. And so it allows us to really assess where do the price points sit right now and are they in the right spot. I would say there's parts of our portfolio, maybe like in condiments and sauces [ have created its own naturally ]. And maybe parts of spices and seasonings, the same thing is true. But there's also parts of that portfolio that we're definitely [ inelastic and focus ] on sauce. So those are areas that we said, you know what, we're going to have to look at them, a much harder look at that, and we did it in a really prudent way. Overall, we take a very SKU-level look at what we do and we take a look at pricing because every item, even every size has some elasticity component. And so we're taking a look at that and just judging on what's going to really drive volume growth across the whole portfolio. And in doing so, we kind of ended up with about 15% of just the whole portfolio really needed a little bit of that surgical approach and say, you know what, let's make sure we're not sitting there uncompetitive when we think about pricing overall. But again, it's part of a whole comprehensive look at all the levers that we're using, many of which Mike talked about, whether we take the innovation overall. And then this combination of price pack architecture, like with our [ Wylie plant ], we're seeing a lot of progress with that. But also in price gap management, it's almost, in a way, just sort of really call what needs to happen in terms of shelfing. We took a very prudent look at it.

We feel good about the investments. As you think about our long-term growth algorithm, operating profit margin should expand about 40 basis points in the year. This year, with sales growth relatively flat, we're actually in the middle guidance about 80% -- or 80 basis points. We're investing in that $80 million of incremental. We are having some CCI, the GOE, the Global Operating Effectiveness program is incremental savings this year to help fund that. But we see a long-term algorithm that's so valuable even -- or still in line even if you do have to spend up on some areas.

Okay. And the price correction, the price investment, as you sit here today, have -- are those enough? Or is there a risk that we need to make more price investments, especially if the consumers' anxieties continue?

I think we have a really good view of what needs to happen in '24. It's hard to sit here today and tell you what I think needs to happen in '25. But we have a really good view of it. And what I would say is if -- and sometimes we test something, it doesn't work, and so we know not to go any further with it or we'll pull back on it and say, you know what, they didn't really have an impact really in Q4. We're always reassessing and modifying that. But I think we have reasonable results against this to give us confidence that we've got the right layer right now.

Okay. Very good. It wouldn't be a conversation with McCormick without talking about M&A. So we're going to -- we'll go there. Obviously, there's been a long and successful track record of not only returning cash to shareholders, but successfully pursuing value-accretive M&A, both on the consumer side, you talked about Frank's, French's, et cetera, but also within Flavor Solutions, you mentioned on it earlier. I guess from here, how would you -- given everything that you got going on in the moment organically, how do you frame the appetite for incremental M&A at this point? And how do you judge the landscape for those...

I mean the nice thing, yes, where we stand now, look at the last couple of years, we've made some really good acquisitions and our debt to EBITDA was at a level that we couldn't do M&A. But now we're getting to the point of paying down our debt or 0 working capital program is yielding results or EBITDA is coming back. So we're ahead of our target. So we have optionality now in that as well. There's a lot of work going on in the core business, and we don't have to do acquisitions. So we really like the businesses that we're in and the category. But obviously, a third long-term growth algorithm is bolt-on acquisitions. And the acquisitions you mentioned like Frank's and French's, they make us want to buy more. I mean they're really successful acquisitions. We know how to integrate them. We do a lot of financial due diligence on these things, not only financial, but just commercially and supply chain, how are we going to run that. So I think we're really good at getting a business, understanding it and then hitting the ground running with it. So if we look at a high level, our strategy really hasn't changed, really, for a long time. I'm the CFO for almost 8 years, but we match it against our strategies that we look at to make sure we're a growth company, it doesn't dilute our sales growth, it helps our operating profit margins. It may give us more capacity operations like on the Flavor Solutions side and technical capabilities. It can give us more scale in certain markets. So at a high level, those are the attributes we look at around -- it's really the end-to-end flavor that we're really focusing on. I think, Brendan...

I mean we like the mix of our business right now in terms of Consumer versus Flavor Solutions. But any acquisition really has to kind of serve the need of delivering an end-to-end flavor. We remain, I think, pretty disciplined that we want to stay in those flavor categories. On the Consumer side of our business, it might look like another spices and seasonings assets somewhere globally. It could be more condiments and sauces, too, somewhere globally. Those are things that would fit pretty obviously, I think, as you think about our portfolio. When we think about the Flavor side of our business, it is the type of asset like a FONA, which gives a lot of opportunities to support either -- on capabilities, technology or even customer access. Going back to the Consumer side of our business, we're looking for brands that really have the ability to either be expandable or very strong. They're not only meeting the margin requirements that we're looking for, but we're also able to really take it to another level. We think about like what we're doing now with Cholula. It's a primary example over Frank's of how we're able to take these brands and kind of bring them into other flavor categories. But also they have to be complementary to our portfolio, and we have to be able to kind of really drive growth in some way, either through the distribution or just really kind of getting behind supporting the businesses. When you think about how we're growing French's as an example, probably it wasn't loved enough, we're going to love it. And that is an element of where we really find our sweet spot. I think with FONA, going back to flavor, that's another area where we really found our sweet spot where it kind of serves to [ eat at one time ]. And technology, capabilities, customer access in places that we didn't compete in before, so these are the areas that we're operating in.

Is the -- I think the attractiveness of flavor enhancement as sort of an umbrella category has been talked about by other companies as well. Is the competition for assets, either today or in the future, do you foresee the competition for assets that do come in, is it going up and the cost of doing those acquisitions rising? Or is it more steady state?

I'd say there's always been a competition for high-quality assets if you think about it that way. But I will say, at McCormick, we do a really good job. We always talk about the 1,000-asset targets out there that at some point some will come right and [ pounce ] on them. But we develop long-term deep relationships with people who run private companies. It might be the founder who's run a certain brand or FONA was that way...

It's a 4-year relationship.

4-year relationship we've built over time and it was the right -- at the right time, came to us and didn't have an option. Other brands like Cholula, it just depends. But we feel generally, the assets and the competition has always been there. So I mean, hopefully, valuations -- we always like valuations to be down to some degree, and I think they probably have moderated a bit. But for good assets, there's going to be competition.

Okay. Brendan, I'm going to give you the last word. But Mike, one thing I wanted to ask earlier and I missed it, you talked about some of the pressures that we're seeing in Flavor Solutions and foodservice go through the current quarter. Is that changing at all your perspective on the ability to drive margin improvement in Flavor Solutions? That's been a key focus for...

I mean it's something -- if we look holistically, we have margin improvement building across the business. Obviously, depending on volume and absorption and things like that, it could put a little extra pressure on the Flavor Solutions business, but that's something as we go through our discussion at Q2 and our forecast process [indiscernible].

Okay. Brendan, I said I'd give you the last word. We've got a couple of minutes left. We've talked a lot, but I want to leave you with the opportunity to just express to investors, what are the key takeaways that they should leave with as they think about McCormick as an investment opportunity?

Thank you. I appreciate the opportunity. I think if I were to leave everyone with just a couple of key messages, one, think of McCormick as a growth company. And we're just fully committed to really continue to drive that leadership and differentiation that we've always really enjoyed, I think, in the categories in which we operate. And as you look at even just this current year, we're executing on really proven strategies that have driven our business. A lot of this is getting back to really the cycle with how we really operate the business. After a lot of disruption, we're really feeling like we're getting back to where we need to be, I think, in terms of those proven strategies. We operate in really great categories. So it's one thing that we didn't take for granted and they're supported by really good long-term trends. I mean consumers wanting to eat in a healthy way, the lift of flavorful cooking, they like to do flavor exploration. And these are things that support our category. But I think the nuance is we're not just going to rest on that. We really have to be very focused on making sure that we're driving significant leadership and competitive posture even in these categories in which we enjoy really strong leadership right now, but just not resting on that, I think, is probably a perspective that I would share. We remain very dedicated to improving volumes in '24. I think you see that in kind of our continuing momentum as we're building on that. And it only should help to continue to improve and sort of the back half is what we've called, at least also into 2025, I think, is just a more stable framing profile of how we're growing the business. So that's really important to us. And we're really committed to delivering on our long-term algorithm. And recall, that long-term algorithm includes really healthy organic growth, which is driven by volume. And that's what's been our algorithm historically, plus complemented by acquisitions. And so this is an element, combined with good margins in attractive categories, we think creates a really nice story in terms of long-term growth and high-quality growth, particularly in an area where we're very uniquely competing in the categories in which we operate. So those would be the final points I would leave with everyone. The things that I think about all the time is making sure that we're staying true to that in everything that we do, and that's definitely the case.

Okay. Good comprehensive wrap and it was to the second almost. So I thank the...

Well, [ we're limited to get it ] in 10 seconds.

Thank you, Mike. Thanks, McCormick. I thank all of you for participating. I wish everybody a great conference. Thanks again.

I appreciate it.