A little more than three months ago, McCormick cut its outlook, citing high cost inflation and supply chain challenges. Now the flavouring giant is lowering it once more. Supply chain challenges, heightened costs, and tepid consumption are taking a more pronounced toll on McCormick than foreseen two months ago.
McCormick & Co. said supply chain challenges that are taking longer to ease and inflation that is impacting consumer buying habits are weighing on its business, prompting the company to trim its financial guidance in 2022 for the second time.
In a statement, CEO Lawrence Kurzius said the “normalization of our supply chain costs is taking longer than expected, pressuring gross margin.” He said the 133-year-old manufacturer of spices, seasoning mixes, flavorings and condiments “will be aggressively driving the elimination of supply chain inefficiencies.”
McCormick is not the only CPG being impacted by macroeconomic issues. Every food and beverage company is dealing with increased costs, heightened uncertainty, and changes in consumer buying habits that have impacted their bottom line and made planning increasingly difficult.
Brendan Foley, McCormick’s president and chief operating officer, said that people are looking for ways to stretch their food dollars, including using more of what they already have in their pantries and eating more leftovers. Shoppers are doing more planning ahead and looking for lower prices on the shelf. The shift has been especially pronounced during the last three months.
“Fundamentally, we’re seeing consumer behaviour change, really pretty significantly since the first half of ’22,” he said.
In addition to supply chain woes, McCormick is facing a moderation in some trends like baking at home that, while elevated, have eased “both faster and earlier than we expected.”