What Management Said
Read the full Q3 2025 transcript ↗Third quarter top-line performance was strong and marked our fifth consecutive quarter of volume-led growth, reflecting our differentiation and the benefit of continued investments in our brands, expanded distribution, and innovation. Due to the dynamic global trade environment, our gross margin was further pressured by rising costs. However, our effective execution on efficiency initiatives drove continued operating profit growth. We are executing with discipline on the actions within our control, while adapting quickly to the dynamics in the external environment and, at the same time, positioning McCormick for sustained long-term growth.
I will highlight some areas of success and the areas we continue to work on, as well as our growth plans. Marcos will then go into more depth and review our 2025 outlook, including an update on our tariff exposure and mitigation plans. In the third quarter, total organic sales increased by 2%, driven by volume growth, primarily in the Consumer segment, in line with our expectations. In global Consumer, organic sales growth was volume-led and demonstrated continued momentum across key markets and core categories in the Americas and EMEA.
However, our food service business, which is reported within China Consumer, faced softer demand due to slower consumption in certain channels, such as high-end dining. Despite this unforeseen headwind, we remain confident in a gradual full-year recovery in China Consumer for 2025. In global Flavor Solutions, despite soft industry trends, we grew underlying volumes as we lapped favorable growth related to the timing of customer activities in the prior year in the Americas. Softness in large CPG and branded food service customers' volumes was also more than offset by QSR growth in both Americas and Asia-Pacific.
- Third quarter total organic sales grew 2%, marking the fifth consecutive quarter of volume-led growth, driven primarily by the Consumer segment.
- Consumer Americas organic sales grew 3% on 3% volume growth, with spices and seasonings volume outpacing private label for the fifth straight quarter.
- EMEA Consumer organic sales grew 4%, with sustained volume growth despite 3% price increases tied to commodity cost actions.
- Adjusted operating income increased 2% as effective execution on efficiency initiatives and CCI savings drove operating profit growth despite gross margin pressure.
- Flavor Solutions flavors grew with new and private label customer wins and increasing reformulation projects, and QSR performance was strong in the Americas and Asia-Pacific while stabilizing in EMEA.
- Asia-Pacific Flavor Solutions organic sales grew 6% on 9% volume growth from QSR customer promotions and limited-time offers.
- Adjusted gross profit margin declined 120 basis points due to higher commodity costs, tariffs, and costs to support added capacity, coming in below expectations.
- Asia-Pacific Consumer organic sales decreased 1%, driven by softer China food service demand in high-end dining and catering amid austerity measures.
- Recipe mixes growth was pressured by increased U.S. competition, particularly in the Mexican Flavor category.
- Large CPG and branded food service customers continued to experience soft volumes, weighing on Flavor Solutions in the Americas and EMEA.
- Cash flow from operations through the third quarter fell to $420 million from $463 million a year ago due to working capital timing.
Guidance Changes
| Metric | Period | Current guidance |
|---|---|---|
| Organic net sales growth | Full year 2025 | 1% to 3%, expecting at least the midpoint (Maintained) |
| Adjusted operating income growth (constant currency) | Full year 2025 | 3% to 5% (Lowered 1 point for incremental tariff and commodity costs) |
| Gross margin | Full year 2025 | Flat (Lowered due to higher commodities and tariffs) |
| Gross tariff costs | Full year 2025 | Approximately $70 million (Increased by $20 million) |
| Annualized gross tariff exposure | Annualized | Approximately $140 million (Increased by $50 million) |
| Inflation excluding tariffs | Full year 2025 | Low to mid-single digits (Raised) |
Performance Breakdown
| Metric | YoY | Note |
|---|---|---|
| Total organic sales | Up 2% | Volume and mix, led by the Consumer segment, in a still-challenging consumer backdrop. |
| Adjusted gross margin | Down 120 bps | Higher commodity costs, tariffs, and capacity-support costs, partially offset by CCI savings. |
| Adjusted EPS | Up 2% to $0.85 | Increased adjusted operating income. |
| Consumer segment adjusted operating income | Up 4% (3% constant currency) | Sales growth and improved SG&A, partly offset by increased tariffs and commodity costs. |
| Flavor Solutions adjusted operating income | Down 2% | Lapping a strong prior-year quarter and increased tariffs and commodity costs, partly offset by pricing and improved SG&A. |
| Income from unconsolidated operations | Down 6% | Strong operational performance at the Mexico joint venture more than offset by a stronger U.S. dollar versus the Mexican peso. |
Earnings Call Themes & Trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Tariff exposure and mitigation | $50 million in-year, $90 million annualized | $70 million in-year, $140 million annualized, with targeted tariff pricing beginning in Q4 | Rising |
| Commodity cost inflation | Low single digits ex-tariffs | Low to mid-single digits, accelerating in Q3 as suppliers pause and pass through tariff impacts | Increasing |
| Volume-led growth strategy | Sustained over prior quarters | Fifth consecutive quarter of volume-led growth, prioritized while applying surgical pricing | Sustained |
| China Consumer recovery | Gradual recovery expected | Still expecting gradual full-year recovery despite food service softness, helped by retail growth and easier Q4 comparison | On track but bumpier |
| Reformulation demand | Noted in Q2 | Increasing projects shifting from synthetic to natural colors, reduced sugar and salt, supported by retailer additive announcements | Accelerating |
| E-commerce and channel shift | — | Accelerating e-commerce and club channel growth helping offset measured-channel softness | Growing |
Q&A Summary
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