Mccormick & Co Inc Vtg Com Stock

So I would like to welcome back McCormick to our conference. And with us today are President and CEO, Brendan Foley; and CFO, Marcos Gabriel. Welcome, gentlemen. It's truly great to be back with you in Boston.

In lieu of a fireside chat, Brendan and Marcos will be walking us through some prepared remarks. So Brendan, over to you, and then we'll take it to the breakout afterwards. Thanks again for being here.

Thank you, Andrew, and good morning. It's a pleasure to be back at the Barclays Conference in Boston. I'm going to flip to this next slide. Before we begin, I think we have to. Let me first acknowledge the forward-looking information. Great. There we go. Make sure everyone reads that word for word.

With that noted, today's presentation is organized around 4 key themes that reflect the strength of our business and the opportunities ahead: First, we'll highlight how we're building on a strong flavor centric foundation grounded in our leadership in flavor, our advantaged portfolio, and the trust of brands and capabilities that differentiate McCormick; second, we'll discuss how we're expanding our flavor of focus and growth opportunities through the combination with Unilever Foods; third, we'll cover how we're preparing for integration and synergy capture. And with a focus on disciplined execution, operational readiness and the actions needed to unlock value as we bring the capabilities together; and finally, we'll address how we're supporting value creation and deleveraging and reinforcing our commitment to strong financial discipline, cash generation and long-term shareholder value.

Together, these themes frame the conversation for today and demonstrate how we're positioning the business for sustainable growth, stronger execution and continued leadership in flavor. Let's start with an introduction to McCormick. At McCormick, we create and deliver flavors that enhance the taste of food and beverages. For nearly 140 years we've been focused on our purpose to make life more flavorful, guided by our vision to be the most trusted source of flavor across food and beverage. Our portfolio includes leading brands in the flavor industry. Household names that consumers trust for their quality and taste, and they are trusted by our customers.

In fact, globally, McCormick flavors are enjoyed by nearly 0.5 billion people every single day. This speaks to the power of our brands, the flavor they deliver, our capabilities, reach and our growth potential. We serve a broad range of customers and operate across every channel from traditional brick-and-mortar to e-commerce and from Food Service to CPG customers. We operate in advantaged categories across both of our segments, and they continue to project strong growth.

In our consumer segment, we offer products at every price point from premium to value to meet all needs. Our brands have been part of kitchens and families for generations. And we continue to innovate, and we are winning over younger consumers. Who are shaping new cooking and eating behaviors and many aligned with health and wellness trends. In flavor solutions, we flavor some of the world's iconic brands as well as fast-growing emerging brands and private label, making us a key part of the innovation that guides the food industry.

Our two segments complement each other, and this reinforces what differentiates McCormick. The scale, insights and technology, that are leveraged from both are meaningful and uniquely position us to cater to the entire flavor market and shape its future direction. Flavor is one of the most attractive, fastest-growing categories within food. It is underpinned by structural tailwinds and offers meaningful runway for the company to capture future growth. It is the #1 purchase driver across cuisines, occasions and demographics. It transcends age, culture, dietary preferences and income levels, making it both resilient and highly relevant in a dynamic consumer environment.

We are differentiated among food and beverage peers and let me explain how. Others compete for calories every day. We flavor them. While many peer companies compete across multiple categories every day, we are intentionally focused on flavor, enabling us to be present in every consumption opportunity. Our differentiation lies in where and how we compete as preferences evolve and calorie shift, the demand for flavor continues to grow. And McCormick is uniquely positioned to capture that growth. We see the world of food and beverage through the lens of flavor. We deliver it more broadly and more deeply than anyone else.

Our portfolio of herbs, spices, seasonings, condiments and sauces is strongly positioned to support today's health and wellness priorities, the continued appeal of cooking at home and emerging flavor trends. Gen Z, who are new and future consumers over-index to flavor. They are leaning into and exploring higher quality premium global flavors and they're looking to create those restaurant-quality meals at home. McCormick is a global leader in flavor with strong scale, category expertise, innovation and consumer insights.

Our growth strategy focuses on advantaged categories, productivity through CCI and targeted investments in high-return opportunities supported by a resilient business model operating across environments. That resilience remains important today. Let me use this moment now to provide an updated perspective on the current environment. Starting with EMEA and Asia Pacific, we are seeing a continuation of strong performance led by our consumer segment and continued strength in McCormick de Mexico. In the Americas region, the consumer backdrop, particularly in the U.S., is increasingly challenging.

We are managing through uneven category and channel dynamics, which have become more pronounced recently. Across the U.S. food industry, we continue to see volume declines. Consumers remain under pressure, and we are making deliberate choices and making deliberate choices to stretch their budgets. We are seeing behaviors such as using more of what's already in the pantry, making meals from leftovers and looking for simple, affordable ways to add flavor at home.

These behaviors reinforce the relevance of our portfolio, particularly in Herbs, Spices and Seasonings. We are encouraged by the signs of progress from several of the growth initiatives we outlined in our last call, including revenue growth management, targeted value marketing and innovation alongside expanded distribution. These actions are helping to drive consumption improvement in our core categories, even in an increasingly challenging backdrop. Specifically, our consumption trends are meaningfully improving in Herb, Spices and Seasonings and Condiments and Sauces, including hot sauce.

These are indicators of continued consumer engagement with flavor and at-home meal preparation. At the same time, we continue to work through categories such as recipe mixes and other parts of the portfolio where performance remains pressured. We are encouraged by the recent momentum in core categories. Our shipments for the quarter roughly reflect our improved consumption. In flavor solutions, we continue to see solid organic sales growth in the Global segment. Although we now expect the mix of growth to be more pricing driven with flattish volume. Softer trends in the U.S. are impacting some of our customers, primarily QSRs and some food manufacturers.

Even with this near-term softness, the segment remains well positioned through reformulation and innovation supported by customer relationships, technical capabilities and flavor expertise. Overall, our plans and initiatives are designed for these conditions, and we are moving in the right direction, and we remain on track with our outlook for 2026. Grounded in the resilience of our model and long-term growth strategy, we are looking ahead to the next chapter for McCormick with Unilever Foods.

M&A has been an important part of McCormick's long-term value creation model and a capability that has been proven over many years. It has strengthened our leadership and flavor, expanded us into advantaged categories, build scale and enhanced our capabilities across both consumer and flavor solutions. Over the past decade, acquisitions contributed approximately 2 points of growth on top of a 4% organic sales CAGR in constant currency, while also delivering synergies, earnings accretion and stronger brand equity. Importantly, our integration playbook is repeatable, tested and grounded in strong strategic rationale and proven value creation.

Building on that proven playbook, the transaction with Unilever Foods represents a compelling next step in McCormick's journey as a global flavor leader. We're making good progress on the transaction. And as previously noted, today, we are sharing additional context on growth, synergies and integration plans. Starting with the strategic rationale. The transaction strengthens our competitive advantages and creates a pure-play global flavor leader with $20 billion in sales.

Together, we will have an expanded portfolio of globally recognized brands supported by industry-leading investment. The combined company will also have a balanced geographic profile and a more diverse global distribution to bring these brands to market. We see multiple levers to drive growth, supporting margin expansion and enabling continued brand reinvestment. We also see meaningful cost synergy that will support reinvestments as well as earnings accretion by year 1 post close. This is about building a stronger global flavor company with focused scale in attractive and growing categories.

We are also excited about the operating model we announced in July led by 4 divisions, each with compelling growth outlook. This model is designed to place consumers and customers at the center of the combined business, enabling disciplined execution, enhanced innovation and sustainable long-term growth. Our talented future executive team brings together proven leaders with global experience from both McCormick and Unilever Foods. This team is 100% focused on flavor and I'm confident that they are the right executives to lead McCormick into the future. The power of our combination with Unilever Foods is that it strengthens every part of our flavor platform.

It brings together greater scale, stronger insights and more innovation across global, local and high-growth brands. That helps us respond to consumers, innovate across categories, expand winning brands and capture more growth across channels and geographies. As all elements accelerate, they create more opportunities to reinvest and continue building momentum. The result is a stronger flavor position and a more powerful engine for attractive sustainable growth. Turning to the growth levers within that platform. After further analysis, we have refined our growth agenda and enhanced our view of how we plan to capture growth.

We expect to deliver growth synergies through 5 key priorities: First, to win where we lead by strengthening commercial execution and accelerating growth in key countries such as the U.S., France, Germany, Brazil, Mexico and the U.K. We've assessed the key markets, the key categories and brands with the greatest opportunity, and this is important for near-term revenue growth; second, to bring our brands to more homes globally by using the combined footprint and routes to market to expand high-growth potential brands like Maille and Cholula. There are significant white spaces for these brands, and we intend to pursue it; third, to shape the future of flavor by pairing McCormick's and Unilever's flavor expertise, consumer insights, R&D and digital capabilities to drive scalable innovation across the portfolio; fourth, to capture the Global Food Service opportunity by bringing together McCormick and Unilever's complementary capabilities and networks; and finally, strengthening our flavor capabilities and customer co-innovation to become an even stronger partner to leading and emerging food brands.

Together, these combined capabilities will help us capture the trends that support long-term growth. We expect the full opportunity to develop in phases. Year 1 will focus on strengthening, integrating and prioritizing the highest value opportunities. Year 2, on scaling early wins and accelerating innovation, and year 3 on delivering sustainably higher growth from a stronger combined platform and then continuing to build on this improved growth. The transaction improves our geographic balance.

Post close, our emerging markets contribution increases from about 25% to over 40% of revenue. We are excited to have exposure to these higher growth regions and well positioned to leverage the brands and capabilities of both companies to further strengthen our combined positioning. It gives us greater exposure to markets expected to grow faster than the global category with growth supported by strong underlying consumer and category fundamentals. It also creates a more diversified business with balanced presence across North America and Europe, and with increased scale in regions like Latin America and Asia Pacific.

Overall, the combination strengthens our long-term growth profile positions us in some of the most attractive and end markets globally. Flavor is ubiquitous, yet highly local, by distinct consumer preferences across geographies and markets. Building on this foundational understanding, we validated the parts of the portfolio that will drive the strongest growth -- volume growth. Herb, Spices and Seasonings, bouillon cooking aids, mayonnaise and hot sauce.

In Herbs and Spices, there is continued growth in established markets, and the combination gives us solid growth into attractive white space markets where McCormick has limited presence. By leveraging Unilever's established footprint, we can strategically build in high-growth countries over time, expanding the category through McCormick's flavor leadership, innovation and broader product ranges, household incomes and consumption occasions grow.

And in bouillon and other cooking aids, the opportunity is to win bigger in a category that is closely aligned with meal building, value, convenience and everyday cooking. This is an underappreciated category with durable structural tailwinds. Across emerging and developed markets, consumers face increasing time pressure from urbanization, workforce participation and value-seeking consumption. At the same time, they are still seeking flavorful meals rooted in culinary traditions that requires slow-simmered stocks, complex spice spaces and labor-intensive preparation. Bouillon is uniquely positioned to meet that need. It delivers depth of flavor, consistency and time savings.

Often for just pennies per serving, it helps consumers build flavor quickly across everyday meals while also helping stretch ingredients and value-conscious environments. Strategically, this expands our presence in the everyday meal building moments with Bouillon at the core and extending into soups, sauces and other cooking aids, enabling consumers to build the meal, not just to finish to season the finished plate.

Knorr brings leader -- global leadership, strong brand equity and deep local capabilities, while McCormick brings flavor and health and wellness expertise. Together, we believe there is an opportunity to modernize the Knorr brand and increased innovation and investment behind it, with growth across cube, powder and protein-led flavors and broader cooking aids formats, further strengthening our position at the center of everyday meal preparation around the world. In condiments and sauces, we see a large and attractive platform, particularly across mayonnaise and hot sauce.

Both categories have similar tailwinds, including growing household penetration, especially with younger consumers. Both provide a runway for growth through flavor innovation, new usage occasions, premiumization and broader global expansion. In hot sauce, you are all familiar with our growth plans in this attractive category, which will be further amplified.

In Mayonnaise, the category has shown consistent volume growth over the last number of years. The increase in U.S. household penetration since 2019 has been driven by younger generations. And these consumers are broadening usage, pointing to opportunities across cooking and meal occasions. We are seeing continued M&A growth in other developed markets.

The Hellmann's brand brings global presence, strong brand equity and sustainable growth, and we see further opportunities for more product innovation to continue winning in this category. Food Service is one of the biggest opportunities in this transaction, and we believe it remains underappreciated. At close, we will stand up a global -- a dedicated global Food Service division. The combination creates a scaled platform with stronger capabilities, broader reach and more growth potential than either business had on its own.

The geographic unlock is significant. Unilever Food Solutions is already established in 75 countries where McCormick has limited or no Food Service presence in 51 of them. That gives us an immediate path to bring McCormick's flavor capabilities into attractive new markets. Our capabilities are complementary. McCormick brings distributor relationships and flavor expertise. Unilever brings operator relationships and global reach.

Together, we can go to market with a stronger, more complete Food Service offering. And we see clear growth areas: expanding Unilever Foods in the U.S. through McCormick's customer relationships and accelerating McCormick's growth in Europe through Unilever's footprint. In addition, we see China as a very compelling opportunity given the complementary nature of our geographic presence. Food Service becomes a scaled global growth platform with meaningful white space and a much stronger right to win.

And now I'm going to turn it over to Marcos.

Thank you, Brendan. Hello, everyone. I'd like to walk you through our latest progress on our plans to integrate Unilever Foods and realize synergies from the combination. I'll also speak more about our capital allocation discipline, and plans to rapidly delever and drive shareholder returns after our transaction closes.

So first, a quick update on our base business, where we continue to remain focused in parallel with our integration planning. We have delivered on a first half of the year commitments with solid organic sales growth, enhanced margins and strong cash flow. As you know, we're now closing the books, and we'll provide more details on our performance on the third quarter call on October 1. Today, I'll provide a brief update on the rest of the year. On the top line, we expect solid total organic growth in the second half, primarily driven by price.

And for total sales, McCormick de Mexico continues to deliver solid growth in line with our expectations, with integration substantially complete. In a challenging environment across our industry, we continue to expand our profit margins while also investing in business growth and offsetting rising input costs. We remain confident in our ability to deliver on our outlook for the year. In terms of key strategic initiatives, we continue to make strong progress, including our ERP implementation in North America. And the Unilever Foods integration remains on track with detailed action plans identified to support our run rate cost synergy targets.

Speaking of integration, we continue to have confidence in our $600 million net cost synergy target with approximately 2/3 expected to be achieved by year 2. Importantly, this target is net of growth investments and potential dissynergies, giving us a clear view of the value we expect to create through disciplined execution. We expect the synergy opportunity to be driven by 3 primary areas: approximately 50% from SG&A, 40% from procurement and 10% from manufacturing and logistics. Our confidence is grounded in a rigorous bottom-up integration planning process, which we've recently conducted.

The integration management office, functional leaders and external advisers are performing detailed cost analysis benchmarking and operational assessments to identify the specific actions required to deliver the full opportunity. This work translates into a clear pipeline of discrete quantified initiatives. Each supported by detailed execution plans, ownership, timing and resourcing. In short, we're building a disciplined path to capture value over the first 3 years post close with 2/3 of the savings coming in by year 2 and a strong line of sight of the actions needed to achieve our remaining synergy commitments.

Let me bring this to life with a few examples from procurement. Direct procurement cost synergies represent approximately 40% of our total target or about $240 million of run rate savings. Our work has identified 2 primary levers: commercial and technical optimization. On commercial optimization, the opportunity is straightforward. We're buying many of the same quantities and type of goods, but not always at the same unit prices. Today, the spend is often fragmented regionally. There is roughly 50% overlap across our top 100 suppliers, and we see inefficiencies in long-tail spend.

The path to capture value is clear. We use global and regional RFPs targeted supplier negotiations and a more disciplined approach to rationalize to spend. In simple terms, we're using the combined scale of the business to buy smarter and more consistently. The second lever is technical optimization. Here, the opportunity is not just price, but how we specify and buy materials. We see the specification proliferation across direct materials and packaging as well as meaningful variation in spec counts and spend between the two companies.

To address this, we'll harmonize like-for-like specifications in the line formula where appropriate, while maintaining the quality, performance and consumer experience our brands are known for. At the bottom of the page, we highlight two tangible examples from a longer list that demonstrates the opportunity.

In Plastic Packaging, savings are driven by supplier-based optimization. We currently have 90 suppliers, but only two in common, lightweighting, resin slate improvement and is standardizing spaces across functionally similar formats. And in Stocks and Derivatives, the opportunity is driven by greater cost transparency, scaled buying and harmonized specifications across McCormick and Unilever Foods while maintaining quality.

So we have identified where the value is. We know how to capture it, and we have a clear path to deliver approximately $240 million in targeted run rate synergies. We have a clear road map in governance structure in place to support integration. The integration is led by a dedicated integration management office under Andrew Foust, who brings significant prior experience from RB Foods Cholula and FONA. Andrew is here with us at the conference and will participate in our Q&A. We have mobilized cross-functional resources, including 20 functional teams and more than 200 team members across both companies.

The TSA structure is designed to reduce execution risk with limited sales impact and cost is already embedded in deal expectations. Services will be phased out in waves over 2 years, supported by centralized contracts process to maintain critical third-party relationships. We do anticipate and have included in our considerations and plans some level of dual running costs as we exit the TSAs.

Stepping back, TSA costs represent the cost of services to be provided by Unilever during a defined period as we will stand up our own services, which we expect to have a similar level of cost. The integration management office will continue for as long as needed to ensure disciplined execution, culture unification, business continuity synergy delivery and an efficient exit from the 2-year TSA.

Let's turn to the carve-out and integration plans. As we shared previously, approximately 80% of Unilever Foods revenue today is managed as a stand-alone organization. Currently, Unilever has a highly experienced, dedicated team advancing the separation. Unilever completed 14 carve-outs in the last 5 years, demonstrating repeatable execution in separating brands and businesses with distinct routes to market, supply chain and regional footprints. By 2 to 3 months pre-close, we expect that 100% of Unilever Foods business will be managed as a standalone organization.

This means that all its corporate functions from sales and marketing to supply chain, information technology, finance and so on will be part of the distinct Unilever Foods business unit, paving the way for a smoother integration. In addition, Unilever Foods business would operate with internal TSA support from Unilever. At close, this TSA support will transition to McCormick. Following the close, we'll begin integrating the business, capturing synergies and executing on our Phase TSA exit.

Finally, we expect to exit TSAs within a 2-year period in a way that provides business continuity and de-risks execution. The TSAs are comprehensive and they are designed to ensure business continuity while integration progresses. Support is concentrated mostly in back office functions, including technology, operations, finance and people services. There's also some commercial and customer enablement support to ensure a seamless transition. Importantly, these plans are designed to protect day-to-day execution and commercial customer-facing operations while building long-term readiness. Before moving to capital allocation, it is important to reiterate the financial merits of the deal.

This slide lays out our expectations for year 3 post close. At the top line, our 3% to 5% sales growth reflects favorable conditions at the high end. Our adjusted operating margin reflects the capture of synergies. The result is a structurally advantaged best-in-class financial profile. The combination is expected to deliver meaningful accretion in the first full year across sales growth, adjusted operating margin and adjusted earnings per share.

Ultimately, this creates a higher growth, higher-margin platform with stronger cash generation, positioning the company, the combined company for durable long-term value creation and sustained profitability. And lastly, we remain committed to maintaining a strong balance sheet and reasonable leverage position as we close the transaction with Unilever Foods. We expect the combined company to have a strong and growing free cash flow profile, enabling a disciplined approach to capital allocation.

That includes continued investments in the business and preserving our dividend aristocrat status. We expect to have $1.5 billion to $2 billion of cash available to pay down debt by year 2. Aside from the funds available, McCormick is now on track to reach less than 2.9x net leverage on a stand-alone basis by the end of 2026. And as a result, we're well positioned to reach our leverage target post close. I will now turn it back to Brendan to close.

Thanks, Marcos. Overall, we're incredibly proud of our progress having announced the transaction only 5 months ago. We are as focused on delivering our 2026 goals, even as we advance the work needed to close and integrate Unilever Foods. Additionally, we have made significant progress in the relatively short time of integration. Having unveiled our leadership team, operating model and secondary listing, establishing global TSAs for day 1 and having a clear picture of our synergy opportunities and making significant progress on detailed integration planning. In the coming months, we expect to announce further updates on our go-to-market plans, the status of our regulatory clearance, and our expected time line to close.

We look forward to sharing updates in the quarters ahead. And as stated at the announcement, we expect the transaction to close in mid-2027. To wrap up, our category -- our foundation remains strong. It is focused on flavor in advantaged categories. We are well positioned to deliver on our FY 2026 commitments, we are excited about the opportunities for growth provided by this combination, which accelerates our strategy and flavor focus.

Lastly, I'd like to thank our entire team who has worked tirelessly to help us achieve all of this. while maintaining our base business performance at the same time. And that concludes our presentation, and we will now move to the other room for, I think, Q&A.

Good morning. This is Faten Freiha, VP of Investor Relations. Thank you for joining today's second quarter earnings call. To accompany this call, we posted a set of slides on our IR website, ir.mccormick.com.

With me this morning are Brendan Foley, Chairman, President and CEO; and Marcos Gabriel, Executive Vice President and CFO. During this call, we will refer to certain non-GAAP financial measures. The nature of those non-GAAP financial measures and the related reconciliations to the GAAP results are included in this morning's press release and slides. In our comments, certain percentages are rounded. Please refer to our presentation for complete information.

Today's presentation contains projections and other forward-looking statements. Actual results could differ materially from those projected. The company undertakes no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events or other factors. Please refer to our forward-looking statements on Slide 2 for more information.

I will now turn the discussion over to Brendan.

Good morning, everyone, and thank you for joining us. Our strong second quarter performance demonstrates the underlying strength and resilience of our business. We delivered robust sales growth, expanded underlying margins and increased earnings. Our total results were supported by McCormick de Mexico transaction. Organic growth was driven by the accelerated momentum in Flavor Solutions with growth across flavors and branded foodservice customers, highlighting the benefits of our diversified flavor focused portfolio.

Looking ahead, we expect to sustain the momentum in Flavor Solutions and increased reinvestment to improve consumer volume trends and organic sales. Our enhanced margin profile and operational rigor position us well to deliver a virtuous cycle of growth through continued investment in our brands, capabilities and innovation that drive long-term value creation. Our fundamentals remain strong, supported by our advantaged categories and disciplined execution, giving us confidence in our ability to deliver on our 2026 outlook.

Turning now to our results on Slide 4. In the second quarter, total sales grew by 14% in constant currency, reflecting acquisition contribution from McCormick de Mexico of 12% and organic sales growth of 2%, as expected, organic growth was driven by pricing. In Global Consumer, volumes were impacted by shifting demand patterns and increased price gaps in the Americas. Looking to the second half, we are implementing targeted actions to strengthen performance. We expect sequential volume improvement in the third quarter and volume growth in the fourth quarter, supported by refined revenue growth management initiatives, expanded distribution, targeted value-focused marketing and innovation.

In EMEA and Asia Pacific, we delivered sustained volume growth during the quarter, and we expect that momentum to continue for the remainder of the year. In Global Flavor Solutions, volume growth exceeded expectations driven primarily by the Americas. We benefited from growth across the Flavors customer base, including large CPG, private label and high-growth innovators. In branded foodservice, growth was balanced across channels, supported by distributor volume recovery, sustained demand in noncommercial channels and strong e-commerce performance. Overall, the quarter reflects solid execution and strengthening fundamentals.

Let's move to Slide 5, and let me highlight for the quarter, some of the key areas of success. Starting with Global Consumer. Across key markets, food categories continued to soften. Against this backdrop, we saw good consumption trends. In spices and seasonings, share gains in Canada, France, Poland and China continue to support global performance. In recipe mixes in the U.K., we drove unit and dollar share gains for the last 3 quarters, supported by expanded distribution and customer wins. In Poland, new recipe mix launches under our [ Canvas ] brand are performing well.

And most recently, we expanded our recipe mix portfolio in France with the Ducros brand, further strengthening our presence in the category. In mustard, U.S. unit share gains were driven by enhanced distribution, and we delivered the sixth consecutive quarter of dollar share gains in Poland. In hot sauce in the U.S., we delivered dollar and unit share gains for the third consecutive quarter, supported by expanded distribution and innovation, including new Cholula sauces. We also drove share gains in the U.K. and Australia, reflecting strong execution and continued brand momentum across key international markets. We expanded total distribution points across the Americas, led by spices and seasonings with incremental gains in condiments and sauces.

Moving to Flavor Solutions. In Flavors, innovation plans across our customer base started to commercialize leading to strong growth across large CPGs, private label and high-growth innovators. Innovation activity remained strong, particularly in cereals, soft drinks, sports nutrition and snacking. We are capitalizing on these tailwinds in beverage innovation, protein and better-for-you growth premiumization and continued customer diversification. And branded foodservice, improving foot traffic drove both volume and sales growth. We continue to see momentum across noncommercial channels, retail foodservice and independent operators. Importantly, we delivered tabletop and front of house share gains across Frank's, Cholula and McCormick.

Let me now touch on some areas where we are seeing pressure. Starting with Global Consumer and U.S. spices and seasonings, the category grew but at a lower rate, reflecting consumers using more of what's in their pantry. Our consumption lagged the category within certain segments due to increased price sensitivity and increased competition, both private label and branded. We are responding with focused actions to drive growth, including disciplined promotional and assortment strategies across channels, refined revenue growth management actions, targeted brand investment and expanded precision marketing to reinforce McCormick's quality and differentiation and consumer insight-driven innovation. We navigated a similar environment 2 years ago, and we have a clear understanding of the factors that impacted performance we believe our initiatives position us to improve consumption trends and return to driving category growth.

In recipe mixes, we have a strong core portfolio that spans multiple segments. We see opportunity to accelerate growth in Mexican flavors, one of the faster-growing segments in the category. We plan to realize this opportunity with innovation, expanded distribution and focused brand investment behind authentic Mexican brands like Cholula.

Moving to Flavor Solutions. In Asia Pacific, primarily outside of China and in EMEA, QSR customer volumes were pressured by softer foot traffic. Looking ahead to the rest of the year, we expect volume trends to improve in Asia Pacific, driven by customers, new products and limited time offers. Let me provide some more context on the state of the consumer. Geopolitical volatility, elevated fuel costs and persistent inflation continue to weigh on consumer confidence. While affordability has been a consistent theme, the key shift this quarter, particularly given rising gas prices impacting budgets was a more pronounced move towards value as consumers became increasingly selective and focused on maximizing their budget.

At the same time, a majority of consumers claim they save for small premiums or indulgences which includes flavor exploration. Health and wellness trends continue to shape behavior, driving sustained growth in perimeter categories at home cooking, protein and broader better-for-you categories across retail and foodservice. Within this environment, flavor remains a powerful constant. At home cooking continues to benefit from consumers seeking affordable, healthier meal solutions and flavors the primary driver of purchase across occasions.

As a result, spices and seasonings remain the top performer in terms of center store growth. They continue to converge into value-seeking behavior and health trends reinforces the central role of flavor and underscores our advantaged position across our flavor focused, diversified portfolio.

Let's turn to Slide 6 and to our growth plans for the remainder of the year that support our confidence in our ability to deliver on our top line expectations. Starting with consumer. We expect second half organic growth to be supported by improving volume trends. This improvement will be driven by expanded distribution, sustained renovation, refined revenue growth management to address increased price sensitivity in specific segments, including optimized price pack architecture.

In addition, we will accelerate innovation and increase brand marketing, including precision marketing designed to drive purchase intent and velocity across our core categories. Let me highlight some examples. We relaunched our seasoning blends line. Beyond new flavor introductions, we are optimizing price pack architecture to enhance value perception and improve accessibility at shelf, an important lever today, value-focused environment.

In addition, we continue to scale newer platforms, including our finishing sugars and finishing salts was on promotional tie-ins to globally recognized franchises, including Bridgerton, Harry Potter and Paris Hilton. These partnerships expand household penetration, engage younger consumers and reinforce the role of flavor as an affordable way to elevate everyday meals. For French's mustard, we have activated promotional partnerships tied to the lease of the new Minions movie, turning the mustard green using all natural colors because of one of the key characters in the movie. This type of culturally relevant activation brings excitement to the category and drives incremental traffic.

In Flavor Solutions, we expect the momentum from the second quarter to be sustained for the remainder of the year. Our flavors customer pipeline remains healthy, and we are seeing growth across all customers. We are leveraging expertise in regulatory, R&D and product development to help customers navigate growing health and wellness demands with innovation. We're partnering with large and emerging brands as well as private label customers to flavor energy, hydration and protein-based beverages as well as protein and fiber snacks and zero sugar drinks.

Our win rate on health and wellness briefs remains strong, and we're focusing resources where we have the greatest opportunity to win across our 4 taste competencies: savory heat, naturally sweet and citrus and fruit. In fact, in the second quarter, a majority of the briefs were tied to health and wellness innovation and renovation. Reformulation projects are increasing, particularly with large CPG customers, and we're beginning to see the benefit of this project activity launched to the marketplace.

And finally, in branded foodservice, we expect to sustain this momentum from this quarter. The environment remains competitive and value conscious. Targeted investments in menu placements, innovation and disciplined execution are expected to drive pockets of growth across customer channels.

Before turning it over to Marcos, I'd like to provide a brief update on the Unilever Foods transaction on Slide 7. Since the announcement on March 31, we have made strong progress on integration planning. We have established a dedicated integration management office led by Andrew Foust, supported by 20 functional teams to ensure a seamless transition. Andrew previously helped successfully lead our RB Foods, Cholula and FONA integrations. Unilever has established parallel teams. Altogether, there is more than 200 individuals fully dedicated to working across integration streams. From a separation standpoint, approximately 80% of Unilever Foods operates as a stand-alone organization, which reduces complexity.

In addition, we are mapping integration plans country by country. This includes focusing on the 10 markets that represent nearly 75% of combined sales, where we have direct operational overlap in the top 6. We expect TSA agreements generally up to 2 years post close to ensure continuity across IT, distribution and back-office functions.

In addition, we are entering a second phase of detailed synergy planning. Based on the work completed to date, we remain confident in our previously announced targets for sales growth, operating margin and adjusted EPS accretion. We expect mid- to high single-digit adjusted EPS accretion within the first 12 months post-close and mid- to high teens accretion in year 3. Looking ahead, we expect to deliver several key milestones in the coming months. By the end of July, we expect to announce the location of a secondary listing on a European exchange.

By the end of September, we expect to share further detail on the operating model, cost synergies and growth plans and the scope of the transition services agreements. At the same time, we will continue to advance parallel work streams to support separation financial reports and regulatory filings. Importantly, we are advancing integration planning with rigor while maintaining disciplined execution in our base business.

Now over to Marcos.

Thank you, Brendan, and good morning, everyone. Let's start on Slide 9 and review our top line results for the second quarter. Total sales grew 14% in constant currency and included a 2% in organic growth with the balance driven by acquisition contribution.

Moving to our consumer segment on Slide 10. Constant currency sales increased 20% including a 1% increase in organic sales with the remaining growth driven by acquisition contribution. Consumer organic sales in the Americas were flat, with pricing contribution of 3%, offset by volume decline. Volumes were impacted by shifting demand patterns and increased price gaps. Looking ahead, we expect volumes to improve in the third quarter and to deliver volume growth in the fourth quarter.

In EMEA, we grew consumer organic sales 3%, driven by a 2% increase in volume and a 1% contribution from pricing related to targeted actions taken as a result of increased commodity costs. We're pleased with the sustained volume growth for the 10th consecutive quarter in EMEA. Consumer organic sales in the Asia Pacific region increased by 3%. The increase was driven primarily by volume and reflects the continued gradual recovery in China. In addition, we delivered strong results outside of China, primarily in Australia.

Turning to our Flavor Solutions segment on Slide 11. Second quarter constant currency sales grew by 6%, reflecting a 3% acquisition contribution and 3% organic growth, driven equally by volume and price. In the Americas, Flavor Solutions organic sales increased 4%, reflecting a 2% price contribution and 2% volume growth. Volumes for the quarter were driven by strong performance across our Flavors portfolio, including large CPGs and high-growth innovators as well as robust growth in branded foodservice.

In EMEA, organic sales were flat, driven by lower volume, reflecting soft QSR customers volumes due to a decline in foot traffic, particularly in the U.K. In the Asia Pacific region, Flavor Solutions organic sales were flat as 1% volume growth was fully offset by price with strength in China tempered by softer QSR volumes in Australia. Moving to Slide 12. Gross profit margin expanded 270 basis points in the second quarter driven by accretion from McCormick de Mexico, the benefit of a tariff of refund, surgical pricing and savings from our Comprehensive Continuous Improvement program, or CCI, partially offset by increased commodity costs. This tariff refund reversed tariffs of the business absorbed in prior periods. For this quarter, it drove 140 basis points of margin expansion year-over-year. Underlying gross profit margin expanded 130 basis points, demonstrating the resilience of our business and the strength of our brands in a dynamic environment.

Selling, general and administrative expenses or SG&A increased relative to the second quarter of last year, driven by the impact of consolidating McCormick de Mexico and increased investments in technology and by marketing. The percentage of sales, RNA was unfavorable by 90 basis points compared to the prior year. For the quarter, adjusted operating income increased by 30% or 27% in constant currency. This increase was driven by strong top line and gross margin expansion, partially offset by higher SG&A. Our second quarter adjusted effective tax rate was 22.5% compared to 24.1% in the prior year, driven by a greater level of favorable tax items in the current period.

Turning to segment operational results on Slide 13. Consumer adjusted operating income increased 33% or 31% in constant currency, with adjusted operating margins expanding by 140 basis points. This expansion was driven by acquisition accretion and the tariff refund, which primarily benefited the consumer segment. These benefits were partially offset by increased inflation and higher logistics costs driven by the Middle East conflict and tighter freight capacity, resulting from recent changes to U.S. federal regulations. Flavor Solutions adjusted operating income increased by 26% or 22% in constant currency, and adjusted operating margin expanded by 210 basis points, reflecting our volume-driven top line and our continued focus on improving Flavor Solutions profitability, in line with our 2024 Investor Day commitment.

At the bottom line, as shown on Slide 14, second quarter 2026 adjusted earnings per share was $0.80, an increase of 16% compared to the year ago period, driven primarily by increased adjusted operating income, partially offset by noncontrolling minority interest. The tariff refund contributed approximately $0.07 per share. On Slide 15, we'll summarize highlights for cash flow and balance sheet. Cash flow from operations for the first half was $431 million compared to $161 million in the prior year, driven primarily by higher profitability and improved working capital. We returned $258 million of cash to shareholders through dividends and used $75 million for capital expenditures to expand capacity, advance digital transformation and optimize our cost structure.

We continue to expect a strong performance in cash flow from operations for the fiscal year. Our capital allocation priorities remain balanced. This means funding investments to drive growth, returning cash to shareholders through dividends and maintaining a strong balance sheet. We remain committed to a strong investment-grade rating. At the end of this quarter, our leverage ratio was approximately 2.9x reflecting delevering from the first quarter following the close of McCormick de Mexico. We expect to continue to make progress paying down debt, positioning as well ahead of the Unilever foods close.

As previously noted, at close of Unilever Foods, we expect to have industry-leading operating margins of 21% and working capital benefits that support 100% free cash flow conversion from net income before any synergies. Post-close, we expect to continue investing in the business while driving margin expansion and delevering. Based on current estimates, after brand investments, costs to achieve synergies and dividends, we anticipate having $1.5 billion to $2 billion available to pay down debt within the first 2 years and deliver 2, 3x. Longer term, we would target a leverage ratio of 2 to 3x.

Turning to Slide 16 to review our 2026 financial outlook which remains broadly consistent with what we shared on our last earnings call. A few callouts. Starting with organic growth, we expect our consumer business volume to improve driven by refined revenue growth management plans, new products, packaging renovation, expanded distribution and increased brand marketing investments. In Flavor Solutions, we anticipate the volume momentum to continue and for this segment to drive total volume growth for the year.

Across both segments, we expect pricing to contribute more to organic sales growth this year compared to prior year. Our tariff cost assumptions, primarily related to the global 10% tariff remained consistent based on the latest development and our current knowledge. While we anticipate incremental year-over-year cost pressure in 2026, we've been focused on mitigating the majority of the impact. In addition to the $28 million tariff refund in the second quarter, we expect an additional $3 million in the second half. For the full year, this benefit will largely help offset heightened inflationary pressures, including costs related to the Middle East conflicts, which will continue to impact us for the remainder of the year.

Turning to gross margin. First half performance exceeded our implied guidance and included most of the full year tariff of refund. This is a dynamic environment, and we continue to navigate several cost uncertainties. However, based on what we know today, we expect gross margins to expand by 100 to 120 basis points for the year relative to 2025. For the third quarter, adjusted operating income is expected to grow in the high single to low double digits year-over-year, supported by continued gross margin expansion. This will be partially offset by SG&A expenses due to the timing of ERP-related technology investments, the build back of incentive compensation and significant increase in brand marketing investments. Adjusted EPS is also expected to be impacted by the same items as well as the lapping of a favorable tax rate in the prior year.

Moving to Slide 17. This slide summarizes the cost headwinds for 2026 and how we plan to offset them. Our guidance reflects strong underlying base business performance and growth from acquisition.

To close, we remain confident in the long-term strength of our business and our ability to deliver on our 2026 outlook. Through disciplined execution, focused strategic investments and continued productivity gains, we're driving sustained net sales and operating income growth as well as generating strong cash flows to support our balanced capital allocation priorities.

Thank you, Marcos. I would like to close with three key takeaways on Slide 18. Our fundamentals remain strong, supported by resilient long-term category trends, healthy and flavorful cooking, flavor exploration and trusted brands as well as the strength of our diversified flavor focused portfolio.

In the second quarter, accelerated momentum in Flavor Solutions more than offset consumer trends. We delivered strong organic growth, expanded underlying margins and increased profitability driven by disciplined execution and productivity initiatives, the McCormick de Mexico acquisition and effective cost management in a dynamic environment. We are also taking focused actions to improve consumer volume trends, sustained Flavor Solutions momentum and invest in innovation, brand building and digital capabilities. We remain confident in our long-term value creation plan, including delivering our 2026 outlook and advancing integration planning for the Unilever Foods combination, which accelerates our growth strategy and reinforces our continued focus on flavor. One of the most advantaged categories in CPG. The incremental growth is supported by industry-leading margins and a strong cash profile.

To wrap up for the quarter, our performance reflects the power of our balanced portfolio, our leadership in flavor and the agility of our teams around the world. I want to recognize all McCormick employees for their dedication and contributions. Their commitment and passion continue to drive our success.

And now for your questions.

[Operator Instructions] Our first question comes from the line of Andrew Lazar with Barclays.

The one key area, obviously, you highlighted in terms of weakness in the quarter was U.S. spices and seasonings, where I guess you experienced softening consumption trends and widening price gaps. I think McCormick went through something maybe somewhat similar several years ago and addressed it in some very specific ways. I guess my question is, is this time around any different than the last time? And if so, how so? And how does your approach several years ago inform how you plan to deal with this issue this time around?

Thanks for the question, Andrew. Our approach is broadly very similar to what we did over the last 2 to 3 years. And so I think the broad theme of the sort of the headline answer to your question would be that. We're taking very much the same type of approaches that we did before. I think there might be one or two things that's a little bit different today than might have been different back in the last 2 to 3 years, and that is -- what we're seeing in the pressure that we talked about is it's happening more in some very specific segments.

So it's not broadly across what is a very sort of many -- a category of many segments, herbs, spices and seasonings. And so we're seeing just more specificity in terms of some things that we have to go address overall. I would say the second thing that's different today is that the consumer pressure is even higher. So -- because we've just seen inflation upon inflation layered into the consumer. And in this particular moment, in the second quarter, we definitely saw quite a spike, I think, particularly from sort of a nonfood standpoint from inflationary pressure on the consumer.

And is that temporary? I think most might think it is, but we're -- I think it's kind of a little bit different than what we would have seen before, which is more sustained pressure on the consumer. I think what's the same is -- and what we've done in the past informs us to a very high degree on what we're going to do moving forward here. Many of the segments that -- in which we implemented these programs continue to benefit even today, even in the second quarter with the types of strategies that we've implemented.

And the strategic approach to solve these particular segments is going to be the same. I think what's also -- I would say, more about on the difference is, if you think about the digital landscape, it's really evolved a lot even in the last 2 years. And so our A&P gets even more targeted as we think about sort of the solutions that we put in place to make sure that we're winning with the consumer and meeting them where they are.

But I would say this time period, if I could reflect back on it, it just continues to reinforce the importance of speed and agility and response. And I really like how our team is responding in this environment, especially when we see kind of such inflection and change. And we like -- we're starting to read early results. We like what we see. It's having the impact that we would expect it to have.

Really helpful. And then it might be hard to sort of parse this out, but of the $31 million full year expected tariff refund benefit, I guess, what portion of that do you think is being used for this sort of reinvestment behind the more competitive environment versus covering some of the higher, sort of, hopefully, what will be temporary sort of cost inflation that you're facing?

Yes, I'll answer that one, Andrew. So I think it's important to note that the Middle East complex is really driving more inflation than we had not contemplated before. If you think about our guide, which is mid-single-digit cost inflation, we're tracking towards the high end of that number, which is about 6% right now. So we are going to use the majority of the tax refund to offset these higher costs. I mean, this tariff, they hurt us last year. We're going to use it now to offset the majority of these costs. But also it's important to note that our online gross margin is really healthy.

This is the second quarter in a row that we're driving in our incremental gross margin of about -- even if you strip out the tariff refund, our gross margin was about 130 basis points up. So it's healthy. It talks about the resilience of our business, and that gives us the room to invest back in the business and continue to drive top line growth in the back half of the year.

Our next question comes from the line of Peter Galbo with Bank of America.

Brendan, if I can ask a variation on Andrew's question. Just obviously, within Americas consumer, you've been faced with a bit of a game of macro whack-a-mole, I guess, is how I would describe it. And you're taking actions, you're using the playbook that you've used in the past.

Just how do we all gain confidence that this is sustainable, right, at the actions you're putting in place are going to work this time around will be somewhat sustainable and that you can kind of I don't know, helped to dampen some of this volatility that's been coming at you for what should be a relatively resilient category but just seems like there's been one thing after another you've had to contend with, and I think that's really thrown us and investors kind of for a loop as we contemplate kind of the core of your business. So -- just would appreciate any additional thoughts on that.

I'm happy to do that, Peter. I think you all gave us a new term, which we'll use internally of macro whack-a-mole, that's a new one for us and -- but we like it. I think if you look back at the last 2 years, when we were dealing with this before, kind of building off of the previous question, we were able to demonstrate sort of sustained improvement during that period of time. And those conditions were, as I described earlier, largely very similar in nature.

So I think that, that is one aspect I would share with investors is that we have a motivation to make sure that we continue to perform in a very healthy way, a volume-driven way within this part of our portfolio. And so we will work hard to make sure that we create even more resilience if it's needed. And I think that's what you're seeing throughout our performance right now, whether it's the underlying performance in terms of gross margin or thinking about how we drive even continued increase in A&P up against our business.

It's all -- and also the continued focus around innovation, which is performing even more strongly this year than last year. I think those are the indicators that we have sustained focus and momentum across portfolio. We're going to go through periods where we get sharp inflections like we saw in the second quarter, and there was a reasonable shift in the consumer behavior. But if you look at it over a more of a longer-term period, I think we demonstrate the resiliency that we have been calling out overall.

But to be clear, the external environment is presenting us new challenges. And as I've asked my organization at the beginning of this fiscal year is just one of our areas of strategic focus is just continued building in resilience into the business. Not knowing where or how we're going to need to use it, but just knowing that resiliency is really important to us and also investors.

Marcos, if I could just ask a clarification question as well. I believe you provided pretty explicit guidance for the third quarter on operating income. Maybe you can help us bridge a little bit more explicitly down to the EPS line. I know there's some below-the-line items, obviously, that are different this year versus last year. But if you could put any sort of guardrails around the EPS rate of decline kind of for 3Q, I think that would be helpful.

Yes. So Peter, on Q3, we provided some specifics on my prepared remarks. I mean, just to reiterate some of them. From the net sales perspective, we believe we'll have solid net sales continued momentum in Flavor Solutions and consumer continued the good momentum in EMEA and APAC and in the Americas, improving the performance. Gross margin expansion will continue, as I said as well in the call.

That drives -- what is really driving the operating profit to be high single digit to low double digit is really timing of expenses within SG&A, the ERP timing as well as incentive compensation and brand marketing. So that is the OP line. To your question about EPS, the biggest element in addition to the elements that I just mentioned is really the tax. the tax was about 16%, I think, last year. And now if you think about the normalization of that tax, in line with the full year guide of about 24%, that creates 700 to 800 basis points, roughly speaking, of a headwind. So that is really the key element that you should think about in terms of the EPS and the below-the-line items.

Our next question comes from the line of Tom Palmer with JPMorgan.

I wanted to start off maybe following up on Pete's question on third quarter expectations. But I think maybe there's kind of two pieces. I want to break this into. One is when we think about the organic sales growth -- or sorry, the operating profit growth coming in maybe lighter than consensus estimates. How much was maybe mismodeling on our part where you had expectations for the whole time that some of these SG&A items might have been greater pressure points than we previously expected versus maybe some incremental costs to consider, including even on the inflationary side?

Well, we had the on SG&A side, that's how we'll be modeling, Tom, in terms of the cadence of our spend in the back half of the year, each one of the quarters. Obviously, we don't provide quarterly guidance. But it is more shifting our expenses into Q3. In terms of more brand marketing, you'll see, as I said, the program, the ERP program is also hit in Q3 versus a year ago and incentive compensation, as we talked about it before.

So I don't think there's a change there in terms of what our internal expectations were. What we're seeing is definitely more inflation coming through, as I mentioned before, due to the middle of this conflict and that is -- we're using tariff refund to offset most of it, but it's still driving gross margin expansion, which is which is what I like about the balance of the year, which is we upgraded the call on gross margin to be 100 to 120 basis points for the full year and you can take the in line. So the implied guidance for the second half should be the number that you take on. So yes, overall, I would say, in line with our expectations, it's just it's a matter of the phasing of the SG&A expenses, really.

Okay. On Flavor Solutions, I know sales growth can be lumpy from quarter-to-quarter. Brendan, in your prepared remarks, you noted a variety of tailwinds for the segment, one that stood out was reformulations. I think you previously expected it to be more of a fiscal 2027 driver. So kind of two questions in here. First, any lumpiness we need to keep in mind when thinking about the strength of the second quarter and then second, what's driving the faster pace of reformulations? And should we think about that continuing to build in future periods?

Thanks for the question, Tom. Flavor Solutions, by the way, we're really pleased with the quarter. And as we look at the rest of the year, I mean, I think if I recall, I said at the beginning of the year when we laid out the guide, we thought that some of that improvement that we would expect to see it come through, certainly start to layer in as we went progressively through the year.

I think what we saw here in the second quarter is obviously there's even more strength come through in terms of our overall performance. And it was broad-based. Hopefully, you got that from my prepared remarks. In terms of the drivers, I think what we're seeing right now is we're really encouraged by the scope of the pipeline that we're seeing. It's very healthy across a lot of our customer segments. And it's clear that, that activity had amplified. So I think that's a little bit of an insight into part of the spirit of your question. Reformulation projects are increasing particularly around -- from large CPG customers. And I think what's start to kind of come through in the numbers, we're starting to see them commercialize and maybe a little bit faster than what we initially predicted.

But I think there's another element to this, which is not just simply large CPG manufacturers driving reformulation. I think there's an element of just a market acceleration of health and wellness innovation. And you heard me kind of comment in my prepared remarks about where we're seeing that, and we're just seeing sort of more activity there. And I think that's also coming through in terms of the trend that we're seeing through private label customers and high-growth innovators. And that seems to be sustained, if not continue to drive some really strong growth on top of what we're seeing is large CPG manufacturers also seeing more activity in market.

There was another element for us, and that is just we saw more beverage innovation, come through in the away-from-home market this quarter, which is more of an enduring trend. I think you'll see is that we definitely see more continued beverage innovation. And that came through in the away-from-home market this quarter, and I would expect that to continue to carry forward.

Overall, though, we know that -- we think we're gaining share in the part of our business. And so it could be is it an insight into where the broad food industry is going. We think it's more of an insight into our ability to gain share in this area. And I think that, that is kind of the context that I have around our performance.

Let's not forget branded foodservice. Branded foodservice is operating in an environment where we're seeing some nice sort of small traffic growth. We know the segments that are performing well. We see consumers kind of moving towards small indulgences and still going out to eat to kind of treat themselves. And so -- but in that environment, also, we're gaining share. So that's the context around our branded foodservice performance. But overall, the food industry is innovating and we're benefiting from it.

Our question comes from the line of Steve Powers with Deutsche Bank.

Brendan, maybe just following up on Tom's question there and your answer. I guess when you stack up that reformulation, innovation, health and wellness activity, for how long would you expect that to translate into what seems to be a favorable spread between how that's impacting Flavor Solutions and what -- I mean I think what we're all seeing and gleaning from end market consumption. Do you view that favorability more as a particular moment in time that has duration? Or is it something that should prove more durable into the future?

Well, because a lot of this is aligned with consumer trends, Steve, I kind of go there first. What supports the activity and is it aligned with where the consumer is going. I believe it indicates more durability and broadly within the marketplace. So as you know, I've said before, I think the food industry has always been really good innovating around meeting the consumer with where they are. And I think this is a good example of just pipeline starting to materialize as we think about the marketplace.

Great. And then you spoke to some of the anticipated outcomes of the integration planning work that you're doing over the next few months, including the announced location of the secondary listing by the end of July and further details on the operating model and synergies and the scope of TSAs by the end of September. I guess, maybe you could shed a little bit more light, if you could, on the work that's going on behind the scenes to get to those outcomes. And how that day-to-day work is being organized alongside general business operations?

Well, as we noted in the prepared remarks, we certainly have a lot of dedicated resources, both at McCormick and at Unilever Foods to really prosecute obviously, this whole integration planning and everything else. And to give you just more context, more subjectively and kind of before we start to kind of report more, more detail as we get to the third quarter, I'm very encouraged by just the level of collaboration.

Almost -- I would almost call it a [ spree ] decor between both integration teams in terms of how they're operating and working together. And it is very, I would say, very disciplined and rigor. There are multiple work streams all organized by function or by specific actions and activity that have to happen, and they're all sort of progressing in parallel and everyone has a timetable that they need to hit, and we're hitting those timetables. We did a check-up in this last week and we're very encouraged by sort of that first 3 months, if you will, and we're right where we want to be in terms of the time line.

I don't expect everything is going to be perfect throughout the entire integration planning. But so far, we really like how we started off. and it leaves us even more encouraged. And I know that my counterparts over at Unilever Foods would say the same thing. I think the other thing that I'm walking away with too after sort of the first 3 months after our announcement is just -- I'm even more excited about the combination than it was before.

Just being able to -- and I think a lot of that is driven also by just being able to interact also with Unilever Foods employees and just really see the energy and the passion for the business from their perspective just only leaves us even more excited about the future of this combination and what it's going to deliver. I mean we still believe very much in what we said back in late March, and it's still true today.

And it's now starting to really feel like it will begin to come to life. We can't wait to really share more details on our milestones. But I just would step back and say the operational clarity and rigor with which the base business is operating versus the integration teams are operating, I think is really clear. And that gives me confidence that we can continue to do this as we go through up until close.

Our next question comes from the line of Robert Moskow with TD Cowen.

Brendan, you've definitely been in this position before navigating price gaps and trying to regain market share in spices and seasoning. But what I remember from last time is that it took longer than just a couple of quarters to regain some competitiveness and to execute the volume-led strategy. It was multifaceted. Price cap changes and packaging changes as well. So the guidance implies a sequential improvement in volume in the back half. So is there enough -- is there is there enough time here to execute the things that you want to execute to get volumes back to positive in the Americas? And then a quick follow-up.

Well, thanks for the question, Rob. I think you're right. It did take us a little bit longer when we were in this position before. So I think that's a reasonable point to call out. Back then, Rob, we were implementing programs and layering them in sort of every other month, et cetera. And so I think we were -- it was more of a sort of a broader program we are implementing at the time. So there was a lot more to execute in that regard back then.

But also, we were getting into making sure that from a customer relationship standpoint, they were aligned with the strategy of really driving the category this way. And so that takes a lot of dialogue with customers back then. And so we really got through that in a really positive way. I think as you now sort of accelerate or fast forward into where we are today, the dialogue that we have with customers is far more faster, a recognition of what we need to go course correct, our ability to kind of implement quickly with our team with more speed and agility. I think also, as I mentioned earlier in a previous question, sort of that digital landscape provides us even more capability to be able to do this. And so that is, I think, an important element of our ability to execute.

Now it's also important to note that -- we also have more gross margin sort of flexibility in which to make sure that we can drive investments in the right areas. But I'm really encouraged by sort of the speed of our response, and we're starting to see it in the marketplace right now. And I think that those are the differences between now and maybe what we did before is a much greater understanding of those levers and how they're going to operate and work. And we have a lot of confidence when we implement them.

Okay. My follow-up is on the seasonings subcategory. If you really drill down here, brands of yours like Grill Mates and Lawry's are losing share and it's to like some up-and-coming emerging brands. So when you talk about price gaps, is that related to that at all? Or is there something else here in terms of the positioning of your brands relative to theirs that you'd like to address as well?

Yes. As I mentioned that there were specific segments that we felt we needed to address. And so that's not inconsistent with what you just called out. And I think price gaps can be a part of it. But I would say what we're seeing now in our category. It's a reflection of everything that we've been saying. These are really attractive categories. They're advantaged. They're structurally sound, and so it attracts more competition. And certainly and even a lot more interest from private label. And so that should not necessarily be surprising.

And so as we saw, especially in the second quarter, we saw a lot more competitive promotional activity. And I think that, that probably reflected in the results overall but also, I think there's a consumer component there. And I think we have a handle on it, and we know what we need to do.

Our next question comes from the line of Alexia Howard with Bernstein.

Can we start by just kicking the tires a bit on the operating margin outlook for the combined McCormick Unilever deal. 21% at close is already fairly high relative to other food companies around the world and obviously then getting up into the sort of 23% to 25% range is even higher. I think we're sort of looking from the outside and saying, well, obviously, the marketing spend is healthy at 7% to 8%.

And if then this is a hypothetical, if the gross margins are sort of somewhere in the low 40s, that implies that the remaining SG&A outside of marketing spend is surprisingly low, and we're trying to figure out if that's sustainable for the long term. Can you sort of give us confidence that this is actually something doable and it's not that the belts have been tightened so much on the remaining SG&A that it's going to be problematic as we get into the combined era next year? And then I have a follow-up.

Thank you for the question, Alexia. I'm going to make -- address a couple of thoughts there, and then I may turn it over to Marcos to see he can tell me if I missed anything important. As we look at -- thanks for unpacking all of that. I think as we look at sort of the future margin profile of the business, you think about the ability of continuing to invest in it.

So thank you for calling out that these are also being done at what are industry-leading sort of healthy investment rates behind A&P and brand marketing and everything else. And so we had to make sure that investors understand that we want to continue supporting the business at increasing levels every year. Its impact on SG&A, I have to tell you, we don't see that as being unusually low in a future state. And I think what we'll have to do is probably as we go through this process and we go this integration is provide more context around that.

I can't really right now today give you the level of detail that I think maybe you're looking for. But as we looked at it and modeled it internally on the McCormick side, and even through conversations with our counterparts over there. This is not coming at the sort of some unusual profile on SG&A.

Yes. I think you hit the key points, Brendan. I mean operating margin has really been driven by gross margin expansion over the last 2 years right? And the team has continued to invest in brand marketing, as you pointed out, Alexia so we don't feel like the SG&A is at the low range or low place to be right now. Obviously, the 21% operating margin is the starting point of the combined company before any synergies and as when you layer synergies on top, you get to the range of 23% to 25%. So we do feel pretty confident about that profile.

Great. That's helpful. And just as a quick follow-up. Coming back to Flavor Solutions, you talked about the benefits of reformulation kicking in. Two other things. Can I ask the branded foodservice channels that are seeing improved foot traffic, can you be more specific about which foodservice channels are seeing that recovery? And then you have a big snacking/beverage company in there that I think has been struggling, and that's been a headwind in that category or segment for the past year or 2. You mentioned that all customers are now seeing growth. Does that mean that, that headwind has gone away?

Yes. I think that when I -- specific about branded foodservice in your question, the segments in which we're seeing sort of more growth than the total foodservice industry would be we're seeing some growth in QSRs, especially in the Americas. And we're seeing growth in fast casual, casual dining.

And also, I think -- yes, noncommercial. Those four to five areas is where we are seeing right now, I think most of the growth in traffic, et cetera. That's the area in which I think we're also finding that our brands certainly can play and resonate or our ability to sort of help with flavor will help there, too. I think overall, though, there certainly has been pressure on the foodservice marketplace.

So this element of -- especially in the second quarter, just increased pressure on the consumer certainly coming through not necessarily just food, but many other things that household budgets need. And I think that's going to -- that did have an impact on foodservice to some degree because it did decelerate in the quarter from the first quarter in our view, but there was still growth. And the growth is happening in areas where we have been putting some focus.

Our final question this morning comes from the line of Max Gumport with BNP Paribas.

I just wanted to return quickly to the commentary on 3Q profit. So after 1Q results, you had signaled that 3Q would be above the low end of your '26 guidance range, so at least 16% year-over-year. So it does feel like a bit of a guide down with regard to 3Q, now indicating high single digits to low double digits. You mentioned SG&A timing. I just wanted to clarify, was there a shift in your view of SG&A expenses that was a shift from 2Q into 3Q, maybe related to ERP and incentive comp timing relative to what was initially planned? Or is this also about incremental brand marketing investment versus what was initially planned?

Max, so a few questions on your -- there. So the first one is in terms of -- when we put out the guide at the beginning of the year, we guide for the full year. We didn't guide by quarter. So the ranges that we put out there, 15% to 19% on constant currency was for the full year.

The second point about the phasing, there's some phasing between Q3 and Q4. We're investing more heavily on brand marketing in Q3 than Q4. Although Q4, you're going to still see brand marketing absolute dollars strong. But year-on-year, we also had a very strong brand marketing spend in the Q4 of 2025. So year-on-year is not going to be significant. And I think I hit these two points. And the other question was about I think it was those are two questions, right, Max. Anything else that I missed?

Yes, that covers it. Maybe I'm putting too fine a point of it, but you did say 2Q would be at the low end of the '26 guidance range, and you said 3Q would be better than 2Q. That's why I'm saying essentially, it does like there is a bit of a change in tone, but I think your commentary does help a lot. So I appreciate that. And I just wanted to touch on cash flow quickly. So it's obviously been a much better first half than last year. You talked about working capital improvements. Can you just expand a bit on what's generating those working capital improvements relative to last year and the sustainability of that?

Sure, Max, this is one area that we are very pleased about, which is the cash flow in the first half of the year, $431 million, very substantial. Also, the deleveraging position that we are right now in terms of 2.9x closing the quarter, even after the acquisition of [ MacMax ] that we incurred additional $750 million of debt. So that talks about our -- always our playbook about acquiring and paying down debt quickly. So working capital is also working in our favor across all three levers of working capital, inventory days, payables and receivables, but primarily inventory days as well as payables are the two main drivers of working capital that we're seeing right now.

Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Ms. Freiha for any final comments.

Thank you. Thank you, everybody, for joining today's call. If you have any additional questions, please feel free to reach out to me. This concludes our conference call for this morning. Thank you.

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.

Okay. Welcome, everybody. Thanks for joining us. I am thrilled to welcome McCormick & Company back to what has become an annual tradition. Brendan Foley, Chairman, President and Chief Executive Officer; and Marcos Gabriel, Executive Vice President and Chief Financial Officer. Thank you both for joining us here at the Deutsche Bank conference.

It's an annual tradition, but this is a unique conversation. There's a lot going on and a lot has transpired over the past year. We'll just jump right into Q&A, and Brendan, I'll start with you.

As I mentioned, a lot has evolved and transpired over the past year. I guess when you think about the context of the demand backdrop, but also the pending acquisition with Unilever Foods, how would you frame the next chapter for McCormick from here? And maybe what are other 2, 3, 4 things that you think investors should be most focused on as they think about McCormick's journey over the next year or 2?

Thanks for the question, Steve. I almost feel like that's a little bit of sort of describing where we've been and where we're going.

Kind of.

For the last 2 years, we've really been focused on driving overall volume-driven performance in our business and especially in the context of a slower consumer packaged goods environment. And I think we're really pleased with our results over the last 2 years. I mean, we had 7 quarters of just consecutive volume-driven growth in our Consumer business, and we're outpacing our peers. And also, we're making progress, too, on growing our Flavor Solutions margin in our portfolio, and so making good progress on that. And then most recently, we reported our first quarter, and it was largely on plan in terms of what we would have expected.

As we look ahead, we really remain focused on balancing volume growth and profitability across our business. And that's sort of a key theme, I think, for us in 2026. We continue to invest behind our brands and really help drive innovation across the business. But also, we recently did a transaction with McCormick de Mexico. And that was important, obviously, and it kind of really gave us a strong geographic presence in a key market, which is Mexico. And so based on what we know today, we remain comfortable with our outlook for 2026. But that's where we are and where we've been overall.

And sort of where we're going, I think, is another way to look at this. And I think the 2 to 3 things for investors that I would love to share just in terms of where we're going is that McCormick, if those who know us and those who are just getting to know us, think of us as just being intentionally focused on building a global flavor company, a company in the food industry focused on flavor. And we're doing that through M&A. We're doing that through R&D. We're doing that through geographic expansion.

And we feel like we've made a lot of good progress, but this Unilever Foods transaction really accelerates that long-term vision that we have for the company, and it creates an even more vibrant company focused on flavor at a global level. Both businesses are really well positioned in the marketplace. And what this does is it creates a combined company that's expected to have faster volume-driven growth across channels and geographies that are more diversified in the marketplace, best-in-class operating margin compared to the rest of the industry overall. And that's before we really realize any anticipated synergies. So that's kind of a little bit -- shortly how we view this right now.

And this combination is expected on a top-line basis, at least by year 3 to sort of drive 3% to 5% top-line growth, but also adjusted operating margins of 23% to 25%. And these are 2 businesses that have really strong cash flow. And so the operating cash flow generation, I think, is something that we can lean into to obviously fund organic growth, but also fund the dividend that we currently pay, but also on the top of that, funding debt.

And so we believe that, that cash flow really supports that story nicely. And achieving this portfolio as well as this geographic presence would have taken us more than a decade to do. And what this really has is sort of accelerated our ability to get to that vision of who we view ourselves in terms of our role within the food industry.

I think the final point is a recognition that this deal is of greater scale than what we've done before. Now we've done big acquisitions before in the context of McCormick's size. But this certainly is bigger. But having said that, we believe that the complexity is certainly identifiable, it's manageable. And we're off to a really good start. And I'm sure I'll get a chance, through other questions here today, but -- to describe sort of where we think we are right now in that process.

Yes. Well, you and I have talked a couple of times in the last month or 2. And I know that there's been a lot of integration planning that's already taken place. But maybe provide an update on that planning and maybe give folks a sense of what it looks like, what the structure of integration management looks like if there's an integration office that's been set up, key work streams, just what are -- what is going on behind the scenes as we stand here today?

There is a lot of great sort of activity. And I would say it's well underway. I mean we started well over a month ago. We've established a separation committee, also an integration management office. And we've got 20 functional teams across both companies really resourced up against planning this integration to deliver a very smooth one without disruption to the business overall.

The integration management office is led by Andrew Foust, who was formerly the President of the Americas region. And I think what's important there is -- Andrew is a strong sort of leader within our business. But also Andrew has previously led and helped lead the integration of Reckitt Benckiser Foods, Cholula and also our FONA acquisition into our business. So a ton of experience there. And then backing him up, we have an interim President for the Americas region, who already was reporting to Andrew in that role overall.

And then on the Unilever side, we have equal level of dedication across their organization to this. And there's been a lot of already constant dialogue between both teams. Right now, this week, all those teams are in Baltimore. I'll be there tomorrow. But they're all there in Baltimore, continuing the blueprinting work that we have to do. And that backs up a meeting they had 4 weeks ago in London to do the very same thing.

So the amount of engagement is very deep, very, very strong. Overall, think about this as more than 200 people combined between both companies, dedicated to really executing this integration and planning for it. And that includes every function and business process that we're looking at right now.

I think second, it's important to really define sort of the complexity that we're looking at across this transaction. From a carve-out perspective, think about this business coming away from the whole Unilever company. The Unilever Foods business, about 80% of it is -- operates stand-alone, such as sales organization, its R&D, its supply chain, really effectively how they execute and really execute in market. And so that gives us a lot of confidence being able to sort of think about the difficulty of separating it out from the Unilever organization.

About 20% is coming through what is their One Unilever part of their organization. That's going to take us a little bit more work just to make sure that we figure that out. But just to provide other context, we're really making progress on mapping market-by-market where we see this integration moving. And so right now, 75% of the sales of the combined company come from 10 markets. So the top 6 are the United States, China, U.K., France, Mexico, Canada. And those 6, we already operate directly, both of us do at scale. So that's going to get a lot of attention in terms of how we think about the integration in those top 6 markets and how we'll execute that.

The other 4, Brazil, the Philippines, Indonesia and Germany, we don't really have a direct presence. So it's going to really require a different approach. So it would be more of a lift-and-shift type thinking and mentality. But also, those are markets where we don't have real McCormick brand presence, too. So we'll also have a lot of planning going on to think about how -- what is the right way to kind of launch those plans into the market. TSA agreements will be in place.

And then when we look at other 3 work streams that I think are critically important. Obviously, synergies. So what you'll hear from us at the end of the third quarter is we're going to provide more detail on how we're looking at synergies overall. But we're already now into the second phase of that planning and our level of confidence is rising on that.

From a growth standpoint, we're having similar work going on. And so at the end of the third quarter, we'll be providing more context around that, too. And again, that's a really important work that we want to kind of really have advanced work on before we hit close.

And then lastly, we have a culture work stream, which I think is very important because cultural alignment, as many of you know, is really critical in any big combination. So that work is important. We're starting from a standpoint of a lot of commonality. But I've already myself been in front of the Unilever organization in some rather large settings. Last week, on Thursday, we were in Rotterdam and spoke to about 5,000 Unilever employees and really share with them kind of our ways of working, the way we would describe our culture. And I think really put a little bit of comfort the minds of employees in terms of, okay, who is this McCormick team and how do they operate. And how do they think about the food business. And how they think about driving the business overall. We did a similar thing in New Jersey 3 weeks ago and spoke to the whole U.S. organization. So we're getting out there. We're getting a chance to meet the organization, and I really am excited about this culture work stream too.

Okay. I'm excited about the 3Q call now.

Yes.

You mentioned the 3% to 5% targeted growth as you think out a couple of years. When you think about all the different levers to unlock incremental growth, what are the top call-outs for you?

There's a lot to be excited about. I'm going to start maybe to provide context around this, just with sort of a summary way of me thinking about it. And then I'll unpack it a little bit. But this is a portfolio with very strong brands who are operating in categories with really good global growth. And those categories really benefit from structural consumer trends. You combine that with a best-in-class go-to-market footprint at both a global level and a channel level. You combine that together, we see a lot of incremental growth opportunities overall.

I think what's first important to unpack is just really the categories in which we operate in. From the McCormick side, we're bringing in a lot of expertise in herbs, spices and seasonings, hot sauce, mustard, and we've demonstrated a lot of growth in those categories, certainly, over time. Unilever is bringing in a real expertise in mayonnaise and bouillon and other cooking aids. And they're really seeing a lot of growth from their portfolio category. And as I've been meeting with investors, I think it's important to sort of just double-click a little bit on mayonnaise and bouillon and the categories that Unilever is bringing to this combined portfolio.

Mayonnaise is a very healthy category at a global level. It's been experiencing really strong growth. It also has projected strong growth. But what I think is really important is it's growing not only in the core, in mainstream varieties of the category, it's also growing because you're looking at some of those areas where the health and wellness cues that consumers are looking for like a different kind of oil or lower in fat. And so both of those together are driving volume growth. And we also see younger consumers are really expanding the usage of mayonnaise too. So it's very relevant with younger generations.

And bouillon are also seeing a lot of other aspects of what really drives, I think, the trends behind that part of the category, too. This is something which is seeing a lot of strong global trends. It's really, I think, driven by the fact that we see a lot of urbanization right now and sort of more participation in the workforce, particularly in markets like in Latin America and Asia. And so those time-saving convenience needs of how you kind of put a meal on the table, especially ones that require like low simmer cooking. These are shortcuts and they're really value-added and they're really at a great value. And so we're seeing a lot of growth there, too. Overall, I think that the trends in the marketplace really do support this category that we're combining with McCormick. And I think that's quite exciting.

On the channel side and the geographic side, the whole go-to-market footprint that I've been talking about, it just is a really great balance between developed and emerging market exposure. It certainly changes McCormick's view from a concentration standpoint. I mean 60% of our business today comes from North America. In the future, it's going to be 1/3. And the rest of that comes from a more balanced geography.

We have a lot of great channel presence, both in the Consumer and foodservice channels. I would say in foodservice, that's one of the really -- everyone, I think, really has an appreciation for our presentation and our presence in Consumer. The one that I think gets -- probably needs more airtime is almost foodservice. And both companies have genuine strengths in their go-to-market models there. When you bring those together, there's a lot of cross-selling opportunity, a lot of geographic expansion opportunity also in foodservice.

And then lastly, I'll just wrap up. It's our brands. And so we have very strong global brands in Hellmann's, McCormick, Knorr. And those brands have proven to be relevant with younger households. We have a strong global marketing organization of both companies. And when we bring that together, I think our ability to really drive relevance with new consumer households is really important. On top of that, there are at least a handful of brands that we believe have real potential at a global level. So a brand like Maille or Cholula or Frank's RedHot have a lot of upside growth, but they just need investment to keep growing and kind of getting introduced to new markets.

Yes. Okay. Marcos, Brendan mentioned the changing of -- the evolving geographic footprint, right, more emerging markets. And one of the -- that comes -- with that comes better prospects for normalized organic growth. But I've also heard a little bit of concern from McCormick shareholders that wow, this is going to increase our exposure to a lot of volatility, volatility in consumer trends, volatility to FX, how do you think about that balance?

Yes. This is another exciting part of the combination, which is expanding into emerging markets, which is an attractive growth potential for McCormick. So expanding in emerging market has always been our intention since when we announced in Investor Day back in 2024. This transaction actually accelerates that plan. It provides immediate scale and distribution that otherwise would take decades, as Brendan mentioned, to achieve. And Unilever brand-building capacity over the years in those emerging markets have been great. Things -- markets like Philippines, Indonesia, other markets, but there are still opportunities within Latin America, Asia and Middle East, right?

We believe that this is very attractive from a growing population perspective as well and rising middle classes in those markets. So we see higher long-term demand environment building across emerging markets. If you think about Knorr as a global brand, EUR 5 billion global brand that is with high consumer awareness and high gross margin and emerging market exposure, that is an awesome brand for us to have.

Now we do have both decades of experience -- both companies' decades of experience in managing emerging markets. McCormick has been in the emerging markets, right now, not at the same scale at Unilever. I have -- a big part of my career has been operating in emerging markets as well. So from the standpoint of managing the risks, and I would think about the currency risks and the inflationary risks that comes by managing those markets.

First, we've been doing this for a long time, managing those risks. And I would describe that the transaction exposure risk is one that the combined company likely to have more of a natural hedge as a significant portion of our operations, we manufacture where we sell. So we're going to see that from the FX perspective. From the inflation perspective, we'll continue to leverage our playbook, which is revenue growth management, price-pack architecture designed for local usage, the simplification of a portfolio, which is essential, especially when you are selling through traditional trade in those markets. And then obviously, our CCI program.

So one of the things that I learned over the years in managing these markets is about speed and agility. They are essential in getting in front of those impacts and be able to mitigate them. So -- and in addition to that, I would say that Unilever Foods bringing a lot of talent and expertise in those markets. So they will be part of our larger organization and bringing that expertise in. So overall, I would say emerging markets moving from 25% today to 40% in the future, actually, it's a growth opportunity for us without taking excessive risk. I think it mitigates an excessive risk. Yes.

So to go after all those growth opportunities, you've been clear that you're going to -- there's a good amount of synergy, but there's a good amount of reinvestment. How should we all think about the balance between margin expansion and reinvestment as priorities in the first couple of years post integration?

Yes. So both Unilever and McCormick, especially over the last few years, have been very consistent in terms of using the playbook of margin expansion and invest back in terms of brand marketing to drive top-line growth and operating margin expansion. So put simply, we're not going to compromise growth at the expense of margin expansion. We are going to continue to invest in organic growth and in brand marketing. Over the last 3 years, Unilever has been investing about 8% of net sales on a comparable basis to our 7% of our Consumer segment, and we'll continue to do that. At least that is the baseline to work from and likely to continue to invest more in the future.

Unilever Foods achieved their operating margin profile by historically expanding gross margin and again, investing back in those brands, especially those big brands, Knorr and Hellmann's, over the years. So over the first couple of years, the plan will remain consistent. We plan to gradually expand operating margins while continuing to invest behind our brands to drive the long-term growth. And the margins will come from volume growth, revenue growth management and cost synergies. Those are the kind of the 3 elements that will help us enable gross margin expansion and then invest back in brand marketing.

Great. And you talked about EPS accretion from the deal. Brendan mentioned the promise of a pretty powerful free cash flow. Maybe ground us in sort of your base case expectations on both those fronts. And then what are the key variables to keep in mind as you think about upside or potential risk around those...

So when we think about sensitivities, I mean, the way that I look at this is there's 2 key aspects of sensitivities within the financial model. One is growth and the other one is around the speed of achieving savings or the synergies.

So in terms of top-line growth, what supports the year 3 projections is the continued growth of the categories in which we are in, plus our track record of driving growth. If you think about our financial model, the financial model works for us in the range of 3% to 4%, the financial model works for us, right?

On synergies, we expect to realize the $600 million synergies, as we said before, with -- and that puts us in the middle of the range of 23% to 25% operating margin, so about 24% operating margin. And with the -- and the sensitivity around synergies is really the speed in which we will be delivering the synergies. So at this time, we said that about 2/3 of the synergies to be realized by year 2 and the remaining by year 3.

EPS accretion, we talked about it as a consequence of the P&L, EPS accretion, we said to be in the mid- to high teens in year 3, post synergies. First full year to be mid- to high single digits. So we continue to feel confident about those numbers. So moving -- that's the P&L.

Moving into the cash component, I think it's important as well to just -- to talk about and the capital allocation. CapEx, we talked about 3% of net sales or about $700 million of investments. We intend to maintain and grow our dividend policies that we have been doing with McCormick. So that is going to be the case going forward. And we have a very focused mindset to delever from the at or below 4x at close to 3x within 2 years.

To unpack a little bit about the deleveraging plans, I think that's important to talk about, I would say, first, both companies start from a position of strength, both in terms of profit and cash flow generation, even though navigating difficult environments as we have been, the combined company expect to have operating margins of 21% and working capital benefits that drives 100% of free cash flow conversion to net income, which is very solid.

Right from the start.

Right from the start, right? So post close, we expect to invest in the business to drive margin expansion. Our year 3 delevering projections are based on the low end of the operating margin range that we gave. And after all the investments, if you think about brand investments, cost to achieve synergies, dividends, we anticipate having $1.5 billion to $2 billion of cash to pay down debt within the first 2 years.

So it is a very solid P&L, a very solid cash flow generation, allow us to pay dividends, allow us to invest in CapEx and still have $1.5 billion to $2 billion of cash left to pay down debt and get to 3x at year 2.

Okay. Perfect. Yes, Brendan, I think every time you've spoken since the deal, we've learned more, including today. And I think so the disclosure has been pretty continuous. You teased the 3Q updates as well. When we think about the path to around about mid-2027 close, how should we think about the milestones of further disclosure as we march toward that end goal?

The time line until close on this transaction is really driven by the legal and regulatory processes for the carve-out and also the combination. And we see that as pretty typical for this type of structure and transaction and scale of it overall. We will use that time to our advantage to just really complete very rigorous planning overall. And we're moving with sort of intent on all of those areas.

I think in terms of milestones, what I think is important to share is kind of let's set the expectations as follows. So by the end of July, we'll be able to share a location of the secondary listing. So we'll be able to do that. And I think it will be important for investors to know what that will be. And so we'll kind of obviously, make sure that we share that as quickly as we can.

By the end of the third quarter, there are 4 things we want to be able to share more detail on. And so the first is the combined company's target operating model, so think about how is this company going to run? How is it choosing to operate? What will be the leadership roles within that top structure? So we'll be able to share that. And I think that's also important to kind of frame how we're viewing how we're running the business.

The second area is providing more color on cost synergies and the implementation plan. So we'll be able to do more of that. As I said, we're already in our second phase, and we feel like we're really -- in fact, our confidence is increasing on at least hitting the numbers that we talked about overall.

The fourth (sic) [ third ] thing is we'll have a refined view of how we're looking at growth synergies. So I've already shared a lot today, great color, but maybe we can provide a little bit more substance on how we're seeing it, maybe even down to a market level.

And then lastly, the fourth thing we'll share is more of a defined scope on the TSA plans. And that will be specifically around IT, distribution, go-to-market.

Work streams are fully underway to do both supporting the carve-out financials as well as the regulatory filings. Those are working in parallel. And we'll be able to share more context around that timing when we get to the end of the third quarter. Those are type of the long lead items that we have got overall. And depending on Unilever's carve-out time line in those financials, that will then sort of dictate when we do shareholder vote. And then that will probably be much closer to close overall.

I think our goal is to really continue building investor confidence by sharing regularly updates and more details in terms of how we're looking at our planning. And the point is to show the sort of the match to what we said, right, and really sort of make sure we generate confidence there. But at the same time, it's really about operating our current business and achieving our goals for 2026.

Okay. Perfect. The secondary listing, Marcos, one thing that has been a kind of a perpetual question or concern is just flowback dynamics in terms of certain U.K.-based or European investors being forced to sell post-close. How are you thinking about that technical item?

Right. Yes, right. Yes, that's what we heard as well from investors. I mean the focus on -- often on flowback. But the way that we frame this is it's important to remember that McCormick is going to be 3x the size as it is today. And with 50% of capital is being managed in the U.S. being managed by index and ETF funds, there should also be a sizable index buying demand on closing as McCormick becomes a larger constituent of U.S. indices.

So we believe that the flowback is expected to more than offset any risks of selling -- any selling U.K. or European index trading funds at closing. Potential mandate-driven selling based on our analysis is very limited and to a small portion of some U.K., European investors. So we believe that net-net, the flow forward is going to more than offset the flowback based on what we know today. Many active managers will have the flexibility to continue holding McCormick shares at closing. So as we said today, as we mentioned today, Brendan mentioned it, the secondary European listing will also be confirmed by the end of July, which should also help support flows and create broader liquidity.

In addition to engaging with McCormick shareholders, Brendan and I have been engaging with Unilever shareholders and European-based active shareholders to make sure that they recognize the merits of this transaction and the combined company. So we are very confident in the long-term benefits of this transaction and what it provides to all shareholders. But at the same time, we believe that the world's largest capital markets will be able to absorb the flows of this transaction, and we have grounds to believe that flowback will be manageable.

Manageable.

Yes.

Okay. Okay. Brendan, you talked about the importance of staying focused and delivering on fiscal '26. And I actually think in recent weeks, that's been the bigger concern of investors is: can McCormick adhere to guidance, which you affirmed. What milestones should we be watching for to gain more confidence that those '26 goals are achievable and the company is not being distracted?

I think I'll talk about from a McCormick perspective and maybe make a comment from a Unilever perspective. From a McCormick perspective, I think investors should look for continued organic sales growth, margin expansion and continuing to invest in the business. Those 3 things are key themes for us in 2026. And as we look at it, we continue to really drive investment in the business, too. And I think you'll continue to see us investing -- sorry, balancing both volume and profitability, and we're not trying to sacrifice either.

So I think in that context, it's important that we're really committed to doing that as we get through the year, and we still see an ability to do that. We're focused on driving long-term healthy trends in our business overall, and doing that across both segments that we've got. And so we feel pretty confident about being able to do that throughout the entire year, and we'll always be -- remain focused on sort of creating that balance right now. I think it's important in the marketplace.

When I think about our key themes for '26, I still feel like we're going to try and deliver on most of those. Interestingly, it's the very same key themes for Unilever overall. And I have a lot of sort of confidence after talking with their teams, too, because it's a recurring point, which is strengthening and continuing to execute on the base business. And so that gives us confidence, too, and we expect them to kind of continue their performance and track record.

Having said this, both companies are doing this in the context of just continuing disruption that's coming into the marketplace, especially through inflationary pressures, and we're finding a way to work through that, which I think is kind of the most important point.

On the context or the idea of distraction overall, I think that what I would tell you is that I observe tremendous organizational and operational clarity right now. And we get that because we really have dedicated the resources to work the integration.

And so when they go to a meeting throughout the day, they're not trying to work on both. They're working on one. And the same is true with the rest of the team, obviously, the lion's share of our organization working on the existing business. And there's just a lot of clarity and focus around that. And we're not conflating the 2. And we're making sure that we don't. So I think that discipline is something that we're good at overall, but it's also important to be said. And that's how we're going to carry ourselves through the rest of the year.

Okay. Yes, the external environment is not making life easier for anybody. So I guess maybe as you step back, what is your perspective on the state of the consumer, both in the U.S. and more broadly overseas? And I guess, what implications for your categories and for your business are you seeing in evolving trends?

If I step back and think about the way we've been talking about this the last several quarters, we've been talking about a pressured consumer, I think we've heard that also broadly within the industry. And you see that expressed as like fewer trips -- sorry, more frequent trips to the grocery store, buying fewer items, greater demand for value and taking a look at that. And at the same time, searching for health and wellness at shelf. And what's interesting is they're not compromising on health and wellness, even though they're looking for more value. And so they're trying to find, I think, both.

Right now, what we're seeing is even a little bit more noise in the data, which would take me to this point of -- this idea of a resilient consumer that we've been talking about now for many quarters, feels like it's weakening a little bit in the context of rising gas prices. So I think it's difficult to identify like how long we think that will be the case. But it's something that we're really taking a close look, like, overall.

But having said all of that, we've been through similar environments in the past, and we know how to navigate them, and I think Unilever does too. And so this is an environment where we have to manage margin and also volume growth. And we'll have to balance those 2, I think, in this environment. And also in these environments, our categories still continue to grow in demand. I mean, flavor is still on trend. So we have a lot to be thankful for in terms of our categories being healthy, but also we have to think about how we navigate now that we have different factors going on overall.

Having said that, we're always prepared to really kind of keep driving, I think, performance in the marketplace. And so for the rest of the year, what you'll see from us is continued growth in distribution, continued focus on revenue growth management plans being implemented in the marketplace. We'll still get the benefit of a lot of launches that we did in 2025 like our McCormick Gourmet renovation overall. And then if you think about the innovation that we're launching this year, pretty exciting stuff. Our French's mustard business has -- we've done a promotional partnership with the release of the new Minions movie. Are you a fan?

Of course.

Okay. It's actually kind of exciting. We're turning to the color of mustard green because of a key character in the movie. It's all natural colors by the way. But that's kind of an exciting element of just bringing fun to the category overall. We're relaunching our Seasoning Blends line and what I'm really excited about, yes, there's new flavors. It's the price-pack architecture changes that we're driving to create maybe more value at shelf. So I'm excited about that.

And then we're taking some of our new platforms and just launching them with really strong promotional ties like Bridgerton or Harry Potter. So these are fun, exciting things that we're doing over the summer that are -- what?

I'm a fan of those too.

I'll get you some green mustard.

Good. I guess, Marcos, from your perspective, what are the most acute cost or demand pressures as you think about '26. And I guess what gives you the confidence that you can fight through them?

Yes, we're kind of -- we're in a quiet period right now, so we cannot share a lot of information, and we'll be able to share more information as part of our close -- earnings call at the end of June. But based on what we know today, we remain on track with our outlook for 2026 overall. Brendan talked about the perspective on the consumer environment. I'm going to cover the cost piece.

So yes, from a cost perspective, we are seeing cost increase. And however, we do plan to mitigate the vast majority of those cost pressures through CCI programs, supply chain initiatives, as well as obviously leveraging revenue management capabilities that we have been doing over the last couple of months in period of cost pressures, but we're trying to balance the idea of margin management with top-line growth as much -- as best as we can and meet the consumers where they are with innovation, with convenience and price. That has been really the focus of the management team is how do we protect margins as well as drive volume as much as we can in terms of finding that balance. So overall, we believe that the costs are rising, but we have elements in place and our toolbook in place to really offset those during the year.

Okay. We're closing in on the end of time. So to close, I guess, if there was one message or one strategy that you -- maybe one message on execution, one message on strategy that you would leave investors with in terms of like this is what we need to focus -- this is what investors should be focused on, this is what we're focused on. What would it be?

Strategically, I think the headline for me would be McCormick is the right home for this Unilever Foods portfolio. It is the vision of how we view ourselves operating in flavor. We're intentionally focused on it, our technology, our talent, our brands, that's all we're focused on, and we see a lot of growth in that part of the marketplace. And we're creating global scale in these attractive categories by combining these 2 businesses.

Just like I said before, we're enabling ourselves to accomplish something that would take decades to do for either company actually. And so it creates a very unique proposition in the industry to have this really focused portfolio with scale. And I think that's quite exciting overall. And it's ultimately what's going to really amplify things that already make McCormick a great company.

From an execution standpoint, I think the most important is, obviously, we're doing 2 things right now. We're running the existing business, and we're preparing an integration plan for the business. They're both receiving sort of that very dedicated attention and focus that you would want them to have. And so all of our executional attention is on the clarity organizationally and sort of operationally on needing to do both, dedicating the resources to make that happen. And I feel pretty confident about our ability to execute that. And that's without dismissing an investor concern about the scale or the complexity. But I would argue there's always complexity in integrations. We just have to really buckle down and make sure that we think it through and do a good job of executing that. And we have a track record of doing that overall. And so execution is definitely on our mind right now to make sure that we get through the year by accomplishing both, and we're off to a very good start, we think.

Okay. With that, we'll wrap it up. I wish you a good trip back to Baltimore, so you can participate in those meetings tomorrow. And thanks for joining us. And thanks to all of you for joining us as well.

Good morning. This is Faten Freiha, VP of Investor Relations. Thank you for joining today's call. While our original plan was to review McCormick's first quarter fiscal 2026 earnings results, today's discussion will focus on our announced combination with Unilever Foods and the strategic rationale for the transaction.

Please note that this call is being recorded. The press release and accompanying slide presentation related to today's announcement along with the materials for our first quarter fiscal 2026 results are available on our Investor Relations website, ir.mccormick.com.

With me this morning are Brendan Foley, Chairman, President and CEO of McCormick; and Fernando Fernandez, CEO of Unilever; and Marcos Gabriel, Executive Vice President and CFO at McCormick.

In our comments, certain percentages are rounded. Please refer to our presentation for complete information. Today's presentation contains projections and other forward-looking statements. Actual results could differ materially from those projected. The company undertakes no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events or other factors. Please refer to our forward-looking statements on Slide 2 for more information.

I will now turn the discussion over to Brendan.

Thank you all for joining our call. Marcos and I are pleased to have Fernando join us this morning as well. Today marks a major milestone for McCormick. We are bringing together 2 leading organizations, McCormick and Unilever Foods, to create a strong, scaled and growth-oriented company that will be flavor-focused and exceptionally well positioned to succeed in today's dynamic environment.

We have always seen the logic of this combination. We're excited by the opportunity to deliver end-to-end flavor experiences to even more people around the world, bringing the taste that inspire, connect and bring joy to kitchens and tables everywhere.

Before we go further, I want to quickly provide an update on McCormick's first quarter 2026 results. For the quarter, we delivered strong growth in sales, adjusted operating income and adjusted earnings per share, supported by our McCormick de Mexico acquisition and organic growth across both Consumer and Flavor Solutions. In a dynamic environment, we drove margin expansion through strong top line, acquisition accretion and disciplined cost management.

While our remarks and other materials from our results can be found on our IR website, as Faten noted, I want to underscore that consistent and strong core financial performance from both McCormick and Unilever Foods is foundational as you think about today's announcement.

Now turning back to today's announcement, starting on Slide 5. McCormick and Unilever Foods are strategically and culturally aligned organizations. We each bring iconic brands in attractive categories spanning herbs, spices, seasonings, bouillon, condiments and sauces.

Bringing these portfolios together creates an opportunity to execute multiple growth levers, such as expanded distribution, accelerated innovation, brand premiumization and a scaled dual-engine foodservice platform. At the same time, we see significant clearly actionable cost synergies layered on to an already strong structural margin profile, creating capacity for continued reinvestment and attractive shareholder returns.

Beyond strategy, our organizations share a common mindset, a passion for flavor, a belief in the power of people and relentless focus on quality and innovation and strong investment behind our brands.

Turning to Slide 6. The pillars of the combined organization reflect distinct and complementary strengths across geographies, channels and categories. Together, we create a focused global flavor powerhouse, scaled, resilient and uniquely concentrated on flavor.

Our balanced geographic and channel footprint enhances durability across economic cycles and market conditions. The breadth of the combined company, diversifies our growth across emerging and developed markets and retail and commercial channels.

In addition, this combination meaningfully expands McCormick's presence in structurally advantaged categories aligned with enduring consumer trends, more flavorful, convenient and focus on health and wellness. We will continue to flavor calories while others compete for them, giving us a strong tailwind and aligning us to favorable consumption growth trends.

All of this results in a best-in-class margin profile that supports sustained industry-leading reinvestment behind brands from global leaders like McCormick, Knorr, Hellmann's and French's to high-growth potential brands like Frank's RedHot, Cholula and Maille, along with strong regional favorites where we see exciting potential.

Moving to Slide 7. We see a clear path to unlock incremental growth, grounded in the complementary strengths of our geographic footprints and go-to-market capabilities. Unilever Foods brands can benefit from McCormick's focus and strength of retail execution in the North America flavor aisle.

At the same time, McCormick is positioned to expand more meaningfully in high-growth emerging markets by leveraging Unilever's established scale, deep local infrastructure and proven route to market.

In foodservice, the strategic fit is particularly strong. McCormick's front of house brand equity and tabletop presence combined with Unilever Foods' deep back of house experience and operator relationships. Together, we create more complete end-to-end solutions for customers, strengthening relevance and deepening partnerships.

Innovation is a shared strength. Both organizations have proven expertise in flavor development and format expansion across consumption occasions, complemented by Unilever's robust culinary capabilities and chef-to-chef engagement model.

Before I expand on these growth opportunities, I will turn it over to Fernando for his perspective.

Thank you, Brendan. We are very enthusiastic about this combination, and about our partnership with McCormick. We are confident it delivers a compelling outcome for all stakeholders.

At Unilever, over the past several years, we sharpened our strategic focus, we have reshaped our portfolio towards high-growth categories and strengthened our operational foundation.

This transaction is a natural extension of our strategy, leading to value creation, while giving our shareholders meaningful participation in the upside of a scaled, global flavor-focused leader with a strong growth and margin profile.

Importantly, this is a transaction anchored in a strategic and cultural fit. Both organizations operate in attractive categories where brand, innovation and execution matter. Both bring disciplined capital allocation, a strong cash generation and a consistent track record of volume-driven growth, and both are driven by performance-oriented culture with a deep commitment to quality and customer partnership.

We believe this combination strengthens the competitive position of the business, enhances its growth prospects and creates a more focused platform to lead in flavor globally.

With that, I hand it back to Brendan.

Thank you, Fernando. Moving to Slide 9. I'd like to begin by reinforcing why flavor is a structurally advantaged category. When you think about food, we strongly believe flavor is the best place to be. It is the #1 purchase driver across dishes, trends and occasions. It transcends age, culture, dietary preferences and income levels, making it both resilient and highly relevant in a dynamic consumer environment.

Importantly, flavor is fully aligned with today's health and wellness priorities as consumers increasingly focus on cooking at home, adding more protein and produce, and pursuing healthier lifestyles, flavor plays a critical role in elevating those choices. Younger consumers, particularly Gen Z, are notable contributors to these trends.

Taken together, these favorable flavor tailwinds position us well to drive sustainable growth as a combined company. The highly complementary nature of this combination gives us multiple ways to capitalize on these tailwinds. The clear tangible and many growth levers we see across this combination create real excitement for all of us here.

Let me highlight our 4 priority areas of focus on Slide 10. Maximizing our reach by leveraging expanded distribution in a highly complementary portfolio across markets; unlocking incremental growth by scaling high-growth potential brands across new geographies, channels and consumer occasions; integrating McCormick's Flavor Solutions and Unilever Food Solutions enhances our dual-engine model with a scaled, globally distributed platform with strong brand equity among chefs and operators; accelerating innovation at scale by leveraging our shared R&D and technology to lead the future of flavor and stay ahead of evolving consumer preferences. These areas of focus are actionable growth levers for the combined company.

Moving to Slide 11. Together, we have an end-to-end flavor proposition, from cooking to condiments with brands that have minimal overlap and maximal adjacency. Our iconic globally recognized brands, Knorr and McCormick, will enable us to be part of more cooking occasions across more markets.

At the same time, our condiments portfolio, including hot sauces, mustard and mayonnaise, allow us to be present in even more kitchens and on more tabletops meeting consumers' growing needs for healthy, flavorful meals.

Moving to Slide 12. Beyond adjacency, the combination also accelerates the opportunity for high-growth potential brands. The brands on the slide as well as the number of brands in our portfolio enjoy high consumer loyalty, connection to consumer trends and global appeal, particularly with young consumers.

For example, we have the leading share in hot sauce in the U.S. with Cholula and Frank's. We have begun expanding in EMEA where we have seen great success in highly competitive markets. For example, Cholula in France.

And through Unilever's capabilities, we'll be able to accelerate expansion, not just in EMEA, but also in Latin America and Asia Pacific. With Unilever Foods' strong presence in these regions, these brands will have substantial opportunities to expand their distribution and reach new consumers.

Another unique opportunity is Maille, an almost 280-year-old French brand deeply connected to French culinary tradition as a French -- as a prestige mustard and mayonnaise brand. We see opportunities to scale this presence -- its presence across a number of new large markets, similar to what we have done with Cholula. This is just one example of many that we see across the portfolio.

In addition to retail expansion, Slide 13 highlights the power of our combined foodservice platform. Together, we will strengthen a scaled business-to-business leader with approximately $6 billion in pro forma annual sales, positioning us among the largest global foodservice players.

Unilever Food Solutions brings global presence with deep back-of-house capabilities and culinary expertise and breadth that meaningfully expands McCormick's reach across multiple foodservice operators. Complementing that strength, McCormick offers a powerful branded front-of-house presence and an extensive partnership network, particularly across independent noncommercial and chain operators.

This creates significant cross-selling opportunities. We see clear potential to elevate key Unilever Foods brands while utilizing our partnerships to drive awareness and trial. In turn, this visibility will reinforce retail demand and brand equity, creating a virtuous cycle across channels.

Supporting all of these growth opportunities is innovation. Slide 14 outlines how we will leverage our combined technology and R&D capabilities, an essential strategic pillar and long-term competitive advantage.

Together, we bring leading capabilities in R&D and flavor science, underpinned by deep consumer insight, culinary expertise and advanced technology platforms. By combining our resources, we meaningfully expand our capacity to innovate, accelerate speed to market, and drive differentiated solutions across retail and foodservice.

Our capabilities are highly complementary. We bring our leadership in seasonings and heat and our expertise in natural ingredients. Unilever brings their emulsion technology, which enhances texture and their ability to leverage protein as a flavor. All of this positions us to support customers to deliver on consumers' evolving dietary needs as well as accelerate innovation across the portfolio.

By combining our technology, culinary and scientific expertise, we are building a differentiated flavor innovation engine designed to sustain growth and reinforce category leadership over the long term.

As Fernando noted, McCormick is the natural home for Unilever Foods brands. We have long thought about this combination, and we'll bring it to lessons learned from our own M&A journey, which has been deliberate and strategic.

As you can see on Slide 15, we focus on strengthening our leadership in heritage herbs and spices, expanding internationally, building scale in condiments and sauces and growing our business-to-business Flavor Solutions platform. Each transaction has aligned with our long-term vision and disciplined capital allocation strategy, and this combination with Unilever is no different.

While this transaction is larger than prior deals, the core drivers of success are the ones we are familiar with. This will be my top priority, and we are approaching with confidence -- we are approaching it with confidence and humility. We have already begun integration planning in partnership with the Unilever team.

Let me share some of the details on Slide 16. We are building a detailed integration plan well ahead of close, positioning us to execute efficiently and with strong governance. Dedicated leaders from both companies have clear responsibilities, supported by experienced external integration partners. Unilever brings significant carve-out expertise and remains financially invested, including 2 years of Board representation, ensuring alignment.

Business continuity is central to our approach with comprehensive TSA support across key functions. In addition, we have tremendous respect for the talent at Unilever Foods, and they are integral to the success of this integration and long-term value creation.

We are defining the target operating model early and executing market-by-market to balance speed with precision. Synergy targets are aligned and backed up by a structured delivery road map and a detailed IT transition plan is already in motion to ensure secure and seamless integration.

At the same time, we are proactively shaping the commercial agenda to unlock the growth potential of this portfolio from the outset. We know what works. Welcoming extraordinary talent from Unilever Foods, retaining key capabilities and applying proven playbooks to scale brands and accelerate innovation. This disciplined integration paired with intentional growth acceleration, a combination designed to deliver value while maintaining operational continuity from day one.

Before turning it over to Marcos, let me highlight why this transaction makes so much sense right now on Slide 17. We have long seen the benefits of the overwhelming strategic fit between the 2 businesses. Both businesses are in a strong and growing position, benefiting from structural tailwinds. Together, we will create a company that is stronger, more resilient and ready to deliver on its full potential in a dynamic environment.

With that, I will turn it over to Marcos to discuss the combined company's financial profile.

Thank you, Brendan. This transaction represents a significant milestone for both companies. Together, we're creating a global flavor leader with expanded scale and capabilities, positioned in attractive high-growth categories and supported by a strong and compelling financial profile.

Let's begin on Slide 19 with an overview of the transaction structure, which was also outlined in our press release. This combination has been thoughtfully designed to create long-term value for each set of shareholders.

The transaction is structured as a Reverse Morris Trust as we are issuing a fixed number of McCormick shares as consideration for Unilever Foods upon closing. This issuance is expected to result in pro forma ownership of the combined company's equity of 65% for Unilever and its shareholders, and 35% for McCormick shareholders.

Unilever will also receive $15.7 billion in cash, subject to customary closing conditions. This is the optimal combination of debt and equity, that allows McCormick shareholders to realize significant value from the transaction, supported by the borrowing capacity of the combined company, which is expected to generate strong operating cash flows.

The transaction implies an enterprise value for Unilever Foods of approximately $44.8 billion and approximately $21 billion for McCormick, representing a multiple of approximately 13.8x calendar year 2025 EBITDA for both companies based on a 1-month volume-weighted average share price.

From a governance and leadership standpoint, Brendan and I will continue in our current roles, ensuring continuity of strategy and execution. McCormick will remain globally headquartered in Hunt Valley, Maryland, reinforcing our commitment to our heritage while building a scaled, global flavor leader.

In addition, the combined company's international headquarters will be in the Netherlands, where a substantial presence will be retained in areas like R&D, among others.

Now moving to the financial profile of the combined company on Slide 20. On a pro forma 2025 basis, annual net sales are $20 billion supported by volume-driven growth and a best-in-class operating margins of 21%. Building from this foundation, we see clear opportunities to further enhance the profile through meaningful revenue and cost synergies.

We plan to reinvest incremental revenue and cost synergies back into the business to accelerate growth. Specifically, approximately $100 million will be reinvested into our brands through increased marketing to support and innovation, fueling sustained volume growth and strengthening our competitive position.

In addition, we anticipate $600 million in annual run rate cost synergies, representing approximately 8% of McCormick's 2025 pro forma sales, including McCormick de Mexico.

The synergy expectations are compelling given the limited overlap and existing efficiency levels of both organizations and reinforce our confidence in the value creation potential of this combination. Importantly, synergy delivery will be supported by our proven capabilities in partnership with the Unilever team.

Our Comprehensive Continuous Improvement program, or CCI, has consistently delivered cost discipline, productivity gains and operational efficiency across the organization. By applying this established framework to the combined business, we're well positioned to execute with rigor and translate scale into sustainable margin expansion and long-term value creation.

Turning to Slide 21. We outlined the key areas where we see clear opportunities to unlock cost savings across the combined company. Through a comprehensive diligence process, leveraging cross-functional teams from both organizations, we have identified actionable savings across procurement, media, manufacturing, logistics and SG&A.

This resulted in a balanced set of opportunities across cost of goods and SG&A. We expect to realize the $600 million in synergies by year 3 with approximately 2/3 captured by the end of year 2, reflecting a disciplined and phased integration plan.

Turning to Slide 22. When you combine the strength and momentum of both stand-alone businesses with the impact of these revenue and cost synergies, the result is a structurally advantaged best-in-class financial profile. This is about focused scale and profitable growth. The combination is expected to deliver meaningful accretion in the first full year across sales growth, adjusted operating margin and adjusted earnings per share.

By year 3, as synergies are realized, we expect sustainable organic sales growth of 3% to 5%, supported by deliberate reinvestment in our brands and an enhanced innovation engine. At the same time, operating margins are expected to expand to approximately 23% to 25%, reflecting structural efficiencies, procurement scale, supply chain optimization and SG&A leverage.

Together, this creates a higher growth, higher-margin platform with stronger cash generation, position the combined company for durable long-term value creation and sustained profitability.

Moving to Slide 23. The combined company will maintain a solid and resilient balance sheet, underpinned by strong, consistent operating cash flow and a disciplined capital allocation framework. This foundation supports meaningful deleveraging while enabling McCormick's long-standing practice of returning capital to shareholders through dividends for the combined company.

Both McCormick and Unilever have long-standing commitments to shareholder returns and historically have provided payout ratios of approximately 60%. We expect the combined company to maintain a dividend consistent with its history.

Strengthening the balance sheet is a clear priority. We expect net leverage to be at or below 4x at closing and plan to reduce it to approximately 3x within 2 years, supported by robust cash generation and disciplined execution. Throughout this period, we expect to maintain our strong investment grade profile and preserve the financial flexibility that has long differentiated McCormick.

With that, I'll turn the call back to Brendan.

Thank you, Marcos. Before I wrap up, Fernando and I would like to summarize the benefits of this deal for our respective shareholders. Strategically, this combination meaningfully expands our portfolio with iconic, high-growth potential and local favorite brands, strengthens our presence in attractive geographies and enhances our scale with customers around the world.

McCormick becomes a preeminent global flavor powerhouse, advancing our vision to be a global leader in flavor. Financially, the combination is compelling for our shareholders. We expect it to be accretive to McCormick growth, adjusted operating margin and adjusted earnings in just the first full year with continued long-term growth and upside to our financial performance.

We expect to maintain a strong balance sheet supported by disciplined capital allocation and clear deleveraging priorities, and our commitment of returning cash to shareholders through dividends remain unchanged. Ultimately, McCormick shareholders gain access to a larger, more diversified business with faster growth, a stronger margin profile and continued commitment to shareholder returns.

And for Unilever shareholders, this is about unlocking trapped value, giving shareholders exposure to a pure-play home and personal care company and to the upside in the global flavor leader.

Thank you, Fernando. To wrap up, on Slide 25, we hope that you take away from our call today is the following: This combination is strength plus strength, with 2 highly complementary flavor leaders coming together.

Together, we are creating a scaled, global flavor-focused company with leading brands in attractive advantaged categories. We see multiple levers to accelerate growth, while leveraging the power of leading iconic brands, high-growth potential brands and local favorites.

At the same time, we have plans to deliver clear achievable cost synergies and building on a best-in-class financial profile with meaningful accretion, strong margins and a compelling return profile, supporting our continued investments in growth. We recognize that the integration is crucial and recognize the work ahead.

We are prepared to execute, supported by a detailed integration plan, positioning us to execute efficiently and with strong governance. And through it all, McCormick will be McCormick, grounded in a 137 years of leadership and guided by a passion for flavor.

With that, operator, please open the line for questions.

[Operator Instructions] Our first question comes from the line of Andrew Lazar with Barclays.

Maybe to start off, McCormick's track record on M&A and integration, as you mentioned, is admirable. But obviously, this one is just many, many times larger, and the industry's track record with larger deals is pretty mixed. What gives you the comfort in taking such a big swing on this one? And really, what are you doing maybe differently on this one from an integration standpoint, just given the sheer scale?

Well, thanks for the question, Andrew. And we're ready to take on the integration at this level of scale, and we recognize, though, more importantly, what we're taking on.

First, there are a couple of important steps to have to complete before close. So we need to do regulatory filings, prepare for a shareholder vote, but also Unilever, we need to separate its Food business from the overall Unilever organization.

So those are certain things that have to happen in advance, obviously, during this period of time. We are leveraging our playbooks to make sure that we have the right integration approach. And I would just maybe break it down into 3 broad areas.

I mean, it first starts with a best-in-class external partner to help guide this. And so we already have that type of a firm on board to really help us think through the best way to approach integration. Now we've done that in the past. It has been very successful, and it's kind of kept us really, I think, executing against our expectations on that.

And as you know, in all the integrations very recently, we tend to overdeliver on our objectives there. But we also have a year or more to thoughtfully develop a disciplined plan. And that's really an important period of time, obviously, to make sure that we get this right.

And during that period of time, there are dedicated leadership that will be on this, but it's also a combination of not only McCormick leaders being a part of this, but also Unilever leaders, too, because they're also committed to this being a successful integration.

We're also planning brand acceleration at the same time against that agenda to deliver the growth potential. And so there are examples where we've done this, obviously, our French's and Frank's, but I would even look to FONA, where we take -- we modify the integration approach based on the business.

We don't execute necessarily a standard template on every one of them because each business is different. They present different opportunities. And sometimes there's different ways of working in how you go to market. We certainly found that with FONA. And so we're very -- took a very deliberate approach on that one. And then you can see the success that we've had.

So I think part of what we -- I think the magic in terms of how we look at this thing is not approaching everything as a nail and a hammer. We really make sure that we have the right approach, I think, to each individual situation. And I think region-by-region, this will probably play out that way.

Then we do have to execute a thoughtful separation. It will be supported by TSA agreements, and we have a very experienced partner in Unilever in doing this. Unilever employees are remaining with the business.

And that's an important, I think, concept to think about, which is there might be many regions in which simply McCormick doesn't operate. So you can imagine the Unilever employee base and talent really becomes part of that business. So there's sort of minimal disruption in that context. And so we're able to still run the business very effectively.

Overall, I would just say we're really committed and we have an invested partner in integration. We have dedicated leadership, best-in-class advisers, ample time to plan, and this is going to be our approach in going into this.

And then maybe second, just quickly. Unilever Foods EBIT margins are already in the sort of the low 20s, a level not many food companies have been able to reach, let alone sustain. And I understand much of this is due to the 2 scaled brands that are part of that portfolio. But I guess, are you comfortable that the brands have been appropriately invested in such that margins like these are, in fact, sustainable? And maybe Fernando can comment on it as well.

Yes. Let me open it up and then I'll ask Fernando to add some context there. When you look at both of our companies, you see robust support for the brands from a standpoint of brand support and innovation.

And we've -- definitely, I think that's where we are very much aligned in terms of how we think about how to drive growth against this portfolio. And it's not only that we're going to be -- we still have sort of a strong baseline that we're walking into this with, but we're going to add to it. Fernando?

Thank you, Brendan. We have been investing around 10% in brand marketing investment behind our Food business. So it's probably one of the best supported business in the industry, and of course, enjoying the benefit of incredible brand scale. Knorr, EUR 5.5 billion. Hellmann's, EUR 2.5 billion. So very, very sizable scale. And margins, gross margin in the mid- to high 40s.

So all these has built a real virtuous upcycle and circle of growth. And really, we have here very, very well-supported brand for a very long period of time. So -- and I believe this is one of the features that we share with McCormick, a real belief in how to build brands and a real belief in investing heavily behind our best assets.

And I would add to what Fernando just said is that, as we said in my prepared remarks, I mean, we are going to continue to invest going forward, particularly the synergies, cost and sales synergies, we are going to invest back in the business. I mentioned about $100 million incremental targets that we have, that's going to be used to be invested back in the business. So that momentum will continue going forward.

Our next question comes from the line of Steve Powers with Deutsche Bank.

Brendan, and maybe this -- maybe Fernando, you can weigh in here, too. I guess, my understanding is that Unilever Foods and HPC operations are pretty well integrated in certain markets around the world. And so as part of the integration plan, Brendan, you mentioned TSA agreements. I guess, could you speak at a high level to the scope and anticipated duration of those agreements and maybe also the costs associated over time with McCormick standing up its own operations?

Yes. I think from a TSA agreement standpoint, it's probably going to be -- not in more than just one form overall. So when you think about from an IT system perspective and separation there and unhooking part of the business and then rehooking it with us, so there's sort of TSA considerations overall in that.

But then also when you think about sort of our TSA agreements as we hand over and we sort of have that first year integration live together as a company, we're going to have TSA agreements there, too.

Fernando, you want to add to that?

Yes. Well, as you know, since 2022, Unilever has moved into an organizational model in which we have separated our 4 key business groups. And they run fundamentally as a stand-alone organization.

The reason for that at that time was to really ensure that we were building the capabilities required to compete with pure play in each of these industries, but at the same time, giving us the flexibility to make separations of this magnitude or the previous we have done in ice cream in a kind of relatively short time frame and without significant disruption.

So our Foods business is in more than 80% on a stand-alone organization, with their own manufacturing setup, their own distribution setup, their own route-to-market, separate sales force. So we really believe that we can separate business with significant -- without significant disruption here in the time frame that we have established.

Great. And then, Marcos, if I understand the deal structure correctly, it looks like you're going to be financing the transaction with new financing and new debt versus absorbing any debt from Unilever. I guess, maybe if you can just talk to the drivers there. Are there restrictions from Unilever signing its existing debt or just the rationale of going to the market new?

No. The rationale is really a combination of stock and cash deal. It's an RMT, think about it as an RMT-like transaction, in which we are providing a fixed number of McCormick shares as consideration for the Unilever Foods business, and they will own 65%, Unilever and its shareholders, and McCormick will retain -- McCormick shareholders will retain the 35%, which is the remaining piece.

And then in addition, we are providing $15.7 billion of cash to Unilever as part of this deal. And that takes us to a 4x leverage at close. And what we feel very comfortable about is that the margin profile of this business will -- it's very strong, and we will be able to delever very rapidly from 4x to 3x in about 2 years.

So it was part of the overall considerations of this transaction. It puts the company or the transaction at 13.8x EBITDA multiple, which is parity with McCormick. So it was the overall consideration between equity and cash as part of this transaction.

Our next question comes from the line of Tom Palmer with JPMorgan.

You noted the combined organic sales growth last year of 2.4% and the view of 3% to 5% longer term. At CAGNY, Brendan, you gave some reasons why you anticipate a sales reacceleration over the next couple of years. Maybe we could kind of do a similar exercise for the combined company, in particular, thinking through how much of that acceleration is more industry conditions versus maybe more self-help type initiatives?

Sure. Thanks, Tom, for the question. When combined, you have to think about the fact that we're 1/3 of the equation right now and the Unilever Foods business is 2/3 of the equation. And as we bring those businesses together, we do see stronger growth in that -- in the range that we had on the slide there, 3% to 5%.

These are businesses both that have been delivering volume-driven growth pretty consistently over the last several years. So we start with confidence in the base business, and so when we take a look at broadly at that growth overall, we see the 2 businesses kind of combined together, growing in that 2% to 3% range.

As we think about towards that year 3, as we outlaid on that slide, we see incremental growth coming from those businesses together. And so that is more about self-help than it is about the sort of the industry getting better with itself.

This is really, I think, the -- maybe the core of your question is we think this combination drives the opportunity to drive a stronger growth profile together, and that's why we sort of laid it out that way, the way we talked about it there, comparing sort of our commentary to CAGNY.

I can go on further on growth, but I thought I'd stop there, Tom, just to make sure if I've answered the core of your question.

Yes, you did. And just a follow-up on the mayonnaise side. You do have McCormick de Mexico now consolidated. Unilever, obviously, has a very large mayonnaise business. Just wanted to ask on the overlap and if there might be any limitations to consider in combining these.

Yes. It's -- right now, it's too early to speculate on that type of a thing. And we just look forward to working with the regulatory authorities on making sure that we review this transaction, and we'll be able to talk about that at a later date.

Our next question comes from the line of Alexia Howard with Bernstein.

Can I start off with, you talked about the deal being meaningfully accretive to earnings and I think earnings per share was mentioned from the outset. Are you able to put a number or an order of magnitude around that, and what the source of that accretion might be?

Well, Alexia, at this moment, we are not putting a number out there. I mean, it is meaningfully accretive in year 1 post-close across all lines of the P&L, including obviously, EPS. And as we get close to the close, we'll be able to provide more information, specific information as we continue to learn about the business. But it is a very substantial margin profile that this business has.

We talked about growth just now. Gross margin is very healthy, and we'll be investing back in the business as we have done in the past, both organizations, and driving operating profit from 21% currently to a range of 23% to 25% with the synergies of $600 million flowing through to the bottom line. So it's a very meaningful accretion across the P&L. But we'll give more information about the exact as we get near the close.

Okay. And then just looking around the world, where do you see the revenue synergies being most significant? I imagine Brazil might be a place where the McCormick brand could be strengthened simply because of the strength of the mayonnaise brands from Unilever over there. But are there other parts of the world where the revenue synergies could be significant?

Yes. I'm going to make a couple of comments here and ask Fernando also to provide his perspective. I see it as not necessarily dedicated to like 1 or 2 different regions. I would say it's really across many different -- so if you think about North America, Latin America, EMEA and Asia Pacific, in each region, we see opportunities overall.

If you think about in the Asia Pacific region, there are a number of markets that Unilever is in, that we're not in, as an example, or in markets that we're both in, we see opportunities obviously to drive even stronger growth in a market like China, for example.

When you jump over to EMEA, we see opportunities to really -- there are a number of markets where McCormick doesn't have presence. And so we see opportunities and revenue synergies there. If you jump over to North America, we see opportunities really, I think, to even strengthen the performance of both brand portfolios.

Latin America is, I think, one of those opportunity areas. When you think about Brazil, I think you're right, it's -- we don't have McCormick presence there. While we have a really strong presence in Mexico or parts of Central America, I think the Southern Cone is an area that Unilever has quite a bit of strength, and so we see synergy opportunities there.

Yes. I feel on top of the shared strength of the brand portfolio, I believe that McCormick brings an incredible product range and Unilever brings an incredible distribution infrastructure globally. And when you can leverage these 2 things, you have huge opportunities.

I agree Asia, Latin America are obvious geographical opportunities. I would like to highlight also the opportunities in foodservice. McCormick is a leader in the top of the table, let's call it, and Unilever is leader in back of house, Unilever foodservice brings a lot of expertise in Asian cuisine, particularly in Chinese cuisine, that is a growing trend.

So the opportunities are both in retail and in foodservice. I would say, also in expanding the range in our core brands, making some of the breakthrough growth brands shine, and of course, expanding the foodservice opportunity that is massive.

Our next question comes from the line of Peter Galbo with Bank of America.

Brendan, just one quick clarification. I believe the Unilever India subsidiary had talked about maybe not including the Food business in the transaction. So maybe you could just clarify for us, will the transaction include India Foods? Or is that kind of excluded from current thinking?

Yes. To be certain, the transaction does not include India Foods.

Okay. Perfect. And I know Fernando just gave a bit of an overview on kind of some of the foodservice opportunities. For Brendan, it'd be helpful, I think, to hear from you just to expand on where you see -- is it bringing more of the Unilever assets into front-of-house and foodservice. Is it more Unilever helps McCormick get more into back-of-house? Just where you see kind of the revenue synergies on the foodservice side?

Thanks for the question, Peter, on foodservice. Foodservice is an exciting area. Let's talk front-of-house first. When I think about the brand portfolio for Unilever, the opportunity, as we see it right now, and Fernando and I have talked about it, is really about the Hellmann's brand, really having more front-of-house presence.

And so that is a good opportunity, I think, for this combined portfolio as we think about that. And so we see that continued growing presence that we have on tabletop and front-of-house and even on menu, we've had a lot of success getting and partnering with operators, particularly sort of the regional chain type operators on beginning on menu with our brands. And so we see that as an opportunity.

The Knorr brand is very strong back-of-house. And I think that -- let's kind of maybe transcend from just a U.S. perspective around this. You have to really have a global perspective because I think the strength of Unilever's foodservice presence is definitely very strong globally.

And so we see McCormick opportunity in that because we have a lot of strength here in North America as an example, but we have an opportunity to accelerate our growth in foodservice at a global level. And so that's another area where we see synergy and opportunity to drive growth. Back-of-house, the McCormick brand name is back there, obviously, with herbs and spices and seasonings, as is the Knorr brand.

But the Knorr chef-to-chef or Unilever rather, chef-to-chef coverage model and having really sort of strong relationships with the person making the menu decisions back-of-house is a coverage model that is quite significant. And so we see that as an opportunity, obviously, to bring in sort of more of the McCormick type of expertise in cooking, which is not an overlap with Knorr.

And so I think that that's another area of opportunity. So if I were to oversimplify, think global as an area, think front-of-house opportunities for Unilever brands, but also think back-of-house, sort of the coverage model there is an important way to establish penetration and strength within the foodservice channel.

Our next question comes from the line of Robert Moskow with TD Cowen.

I think this is a question for both management teams, but it's going to take a year for this transaction to close theoretically. Fernando, maybe you could talk about what you learned in the process of separating ice cream, how you were able to keep people on that team focused on executing their operating plan. And I guess, the same question for the McCormick team.

Well, thank you, Robert. Yes, we have the recent experience of separating ice cream, that was a big business. It's an EUR 8 billion business, not a small business, and establishing that company in 57 countries.

I feel in this case, we have the advantage of separating foods and integrating that into an established organization like McCormick, and that simplifies things a bit.

In our case, we have had a team of experts with a lot of capabilities. That team is now at the service of McCormick to make the separation happen and to support in the integration also. I believe we learned a lot with previous experiences like tea and spreads in which the separation didn't take into account really sorting out the issue of [ external ] costs.

In ice cream, we did that much better, and we have the opportunity at the same time of accelerating our growth performance, delivering the separation of ice cream and increasing our margins. So of course, it takes a lot of leadership from the front, and this doesn't happen without good planning, without good external support.

But I know Brendan has put that in place already. And of course, in our side, we will provide all the necessary support. There will be transitional service agreements in place for around 2 years also in different areas like IT, distribution in order to ensure that this is a smooth transition, and there is no disruption in the case of our Foods business transfer to McCormick.

Rob, I think from a McCormick perspective, there are maybe 2 perspectives I would want to share. The first is being able to continue driving the business performance right now. We have a really strong team. And so as we put dedicated leadership and teams on this work, we also have been a great talented organization for those people to step up and really continue leading the business.

And so we see our ability to do that as being very strong and high, and obviously, we feel like we have a very disciplined approach at this in the past because we have done integrations, although the scale is different, and we acknowledge that.

But I think that the element of that is really going to come through in this planning and making sure that we are very, very specific and precise in terms of how we make sure that we continue really strong support against the current business while we also take on what was a pretty important initiative.

There was a question earlier in the call, which I'm not sure I fully answered as I kind of reflect back on my reply, and that was, what's different about this than the other ones? And I think what's really different here, and I really want, hopefully, everyone to appreciate this is when you look at traditional sort of an acquisition of transaction, you've got a company taking over something else. And that company's employees sort of then go over and take over the business, so to speak.

This is very different. This is a combination of 2 companies already with the support and the discipline and the knowledge of running the business, coming together to execute this integration. And so I think that element of Unilever being a partner in this is not a temporary point. It's a sustainable point.

When we think about that employee, those employees, a part of that organization becoming part of McCormick. And so we see a lot of strength in that. And that's a lot of -- if you had to compare on a principle, what may feel different in this, I think that would be one of the key points I would call out.

Our next question comes from the line of Max Gumport with BNP Paribas.

You've quantified synergies and discussed some of the considerations with regard to the separation, such as TSA agreements. But I'm wondering if there's been any considerations for dis-synergies that could arise from the separation, and if so, any initial quantitation of those dis-synergies and also how they might split across the Unilever RemainCo and the Foods business?

I can answer this. We don't see any revenue dis-synergies here. We don't see in the case of Unilever, basically, as I mentioned before, these are a stand-alone business. Our Foods business has their own sales force, their own manufacturing, their own operations and logistics. So basically, we don't see any fundamental issue of dis-synergies in our side.

Great. Very helpful. And then, Brendan, Marcos, with regard to the multiple, the 13.8x EBITDA multiple, can you just talk a bit more about the conversations that went into determining what was the right multiple to pay? It seems like there is some focus on not paying more than McCormick's 13.8x that you also quoted. But just any color or consideration that went into determining the right multiple would be appreciated.

Yes, Max, I would say that both businesses are great businesses, and Unilever Foods is a fantastic addition as you think about the 2 companies coming together. So the way that we were assessing this deal was parity in terms of the multiple between the 2 companies.

Unilever brings a lot, not only the scale, but healthy margins. And McCormick, as you know, is very differentiated as well in terms of volume growth over the last few years and our margin profile as well, we play in an advantaged category. So when you put those 2 companies together, we felt like the parity multiple would be adequate in terms of this transaction. So that's kind of the high level rationale for being at the same 13.8x.

Our final question this morning comes from the line of Scott Marks with Jefferies.

The first one I just wanted to touch on, understand all the synergy potential and the overlap between some of the portfolio, but just wondering if you can kind of help us understand if the current backdrop in the food world or in the staples world in general has kind of changed your time line for this or given you any sense of urgency to get this done? Or if it has had any impact in any way?

Yes. I think, obviously, there's a lot going on in the world right now. So that's important to kind of keep in mind. But I think we've always viewed Unilever Foods as a great strategic fit. So we're in this moment where you can pick another year, something is going to be going on.

But it still comes back to is this really strategically a strong fit and does it make sense? And when an opportunity presents itself like this, we think that it then becomes the right time. This transaction is about long-term potential of the combination and where we see multiple levels of growth in established and emerging markets and across channels and brands.

So I think I would also then really kind of emphasize the long-term nature of our thinking and our planning has to really sort of drive your thought process on something like this. We're certainly aware of the near-term pressures facing not just the food industry, let's say, but broadly, you think about the conflict in the Middle East and the broader CPG space.

So each of us are taking steps to manage our business accordingly. However, we continue to believe in just the long-term fundamentals that really underpin the confidence in this combination, such as structural flavor tailwinds and emerging growth opportunity.

And so in the meantime, sort of call it within the short term right now, we're both laser-focused on managing our businesses to deliver our plans. I think that's the best context I could give you because, obviously, there is a lot of headlines in the news.

Understood. Appreciate that. And then maybe just last one. Given everything going on in the Middle East, just wondering how some of those dynamics impact your thinking on this, whether it's in terms of realizing some of those synergies or getting this deal complete or any other dynamics that could be impacted by what's happening across the world.

No. I can't call out a specific element of that, that caused us to think about this differently or faster or slower. I'd just go back to my long-term commentary, and our thought process on that.

Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Ms. Freiha for any final comments.

Thank you so much. Thank you, everyone, for joining our call today. If you have any further questions regarding today's information, please feel free to reach out to me, and this concludes our conference call for this morning. Thank you.

Thank you. Ladies and gentlemen, you may disconnect your lines. Thank you for your participation.

McCormick would like to remind you that today's discussion will refer to certain non-GAAP financial measures. The nature of those non-GAAP financial measures and the related reconciliations to the GAAP results are included in the company's materials. Additionally, today's presentation contains projections and other forward-looking statements. Actual results could differ materially from those projected. The company undertakes no obligation to update or revise publicly any forward-looking statements whether because of new information, future events or other factors.

Great. Good afternoon, everybody, and we're thrilled to have the management from McCormick with us here today. Just a reminder, this is our last presentation of the day. So if everyone can remember to please take all their belongings. This room will be locked up because we've got a lot of rehearsals and things like that going on after this ends.

Also, please first join me in thanking McCormick for generously sponsoring the reception following this presentation where I think you'll find lots of flavor creativity throughout all the offerings.

McCormick management will join us out at the reception in lieu of a formal breakout, so just keep that in mind. McCormick is one of the few large cap packaged food companies to deliver consistent volume growth in a very challenging broader packaged food environment. But as Chairman, President and CEO, Brendan Foley likes to say, McCormick does not compete for calories, it flavors them. We look forward to hearing more about plans for this fiscal year as some additional pricing rolls through, more innovation kicks in and McCormick funds additional A&P and an acceleration of ERP spending. Joining Brendan today is CFO, Marcos Gabriel. Welcome, gentlemen, and over to you, Brendan.

Thank you, Andrew. Good afternoon, everyone. We appreciate the opportunity to be here. It's a pleasure to be back at CAGNEY. McCormick is a global leader in flavor. Our long-standing tradition of excellence and innovation sets us apart. And today, I'm excited to share how we're advancing this differentiation and driving meaningful value creation. The last 2 years have been defining for McCormick. They demonstrated the strength, resilience and differentiation of our business. We delivered volume-led organic growth, expanded our operating margins and continue to invest in our brands, capabilities and people.

Our performance reflects the power of our balanced portfolio, our leadership in flavor and the agility of our team in the world. We are executing with focus and discipline on what we can control, and we remain well positioned to deliver sustainable, profitable growth. Today, we [indiscernible] that we are driving our global flavor leadership, accelerating innovation and transformation and strengthening profitability. Importantly, we are updating our near-term expectations, reaffirming our long-term objectives. And with our strategy of best-in-class leadership, we are well positioned to continue to drive shareholder value.

At McCormick, we create and deliver flavors that enhance taste of food and beverages. For more than 135 years, we've been focused on our purpose to make life more flavorful, guided by our vision to be the most trusted source of flavor across food and beverage. Our portfolio includes leading brands in the flavor industry, household names that consumers trust for their quality and taste, and they are trusted by our customers. [indiscernible] globally, McCormick flavors are enjoyed by nearly [indiscernible] billion people every single day. This speaks to the power of our brands, the flavor they deliver, our capabilities, reach and growth potential.

We serve a broad range of customers and operate across every channel, from traditional brick-and-mortar to e-commerce and to food service to CPG customers. We operate in great categories across both of our segments, and we continue to project strong growth. In our Consumer segment, we offer products at every price point from premium to value to meet all needs. Our brands have been part of kitchens and families for generations, and we continue to innovate. We are winning over younger consumers who are shaping new cooking and eating behavior and many aligned with health and wellness trends.

In Flavor Solutions, we deliver some of the world's iconic brands as well as fast-growing and emerging brands and products, making us a key part of the innovation that guides the food industry. Our 2 segments complement each other, and this reinforces what makes McCormick different. The scales, insights and technologies that are leveraged from both are meaningful and uniquely position us to cater to the entire flavor market [indiscernible] direction.

Given this position, we are differentiated among food and beverage peers, and let me explain how. Others compete for calories every day. We flavor them. While many peer companies compete across multiple categories every day, we are intentionally focused on flavor, enabling us to be present in every consumption opportunity. Our differentiation lies in where and how we compete. As preferences evolve and calories shift, the demand for flavor continues to grow, and McCormick is uniquely positioned to capture that growth.

We see the world of food and beverage through the lens of flavor, and we deliver it more broadly and more deeply than anyone else. Putting all these things together, flavor remains an enduring trend. It's essential to food and beverage. Two years ago, you heard me lay out our robust plan to reinvigorate volume growth, and we delivered. We achieved strong and sustainable volume growth, and we expect this momentum to continue into 2026. This top line performance, our growth [indiscernible] focused plans [indiscernible] confidence in our near-term and long-term objectives. Before I cover growth, let's look at why flavor is at the heart of everything we do.

[Presentation]

As you can see, the global demand for flavor remains strong. It is projected to grow 5% to 7%. Within our current geographic footprint, the market growth is projected to be 3% to 5%, positioning us for sustained best-in-class organic top line performance. This highlights the runway for growth in current and new markets.

Flavor remains the top purchase driver across every dish trend and occasion. It transcends age, culture, diets, income -- and income. Consumers, especially in lower to middle-income households are shopping more often buying fewer items per trip and choosing more flavor each time. They're stretching their meals further and finding affordable ways to cook at home, particularly as health and wellness trends continue to gain momentum. These habits reinforce the central role of flavor every day in cooking with herbs and spices [indiscernible] unit growth.

Also, convenience and flavor exploration remain areas where consumers are willing to spend and e-commerce and social commerce are reshaping how they discover and buy new products. The convergence of these trends underscores our advantaged position. Our consumer portfolio meets growing demand for cooking and healthier meals, while our Flavor Solutions business partners customers with innovation and reformulation aligned with these very same needs. We are winning across the industry, all emerging brands to large established players, and our success is not defined by any one single segment or product category.

When I stepped into the CEO role, I introduced a set of priorities to [indiscernible] Since then, I've reflected on our goals, our progress and the rapid pace across the industry. With that perspective, our refined [indiscernible] position us to deliver on our ambition. First, we continue to strengthen our leadership in global reach and core category with added focus on geographic expansion. Our recent acquisition is [indiscernible] Second, it's advancing our position as the go-to flavor expert. The Flavor Solutions segment is central to our growth and our expertise sets us apart. We are emphasizing this and building on our flavor leaders make it even stronger globally.

Third, we're even more focused on strengthening our competitive edge and innovation. It drives everything we do from new products to better ways of working, and we're continuously pursuing ideas that keep us ahead. We remain focused on accelerating our digital [indiscernible] and driving [indiscernible] profitability. And finally, we are focused on developing a future-ready workforce, which I will address shortly.

Moving to digital transformation. We are unlocking the power of data and AI to transform how we innovate, operate and grow. By combining trusted data, responsible AI practices and a future-ready workforce and an ERP foundation, we are building a stronger, smarter and more resilient work force. Over the past 2 years, we've taken a proactive approach to establishing AI governance oversight, scaling pilots across the business and developing our own internal AI chat platform, leveraging best-of-breed capabilities from the industry.

Digital transformation is a driver of both our growth and performance across our business and strengthens our system of competitive advantage. Our business is supported by unique [indiscernible] advantages that drive industry-leading growth. Our broad portfolio, global portfolio and leading brands and heat platform set us apart in the marketplace. The complementary nature of our segments strengthens our insights. Combining learnings from flavor solutions with consumer insights to fuel innovation and stay on trend.

The global sourcing and quality expertise stems from decades of experience sourcing over 17,000 ingredients across 90 markets. We maintain a disciplined approach to acquisitions, proven record of successful integration. And our power of people culture is at our foundation. We remain focused on strengthening this foundation and the strong culture and values that have always defined McCormick. Our employees drive our success. That's why one of my top priorities and a key area of investment is training our workforce to be equipped to thrive in a rapidly evolving environment.

Digital tools and AI are shaping [indiscernible] plan, collaborate and deliver results. We are investing in the skills and capabilities our people need to accelerate innovation and improve productivity and enhance decision-making. We are reinventing some of our key work processes, AI-driven forecast, [indiscernible] end-to-end planning, streamlining processes and reducing manual touch points. Ultimately, we're investing in digital enablement for our employees for sustained top line growth and advancing profitability, positioning us for future success. All these elements together reinforce our conviction of reaffirming our long-term objectives, which remain unchanged. Later in this presentation, Marcos will cover the detailed financial building blocks that outline how we will achieve these objectives beyond 2026.

Now let's turn to the plans that will bring those objectives to life across Consumer and Flavor Solutions segments. Starting with Consumer. Our growth levers remain consistent. And through these levers, we stay at the forefront of flavor, effectively responding to shifting preferences, including increased demand for health and wellness, elevated culinary experiences and value-driven choices. We are strengthening our connection with younger consumers, the generation shaping the future of food by engaging them through bold flavor innovation, additional first brand experiences and a commitment to authenticity and quality. It all starts with great brands, loved by consumers. We hold the #1 brand position in household penetration globally across spices, seasoning, hot sauce and mustard. And we have a strong portfolio of leading regional brands using our competitive differentiation.

This brand strategy is a great benefit to retailers as they prioritize our brands and implement our category management recommendations. To put this in perspective, 2/3 of households across our core markets and nearly every U.S. home have a McCormick branded product in their pantry.

Let's turn now to our plans for categories. Starting with spices and seasonings, where we have the leadership position. We are building on this strength of world-class brand marketing, ongoing brand innovation, advancing category management, and insight-driven renovation. Together, these strategic levers are accelerating our growth and reinforcing our leadership.

Starting with brand marketing, our focus is to inspire every generation to cook.

We are seeing strong momentum across young consumers, millennials and Gen Z, driving volume growth and household penetration, demonstrating enduring and expanding brand relevance. Our latest campaign builds on McCormick's iconic flavor leadership, honoring their heritage, and driving relevance with today's consumers. Both longtime brand advocates and new households are engaging with McCormick in fresh, new ways that reinforce our leadership and fuel continued category growth. Let's take a look.

[Presentation]

We continue to elevate the category with continuous renovations, starting with our McCormick Red Cap packaging, to our growing portfolio, most recently, our McCormick Gourmet collection. Our innovative McCormick Gourmet collection, highlighted by its countertop-worthy packaging, is now on shelf, and we transitioned the vast majority of the portfolio. Velocity so far has exceeded our expectations, and we anticipate the benefit from this renovation in 2026. In addition, this year, we are renovating all of our seasoning blends with a modernized and cohesive packaging, including optimized price pack architecture, to enhance the value and drive the impact at the point of purchase. We are leading the category everywhere the consumers shop, accelerating distribution, particularly in spices and seasonings, which are leading distribution growth in the U.S. For the past decade, revenue management has been a key capability and where we have invested in dedicated [indiscernible] technology.

We were one of the first to invest in price in late 2023, leading to volume improvement. We have done this through a targeted approach [indiscernible], and by leveraging advanced [indiscernible] tools and talent. Looking ahead, we are strategically building on our capabilities to execute precise, data-driven pricing in partnership with our customers. Ultimately, all of our efforts are leading to volume growth and share gains in spices and seasonings, both in the U.S. and in our core markets. We expect this performance to be sustained as we continue to execute on this proven strategy.

Moving to condiments and sauces. We're positioned to win here with our leading brands, strong loyalty and sustained relevance with younger consumers. It's pretty incredible that in the U.S., Gen Z and millennials spend more on hot sauce than on ketchup. They use more hot sauce than any other generation.

In fact, Gen Z's spending on hot sauce in 2025 has risen significantly compared to the prior year. Our brands have strong loyalty and repeat rates, and Frank's RedHot has the highest household penetration [indiscernible]. In hot sauce, we have returned to unit growth and share gains and continue to execute on our growth drivers. We launched brand marketing campaigns for Frank's and Cholula, further driving brand love with passionate consumers, and we continue to innovate with items like Frank's Mighty Jalapeno Sauce and Cholula Chipotle [indiscernible] Sauce. We are focused on growing share in hot sauce as we expand around the world. Our hot sauce brands are leading the way in social commerce. We launched Cholula on TikTok Shop and have seen a great response. 72% of TikTok users are Gen Z and millennial, and our targeted marketing is strengthening engagement and driving incremental growth in retail. We have robust plans to complement this in 2026 with other brands.

Moving to mustard. For the U.S., our largest franchise market, we are focused on [indiscernible] building brand marketing, and we've [indiscernible] strong unit growth and share gains. This year, we are launching modernized packaging, enhancing our revenue growth management [indiscernible], and dialing up innovation with new flavors and forms, including Hot Honey and Maple. Outside of the U.S., we continue to see strong performance in [indiscernible] Kamis brand, and we're growing share in all those key units.

Turning to mayonnaise, a high-growth, attractive category. We recently strengthened our position in this category with our ownership of McCormick [indiscernible]. Our long-standing joint venture with one of Mexico's most prominent food brands, anchored by its leadership in mayonnaise. Our plan is to accelerate McCormick mayonnaise growth in Mexico by driving household penetration through new flavors, formats, and eating occasions.

For example, we're launching a series of limited-edition mayonnaise in glass jars featuring FIFA World Cup, as part of our sponsorship with the Mexican Soccer Federation, also known as FMF. The power of the brand, combined with our local capabilities, supports our growth ambitions in Mexico as well as Latin America. In the U.S., Mayonesa has performed well. Our plan is to continue to leverage the best-in-class marketing assets from our leading [indiscernible] further drive growth through broader distribution and stronger in-store activation. We are continuing to grow this [indiscernible]. Let's move to innovation across our portfolio. In the last 2 years, we have doubled our innovation, delivering new products faster and meeting evolving needs. These launches in the second half of 2025 continue to build traction and will contribute to our performance in 2026.

We're further building on this momentum by expanding the success of our finishing sugars platform with high-impact partnerships like Bridgerton and Harry Potter. Our 2026 flavor of the year, Black Currant, is launching in both retail and food service. In addition to our 2025 Flavor of the Year, Aji Amarillo, in a hot sauce format this year. We're also launching our on-trend Frank's sauce flavors like Pineapple Hawaiian and Spicy Maple as well as new seasonal blends of chili, garlic and [indiscernible].

Let me now [indiscernible] to focus on brand marketing. Driving higher returns through precision, using advanced data and algorithms to identify the right consumer at the right time with the right message and product. AI is enabling us to personalize content at scale, building relevant and engaging experiences that convert more effectively.

We are leveraging AI agents to mine data for refined personalization and enhanced targeting to reach the highest propensity of consumers at the lowest cost. Generative AI is accelerating our ability to develop, test and optimize new [indiscernible] faster. We're expanding into emerging high-growth channels like social commerce and preparing for agentic commerce by ensuring our data stack is ready to interact with and influence these agents. Importantly, we remain at the forefront of evolving trends, whether it's flavor, value and convenience, and our campaigns bring this to life every day. Now, I want to show you how we're building excitement with Frank's RedHot. We've had a very successful Super Bowl activation over the last few years, leveraging different celebrities. They all love Frank's. This year, we partnered with Ludacris, and this activation has surpassed all previous campaigns, capturing 2.6 billion impressions. We're going to share it with you.

[Presentation]

This is a great example of how our brands, Frank's in particular, are resonating and creating opportunities with consumer and in branded food service. We had a highly successful promotion to complement the Frank's RedHot Diablo Crispy. This was on menu at over 7,600 locations, and we had significant media coverage with 11.5 billion impressions. This is a great example of the complementary nature of our segments.

Speaking of that, now moving over to Flavor Solutions. Let me start by covering our core product categories within Flavor Solutions, starting with flavors. This is roughly 60% of the segment. We flavor products in a wide range of end-market applications and in every aisle in the grocery store. Branded food service is about 20% of the segment. These are our brands used back of house by chefs or sitting on tabletops. Since 2018, we have been successful in advancing our portfolio to these two high-margin categories. We are different from other flavor houses. We're the only major flavor house with 100% focus on flavor. We have a deep culinary and natural food foundation and expertise in natural ingredients. We focus on four taste competencies: savory, heat, naturally sweet, and citrus and fruit. We are a growing global brand leader, and we know what it takes to drive brand equity. We have more consumer touch points spanning all channels leading to these [indiscernible]. This unique positioning sets us apart from the industry. We partner with customers across food, beverage and consumer health. We develop flavors for a wide range of applications, ranging from non-alcoholic beverages to better-for-you snacks to supplements. We are present across channels, both in out-of-home, and we have a wide customer base.

In the flavors market, we have a significant growth opportunity across various customer types. Regional leaders and high growth innovators represent a significant portion of the opportunity and are growing at higher rates. In terms of our customers, we have a strong exposure to global consumer packaged goods companies and regional leaders, where we are partnering with them to reformulate by eliminating artificial ingredients, reducing sodium, and improving affordability.

Across high growth categories such as protein supplements and beverages, we have a growing exposure with high growth innovators, helping them to scale and move into adjacent categories. Recently, we partnered with a nutritional bars brand to enter the high protein cube category, leveraging our expertise in seasonings. Lastly, we are increasing our engagement with private label customers to help them meet the needs for wellness and affordability from beverages to food.

We recently partnered with a major national retailer to launch a new line of affordable premium beverages. We see growth and sharing opportunities across all customers, and we are focused on diversifying across segments to remain resilient against market fluctuations and balanced growth.

While food growth remains soft, our capabilities and reach enable us to build with our customers with attractive high growth end market applications. Within food, various categories, particularly better-for-you ones, which include snacking, continue to have strong growth, and we are focused on flavoring. Health and wellness is a key focus for all consumers, and we have a long history with 135-year heritage in natural flavors and extracts, complemented by the McCormick Science Institute, celebrating this year 2 decades of supporting scientific research on the health benefits of culinary herbs and spices.

We inspire healthy lifestyles by flavoring healthy categories, such as supplements, protein shakes and nonalcoholic beverages. We enable better nutrition by removing ingredients such as sugar and MSG or adding high-demand nutrients like protein and fiber, all without sacrificing taste. We partner with customers to bring designed products, leveraging our insights and technologies.

Let me bring this to life through 2 case studies. In this example, we partnered with a high growth innovative customer to create a super fruit gummy. The gummy is nutrient-dense, low carb, and high in fiber with more than 50 ingredients, but with an appealing fruity flavor, as our Optify technology masks off-notes from the high concentration of green ingredients. In another example, we partnered with a global CPG company in reformulating their range of meal replacement shakes to optimize a new vegan protein base.

To mask off notes, we developed our natural flavors, including vanilla and chocolate. We reformulated a dozen SKUs in 6 weeks [indiscernible] to deliver speed, value and superior taste. By combining our data-driven insights from sensory science, preference and flavor chemistry, we are able to deliver faster consumer-preferred innovations.

Let me focus on [ First Flavor, ] which is our trend-led flavor identification model that can pinpoint trends just before they reach mainstream awareness. We talked about this at Investor Day. Since then, we've been leveraging AI to aggregate and analyze data, now able to extract thousands of search and trend data points in minutes, compressing hours of manual effort into a near instant automated process. We are turning these data points into actionable information and innovation, delivering measurable growth across both segments.

Moving to branded food service. We continue to drive growth despite a challenging environment by increasing innovation, expanding and diversifying our channel presence. Starting with innovation, we are partnering with operators with limited time offers to attract and increase their traffic. We've relaunched the McCormick Chef's product line to expand our reach and performance has been strong. Our new Frank's RedHot partnership with McDonald's Canada features the brand on 7 menu items across 1,500 restaurants. Engagement has been strong. And in terms of channels, we see strong growth in noncommercial sectors as well as newcomers as we expand our reach to smaller operators. In summary, our branded food service business has been successful as consumers want to find the brands and flavors they love, that they are eating when they are eating away from home.

Now, let me hand it over to Marcos.

Thanks, Brendan, and good afternoon, everyone. Today, I'll focus on our performance and how we are executing with discipline on what we can control while staying agile as we navigate external challenges. Our strategy continues to position McCormick for sustainable long-term value creation. I'll start by covering our historic performance, which highlights the resiliency of our business with the [indiscernible] maintain volume momentum and improve profitability. Then I'll discuss our capital allocation strategy and close with an update on our near-term goals and reaffirm our long-term objectives.

Our priority remains to drive differentiated volume-led sales growth, consistent with our historical performance. We operate in great and advantage categories and are intentionally focused on investing to sustain volumes and drive long-term profitable growth. Looking back from 2015 to 2025, we delivered 12% organic sales growth and our successful M&A contributed 2%. In total, we achieved a 6% compounded annual growth rate, in line with the high end of our long-term objective. Historically, our organic growth was volume-led and after a period of hyperinflation, we returned to robust volume performance in late 2024. In 2025, we continued the momentum with sequential improvement from 2024 and volume-led growth for the year. Performance was driven by our proven [indiscernible], including brand marketing, innovation and packaging renovation, category management and our proprietary technology.

Turning to operating income. Our disciplined cost management and [indiscernible] have supported our operating income growth and margin expansion for the past few years. We have a track record of investing for long-term growth, leveraging a real flywheel of margin expansion on investments and continue to drive strong operating results. This is foundational to McCormick, and has enabled us to deliver long-term [indiscernible]. And we remain confident in the continued trajectory of our operating margin expansion.

Turning to the 2026 outlook, which we recently discussed in our earnings call, and remain consistent. Let's focus on the top line. We expect our Consumer business to continue delivering volume growth, driven by [indiscernible] new products, packaging renovation and increased brand marketing investment. In Flavor Solutions, we anticipate volumes to recover from the prior year as we execute on innovation plans across our diverse customer base.

Across both segments, we're leveraging our revenue growth management capabilities to [indiscernible] offset inflationary pressures. We expect pricing to contribute to organic sales growth this year. Lastly, we anticipate strong combined contribution from both segments. From a bottom line perspective, we anticipate incremental costs associated with inflation, including [indiscernible] as well as the rebuild of incentive compensation, continuous [indiscernible] notably related to our refined ERP plan and the impact of increased tax rates while offsetting pressures with productivity savings, support of our enhanced CCI program, including SG&A streamlining and vertical pricing.

Additionally, we anticipate accretion from the McCormick de Mexico acquisition. In summary, 2026 [indiscernible] with strong underlying business performance and growth from acquisitions.

Let's review our digital strategy, starting with our refined ERP plan. Our implementation so far has been going very well. Our integrated approach, which reflects continued collaboration between the business and technology teams, has enabled us to execute [indiscernible] successfully with minimal business impact. This gives us the confidence to compress the waves of our upcoming deployment, which minimizes risk. It shortens the period of full operation between legacy and new systems, minimizing data variation and interface risk. Overall, program costs have remained unchanged. However, this refined execution plan shifts more [indiscernible] into 2026 than originally planned. We are pleased with our progress.

Our ERP foundation enables cybersecurity, AI-ready data and tech modernization, allowing us to capture value to increase efficiency. This becomes a springboard for advancing our digital initiatives.

Our digital transformation is a strategic [indiscernible] and driver of cost savings. Consumer and customer are at the center of everything we do, and to better serve them, we're leveraging data and AI to improve consumer experience by delivering personalized content, meeting consumers where they are across channels at a lower cost. Accelerate product innovation while leveraging our proprietary tools to combine consumer insight in a structured way to fuel faster, more creative new product development.

Collaborate with customers by enhancing revenue management with digital simulation, ultimately delivering effective pricing, improved execution and volume growth. Enhance supply chain and operations using predictive analytics, optimize sourcing, mitigate risk and improve forecasting.

With data and insights across the business, we are unleashing faster decision-making, deeper consumer understanding and more agile execution across our global footprint. In terms of our cost savings initiatives, our efforts will be enabled by enhanced processes and digital capabilities with growth aspirations [indiscernible]. And to fuel growth that matches our aspirations, we remain focused on driving the top line and productivity initiatives of all lines of the P&L. Our CCI program has a well-established track record of success, and we're leveraging its [indiscernible] to drive efficiency. [indiscernible] also includes our SG&A streamlining efforts and we are making great progress there. These efforts are supported by our global business solutions organization, or GBS, which delivers scalable, efficient and digitally enabled services across key business functions.

By standardizing processes, leveraging automation and driving continuous improvement, GBS enhances operational excellence and enables our teams globally to focus on strategic growth and value creation. We are stepping up total cost savings by about 10% relative to the prior year to fuel growth, offset increased cost headwinds and contribute to a profit realization. Overall, savings are expected to be driven by procurement initiatives, operational efficiencies, streamlining of processes, reduce their indirect spends and reinventing our ways of working. Importantly, this is all reflected in our 2026 outlook and long-term objectives.

Turning to capital allocation. Our priorities remain consistent. We expect to drive shareholder value through strong cash flow generation and a balanced use of cash. This means funding investments to drive growth, returning a significant portion to our shareholders and maintaining a strong and flexible balance sheet. Returning cash to shareholders includes our dividends as well as share repurchases. They remain a key component in our toolkit. Our balance sheet puts us in a position of strength and give us the flexibility to continue to invest in the business organically and inorganically to support our growth.

As we think about ROIC, we have achieved an average return over the past 3 years of 10%, and we're expecting to build a 10% to 12% range in the near term. We continue to generate strong operating cash flow and expect robust cash generation to continue in 2026. Growth will be driven by higher net income, fueled by revenue gains, margin expansion and sustained working capital improvement. Lastly, we continue to expect that on average, approximately 95% of net income to be converted to cash flow.

We expect capital investments to represent 3% to 4% of net sales. Roughly 3/4 of this spend will support capacity, capabilities and efficiencies, with the remaining 1/4 focused on IT and digital transformation. We remain committed to returning cash to our shareholders in the form of dividend payments or share repurchases. We're proud to be a dividend aristocrat, and over the long term, we anticipate dividend growth to be in line with earnings per share growth. We have made excellent progress in paying down debt, enabling us to maintain strong balance sheet that gives us flexibility to make future investments. And as always, we remain committed to strong investment-grade rating.

Moving to acquisitions, which will remain a key growth driver of our long-term objectives and are expected to contribute about 2% growth. As you know, we have a proven track record of value-enhancing acquisitions rooted in our tailored strategies and financial discipline. Our commitment to this strategy is evident in our transactions, including Cholula, FONA and most recently, our majority ownership stake in McCormick de Mexico, which closed just 6 weeks ago.

Today, we reaffirm our outlook for 2026. It remains the same as we have provided on the fourth quarter earnings call in January. Let me recap the components of our outlook and comment on the first quarter tax rates. Our outlook reflects a strong underlying business performance and growth from acquisitions that is hampered by cost headwinds as well as a higher tax rate. While we are maintaining our full year guide of tax rate of 24%, we now expect the first quarter to exceed this level due to the timing of expected tax items.

Importantly, we remain on track to sustain our volume momentum and drive strong top line and bottom line growth. We're confident in our ability to deliver on our 2026 outlook and in achieving our long-term objectives over time. Before we look ahead, it is important to reflect on the past couple of years and how the facts on the ground have changed. The environment has been more challenging than anticipated, yet our base business remains strong. We continue to drive growth in the Consumer segment, and despite industry softening in Flavor Solutions, we are driving growth with high-growth innovator increasing our customers. We continue to realize the benefits from our CCI and SG&A streamlining initiative.

Moving to what has changed. Health and wellness trends are gaining momentum, bringing top line opportunities. Cost pressures from tariff rates, increased tax rates and interest rates have created headwinds. Actually, the acquisition of majority stake in McCormick de Mexico has provided both top and bottom-line benefits. After reflecting these variables, including our 2025 results and our outlook for 2026, we anticipate achieving performance in line with our long-term objectives after 2026.

Let's summarize the pathway from 2026 to achieving growth in line with our long-term objectives. From a top line perspective, organic sales expectations remain at 3% to 4%. Our consumer business is strong, and you heard today the plan we have in place to continue this trajectory. In addition, we'll also benefit from the McCormick de Mexico acquisition. While Flavor Solutions growth has been hampered by softness in the industry, we expect improvement to begin in 2026 and to strengthen over time.

Operating income margins will be achieved through operating leverage, our cost savings and [indiscernible] programs, accretion from McCormick de Mexico acquisition as well as the ERP tailwind we expect in 2028. This aligns with implied expansion in our long-term objectives of approximately 50 basis points per year. Finally, we anticipate the benefit from operating income to flow through to earnings per share, including the accretion from McCormick de Mexico transaction and the benefit from share repurchases in the absence of acquisitions. Ultimately, leading to high single-digit earnings per share growth over this period. The leverage from operating income to earnings per share in 2026 and 2027 will be impacted by the elimination of the 25% minority interest in McCormick de Mexico. This mechanical impact is near term.

Once we wrap it for a full year, which will be 2028, we don't expect it to [indiscernible] drive leverage from operating income to earnings per share.

Turning to Flavor Solutions operating margin. We remain committed to continued improvement we have achieved since 2023. This will come through volume growth. We expect operating leverage to contribute to margin expansion, portfolio migration by margin categories, revenue growth management and enhanced cost savings and efficiencies. We continue to drive margin expansion while investing for growth. We're reaffirming our long-term objectives with a net sales growth of 4% to 6%, operating income of 7% to 9% and earnings per share of 9% to 11%. I'm confident in our ability to deliver on these objectives. I will now turn the presentation back to Brendan.

Thanks, Marcos. We hope our presentation offers valuable insight into how we are driving our global flavor leadership, accelerating innovation and transformation, enhancing profitability. We are energized by the opportunities ahead and remain committed to creating long-term value for our shareholders. We're also excited about our reception this evening, which will highlight our Flavor Forecast [indiscernible]. No one knows flavor like McCormick and our Flavor Forecast is [indiscernible] flavors and all the new trends, and many of our predictions have stood the test of time, Pumpkin Spice to Chipotle and many. We would love for you to join us in the [indiscernible]. We invite you to experience the flavor of McCormick, and I'm not sure we have any time to take your questions, but I'll let Andrew be the judge of that.

Yes. I think we're out of time here, but McCormick management will be out in the reception. And please again, thank McCormick for being here and sponsoring the reception.

Good morning. This is Faten Freiha, VP of Investor Relations. Thank you for joining today's fourth quarter earnings call. To accompany this call, we've posted a set of slides on our IR website, ir.mccormick.com. With me this morning are Brendan Foley, Chairman, President and CEO; and Marcos Gabriel, Executive Vice President and CFO.

During this call, we will refer to certain non-GAAP financial measures. The nature of those non-GAAP financial measures and the related reconciliations to the GAAP results are included in this morning's press release and slides. In our comments, certain percentages are rounded. Please refer to our presentation for complete information.

Today's presentation contains projections and other forward-looking statements. Actual results could differ materially from those projected. The company undertakes no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events or other factors. Please refer to our forward-looking statement on Slide 2 for more information.

I will now turn the discussion over to Brendan.

Good morning, everyone, and thank you for joining us. McCormick's performance in 2025 demonstrated the strength and resilience of our business. We delivered differentiated volume-led organic growth and share gains, powered by sustained momentum from investing in our brands, expanding distribution and driving innovation across our business. We achieved solid profitability gains in the first half of the year. However, rising costs in the second half related to the dynamic global trade environment pressured gross margins.

Despite these headwinds, our disciplined cost management and efficiency initiatives kept us on track. As a result, we realized operating income growth and margin expansion for the full year, all while continuing to invest to drive future growth. We are executing with focus and discipline on what we can control and staying agile as we navigate external challenges. Our strategy continues to position McCormick for sustainable long-term value creation.

Turning now to our results on Slide 4. In the fourth quarter, total organic sales increased by 2%, supported by growth in both Consumer and Flavor Solutions. In Global Consumer, organic sales growth was driven by volume, which grew for the seventh consecutive quarter as well as price contributions. In the Americas region, we delivered volume growth even as pricing actions took effect with elasticities coming in broadly in line with our expectations. Volume performance in EMEA remains solid with continued benefits from price. In Asia Pacific, organic growth was supported by strong and continued momentum in Australia and our China retail business. Importantly, we achieved the gradual full year recovery in China consumer for the year as planned.

Moving to Flavor Solutions. Volumes declined for the Global segment. Our performance was impacted by customers' reset of inventory levels in Latin America, which we expect to be behind us in 2026. Volumes across the rest of the business were roughly flat and reflected softness in large CPG and branded foodservice customer volumes. These headwinds were mostly offset with growth from high-growth innovators, private label customers and QSRs across the Americas and Asia Pacific.

Turning to profitability. Fourth quarter gross margin was pressured by higher-than-expected inflation across our diverse basket of commodities, and we recognized more tariff costs than previously planned. It's important to note that pricing actions and CCI-driven productivity savings were delivered as planned. In addition, as expected, we continue to invest in the business, advancing our supply chain capabilities, innovation and growth platforms. These investments continue to strengthen our foundation and reinforce our resilience, positioning us well for long-term success.

Let's move to Slide 5, and let me highlight for the quarter some of the key areas of success. Across the Global Consumer segment, we have held or improved share across many core categories in key markets for the last 6 quarters. McCormick branded volume consumption growth continues to outpace the broader edible category in the U.S. In EMEA, unit and dollar consumption continued to outpace branded and private label fast-moving consumer goods or FMCG food.

Let me provide some additional color, starting with Spices and Seasonings. We drove strong volume growth across all regions. In the U.S., we implemented pricing actions due to increased cost inflation. Elasticities as well as share performance were broadly in line with our expectations. Our performance in the U.S. was supported by innovation, most notably with our newest lineup of holiday finishing sugars as well as growth in Gourmet Garden, our fresh convenience line. Importantly, our renovated McCormick Gourmet collection highlighted by its countertop-worthy packaging is now on shelf as we transitioned the vast majority of the portfolio.

Velocities so far have exceeded our expectations, and we anticipate continuing to benefit from this renovation in 2026. In Canada, we continue to grow overall share in dollars, units and volume. In France and Poland, unit share growth in Spices and Seasonings are contributing meaningfully to EMEA's gains.

Moving to recipe mixes. Our performance in EMEA is strengthening. We drove unit and dollar share gains this past quarter as we expanded distribution with new customer wins in the U.K. In hot sauce, we are achieving good results. In the U.S., for the fourth consecutive quarter, we continue to drive unit share gains fueled by investments in brand marketing and innovation. We continue to improve total distribution points or TDPs. In the Americas, we expanded TDPs with Spices and Seasonings driving the majority of the growth. Across our business, we continue to gain distribution in high-growth unmeasured channels like e-commerce, and we are expanding into social commerce in the U.S., a channel with significant growth opportunities.

In Flavor Solutions, we continue to see strength in our technically insulated high-margin product category, flavors. In flavors, in the Americas, we are expanding and diversifying our customer base by winning both high-growth innovators and private label customers. We're also seeing strong momentum in reformulation projects with larger customers and outperforming the industry across key categories, including beverages and better-for-you snack seasonings.

Turning to QSRs. In the Americas, QSR volume performance remains strong, driven by continued innovation. In the Asia Pacific region, specifically in China and Southeast Asia, our customers' new products and promotions continue to drive strong volume growth. In EMEA, QSR volume performance continues to stabilize.

Let me now touch on some areas where we are seeing pressure. Starting with Global Consumer. In recipe mixes, our base business remains strong with continued consumer loyalty and growth across many product lines. Competitive activity in the U.S., particularly within the Mexican flavor category, tempered overall share performance. We expect these trends to gradually improve as we launch new innovation, expand distribution and continue to build momentum behind our authentic Mexican brands like Cholula and supported by strong brand marketing investments.

In mustard, where we have performed well for the majority of the year, in the fourth quarter, the category declined in dollars and units in the U.S. French's mustard trailed the category and share performance was impacted by the timing of certain promotions, which we expect to normalize as we continue to execute on our plans in 2026. These include continued focus on innovation, increased brand marketing investments, expanding distribution as well as strategic partnerships. Outside of the U.S., in Canada, we continue to drive dollar and unit share gains in mustard for the fifth consecutive quarter. In EMEA, most notably in Poland, we drove unit and dollar share gains in mustard for the last 3 quarters.

Moving to Flavor Solutions. In flavors in the Americas and EMEA, some of our large CPG customers continue to experience softness in volumes within their own businesses. We expect these trends to stabilize as we continue to work with our customers on product innovation as well as win new customers. In branded foodservice, foot traffic remains soft, which is impacting customer volumes. We continue to see growth in certain channels, particularly with noncommercial customers. This includes places of employment, hospitals and colleges and universities.

Now that we have covered the quarter, I would like to reflect on our performance for the fiscal year on Slide 6. When we set our goals for 2025 last January, market conditions were very different. Although the external environment proved more challenging than anticipated, particularly with respect to cost pressures, we achieved many of our objectives, especially on the top line and continue to strengthen the fundamentals of our business. I am proud of the results our teams delivered and the discipline with which we executed even as the external landscape evolved.

While we achieved our top line goals, our bottom line came under pressure. Inflation, commodity cost volatility and the macro environment created incremental costs that impacted our margins. Despite this, we made deliberate choices to continue investing in our brands, capabilities and people, decisions that strengthen our long-term competitiveness and position us well for sustained growth. Our focus remains clear: sustaining our strong top line, strengthening profitability, delivering strong cash flow, investing in growth, funding shareholder returns through dividends and further strengthening our balance sheet to position McCormick for long-term success.

A few highlights for the year. We delivered sales growth at the midpoint of our constant currency guidance, driven by positive volume. Our Consumer segment delivered another year of industry-leading volume-led growth, up 2% for 2025 as we continue to expand and win in high-growth channels where consumers are increasingly shopping. Our Flavor Solutions segment continued to show resilience despite soft industry trends, reflecting the strength of our capabilities and customer partnerships.

We continue to prioritize investment in our business, while driving margin improvement, particularly in Flavor Solutions, where we made meaningful progress in expanding operating margins despite a challenging cost environment. We generated strong cash from operations and continued to delever, reducing our leverage ratio, while also continuing to fund our growing dividends and capital investments. In terms of M&A, we further strengthened our global flavor leadership with the acquisition of a controlling interest in our long-standing joint venture, McCormick de Mexico.

Lastly, at the end of 2025, our Board of Directors authorized a 7% increase in the quarterly dividend, marking the 102nd year of continuous dividend payments and 40 years of consecutive annual increases. This reinforces our recognition as a dividend aristocrat and reflects our long-standing commitment to returning cash to shareholders.

Our performance reflects McCormick's strength, resilience and solid foundation. Beginning in 2024, we set a clear path for volume growth and have now delivered 2 years of consistent results. With our strong brands, effective strategies and continued investment, we remain positioned to deliver sustainable growth and profitability. We've built momentum, and we intend to carry that forward into 2026.

On Slide 7, let me now share our current view on the state of the consumer and considerations for 2026. The environment across our key markets is marked by volatility and continued pressure from inflation, geopolitical and trade uncertainty and threat of rising unemployment and overall consumer confidence remains low. Consumers, especially low- to middle-income households continue to make more frequent trips to the store, while purchasing fewer units per trip, a trend that was evident at the start of the year and accelerated through the fourth quarter.

In addition, consumers continue to stretch meals across multiple occasions and seek affordable ways to prepare fresh home-cooked meals. The consumer continues to show resilience by increasing their demand for value and behaviors that enable them to stretch their budget. These behaviors reinforce the importance of flavor in everyday cooking with herbs and spices continuing to lead center store unit consumption.

Health and wellness trends continue to gain momentum. Consumers are preparing healthier, more affordable meals at home, while exploring new flavors and culinary creativity. Perimeter and scratch cooking categories are outperforming, while high carb and high sugar foods, along with alcohol are declining. High protein and better-for-you claims are driving purchase trends across retail and foodservice. In addition, convenience paired with flavor exploration remains an area where consumers are willing to pay more.

E-commerce continues to accelerate and social commerce is also reshaping how consumers discover and buy packaged goods, fueling momentum for emerging brands. The convergence of these enduring trends, health and wellness, affordability, flavor exploration and convenience underscores McCormick's advantaged position in the marketplace. Our consumer portfolio meets consumer demand for home cooking and healthier meal preparation.

At the same time, our Flavor Solutions business partners with large and emerging brand customers to deliver innovation and reformulation aligned with the same trends. We are winning across the food industry from small emerging brands to large established players, and our success is not defined by any single segment or product category. Notably, recently issued USDA dietary guidelines for Americans again promoted herbs and spices as well as natural flavors as a healthy way to flavor nutrient-dense food, including proteins, vegetables, fruits and healthy fats to make them more appealing, further supporting the importance of our product categories.

In terms of tariffs, recent reductions are a positive step from a cost standpoint. However, approximately 50% of the incremental tariffs on McCormick items remain in place, and we continue to face related inflationary pressures. Our pricing actions have been surgical. We took pricing actions to offset inflation, but we have not fully passed through tariff costs, and we remain focused on partnering with our customers to meet consumers' demand for value, flavor and quality.

We are navigating inflationary pressures with strategies designed to best meet the needs of the consumer and maximize category growth. Our focus on the long-term health of the business, innovation and execution continues to position McCormick for sustained success in a dynamic marketplace.

Before reviewing our growth plans, I'd like to briefly discuss our outlook. In 2026, our results are expected to benefit meaningfully from the McCormick de Mexico acquisition, which is driving significant contributions to both the top line and operating income. Additionally, the transaction is accretive to earnings per share. However, year-over-year earnings per share growth is reduced by the elimination of the 25% minority interest in McCormick de Mexico net income attributable to Grupo Herdez and several below-the-line items that are unfavorable relative to 2025, including a higher tax rate and increased interest expense.

In our base business, we continue to drive underlying profitable growth through our strong execution. That said, we anticipate incremental costs associated with elevated inflation, including tariffs, continued digital investments, most notably related to our ongoing ERP implementation, along with rebuilding of incentive compensation from 2025 to impact our profitability. We are partially offsetting these pressures through cost reduction efforts, which are focused on restoring gross margin performance and enhancing overall productivity. These efforts are supported by our CCI programs, including SG&A streamlining.

Importantly, our outlook for 2026 and beyond remains firmly supported by our proven strategies, and disciplined execution of our growth plans. As we look beyond 2026, we expect the incremental costs impacting the year to remain on our base. Through our enhanced CCI programs and disciplined SG&A streamlining, we are well positioned to manage these costs, maintain investment in growth and deliver sustained profitability consistent with our long-term algorithm.

As outlined on Slide 8, our growth levers remain consistent to drive growth through category management, brand marketing, innovation, proprietary technologies, and our differentiated customer engagement. These levers are supported and enhanced through data and analytics as we continue to accelerate our digital transformation. The strength of our base business continues across major markets and core categories. We have a number of initiatives in flight that will continue to support our performance for 2026 and beyond. We plan to address the details of our plans at CAGNY in February.

To provide some perspective relative to 2025, we expect our consumer business to continue delivering volume growth, supported by higher pricing compared to last year. We expect distribution growth, accelerated innovation and renovation across the portfolio and increased brand marketing investments to drive higher purchase interest and velocity and support volume performance across our core categories. Importantly, we remain at the forefront of evolving consumer trends, delivering on the demand for flavor exploration, health and wellness, convenience and value, while expanding our presence in high-growth channels where consumers are increasingly shopping.

In Flavor Solutions, we anticipate stronger performance as we lap a challenging 2025 in terms of customer volumes. In flavors, our customer pipeline is very healthy across our customer segments. It has doubled relative to the prior year. We are leveraging expertise in regulatory, R&D and product development to help customers navigate evolving regulations and meet growing health and wellness demands with innovation. And finally, in branded foodservice, we expect a gradual improvement as traffic trends improve.

To wrap up, we remain confident in the long-term health of our business, our fundamentals and in delivering on our plans to continue to drive industry-leading differentiated performance, supported by our broad and advantaged global portfolio anchored in high-growth categories that reinforce the strength and resilience of our business.

Now before I turn it over to Marcos, I would like to comment on some recent changes to our Board of Directors. Maritza Montiel and Tony Vernon, who have each served as directors over the past decade, will be retiring from the Board as of our Annual Shareholder Meeting this April. I am grateful for their exceptional service and many contributions, which has significantly benefited McCormick. We will miss them both.

At the same time, I would like to welcome 2 new members to our Board, Rick Dierker, President and CEO of Church & Dwight; and Gavin Hattersley, former President and CEO of Molson Coors. Both Rick and Gavin bring deep experience in the global consumer product industry, and I look forward to working with them and to the contributions they will bring to McCormick.

Now over to Marcos.

Thank you, Brendan, and good morning, everyone. Let's start on Slide 10 and review our top line results for the quarter. Total organic sales grew 2% for the fourth quarter, driven by growth in both Consumer and Flavor Solutions.

Moving to our Consumer segment on Slide 11. Organic sales increased 3%, driven by price and volume. Our continued volume growth for the last 7 quarters underscores our differentiation and ability to drive growth even in a consumer backdrop that remains challenging. Consumer organic sales in the Americas grew 3% with 1% volume growth and 2% pricing.

Pricing reflects the cost inflation-related pricing we implemented in September. Despite these pricing actions, volume growth was strong across core categories. The impact of elasticities overall was broadly in line with our expectations and is informing our plans for 2026.

In EMEA, we grew consumer organic sales 3%, driven by a 1% increase in volume and a 2% contribution from pricing related to targeted actions taken as a result of increased commodity costs. We're pleased with the sustained volume growth for the eighth consecutive quarter in EMEA.

Consumer organic sales in the Asia Pacific region increased by 2%. The increase was driven primarily by volume growth as our growth in China was in line with our expectations. In addition, we delivered strong results outside of China, primarily in Australia.

Turning to our Flavor Solutions segment on Slide 12. Fourth quarter organic sales rose 1%, driven by price contribution of 2%, partially offset by volume decline of approximately 1%. In the Americas, Flavor Solutions organic sales increased 1%, reflecting a 3% price contribution, partially offset by a 2% volume decline. Volumes for the quarter were impacted by the reset of some of our customers' inventory levels in Latin America, which we expect to be behind us in 2026. Underlying volume performance was flat, reflecting continued softness in large CPG customers volumes as well as softer foot traffic in branded foodservice, offset by growth with high-growth innovator and private label customers.

In EMEA, organic sales decreased by 3%, including 2% from price and 1% impact of lower volume, reflecting soft CPG customers' volumes. We're pleased to see that volumes remain stable in EMEA relative to recent trends. In the Asia Pacific region, Flavor Solutions organic sales increased 3% with volume growth of 5%, driven by QSR customer promotions and limited time offers, partially offset by price of 2%.

Moving to Slide 13. Adjusted gross profit margin declined 120 basis points in the fourth quarter due to higher commodity costs, tariffs and costs to support increased capacity for future growth, partially offset by savings from our comprehensive continuous improvement program, or CCI. Relative to our expectations, changes in tariff rules within the year contributed to higher-than-expected overall cost inflation in our broad basket of commodities. In addition, we recognized more tariffs in our cost of sales than previously planned. For the year, gross margin was down 60 basis points, reflecting the pressure from rising commodity costs and tariffs. As we look ahead, we expect to recover this margin compression in 2026.

Selling, general and administrative expenses, or SG&A, decreased 120 basis points relative to the fourth quarter of last year, driven by lower employee-related benefits expenses as well as CCI savings, including our SG&A streamlining initiatives, partially offset by increasing investments in brand marketing and technology. For the fiscal year, SG&A improved by 70 basis points compared to 2024. For the quarter, adjusted operating income increased by 3% or 2% in constant currency. This increase was driven by improved SG&A, partially offset by gross margin and increased investments to drive growth.

For the total company, we grew fiscal year 2025 adjusted operating income by 2% or 3% in constant currency and expanded adjusted operating margins by 10 basis points. Our performance in 2025 demonstrates our commitment to delivering healthy top line growth and our agility in managing costs across the P&L to protect our profitability and to enable us to invest in growth.

Our fourth quarter adjusted effective tax rate was 23.9% compared to 25.4% in the prior year as expected. For the full year, our adjusted tax rate was 21.5% compared to 20.5% in the prior year, driven by a greater level of favorable discrete tax items in the prior year. Our income from unconsolidated operations in the fourth quarter was flat as expected. For the fiscal year, unconsolidated income decreased 3% as the strong operational performance from McCormick de Mexico was more than offset by the unfavorable impact of foreign exchange rates.

Turning to segment operational results on Slide 14. Adjusted operating income in the Consumer segment increased 1% for the fourth quarter with minimal impact from currency. The increase was driven by sales growth and improved SG&A, partially offset by increased tariffs and commodity costs. For the year, adjusted operating income in the Consumer segment declined by 1% with minimal impact from currency. The decline in the Consumer segment was driven by increased commodity costs and tariffs, which impacted the segment's gross margin as well as continued growth investments. This was partially offset by improved SG&A driven by CCI and SG&A streamlining initiatives.

In Flavor Solutions, adjusted operating income in the fourth quarter increased by 7% or 6% in constant currency. For the fiscal year, our Flavor Solutions operating income grew 9% or 11% in constant currency, and operating margin expanded by 90 basis points, reflecting our continued focus on improving Flavor Solutions profitability.

At the bottom line, as shown on Slide 15, fourth quarter 2025 adjusted earnings per share was $0.86, an increase of 7% compared to the year ago period, driven by increased adjusted operating income, improved interest expense as we paid down debt and a favorable tax rate. For the full year, adjusted earnings per share was $3, reflecting an increase of 2%, driven primarily by growth in adjusted operating income.

On Slide 16, we've summarized highlights for cash flow and balance sheet. We delivered another year of strong cash flow from operations of $962 million. We returned $483 million of cash to our shareholders through dividends and used $222 million for capital expenditures. Capital expenditures for the year were slightly below our plans due to the phasing of certain initiatives. Our investments include projects to increase capacity and capabilities to meet growing demand, advance our digital transformation and optimize our cost structure.

Our priority remains to have a balanced use of cash. This means funding investments to drive growth, returning a significant portion of cash to shareholders through dividends and maintaining a strong balance sheet. We remain committed to a strong investment-grade rating. With another year of strong cash flow driven by profit and improved working capital initiatives, we successfully reduced our leverage ratio to below 2.7x.

Overall, results for 2025 reflected the strength of our business. On the top line, we delivered constant currency volume-led organic growth at the midpoint of our range, reflecting the continued focus on driving volumes and healthy sustainable sales momentum. While inflation and tariffs impacted our gross margin for the year, we effectively offset this impact through CCI and SG&A streamlining initiatives, all while continuing to invest for growth.

As a result, adjusted operating income and earnings per share finished at the low end of our outlook, a solid outcome in light of the macro headwinds we faced. Importantly, we drove strong cash flow from operations for the year, paid down debt and delevered, giving us ample flexibility to continue to invest in the business.

Before turning to our outlook, let me provide an update on our tariff exposure and mitigation plans on Slide 17. Since our last earnings call, our tariff exposure has been reduced by approximately 50%. Our total gross annualized tariff exposure is now approximately $70 million compared to $140 million we provided previously. As a result, we expect the incremental year-over-year cost impact of tariffs to be approximately $50 million in 2026. We plan to mitigate the vast majority of this impact with productivity savings across the P&L, alternative sourcing, supply chain initiatives and, of course, leverage our revenue management capabilities, including surgical pricing.

The reduction in tariff rates is not expected to benefit the bottom line as some supply chain mitigation efforts have been adjusted in line with the new rates, and we are intentionally choosing to continue to invest in the business. Lastly, as you know, this is an evolving situation, and we'll continue to monitor how policies impact tariff rates and therefore, our costs.

Now let's turn to our 2026 financial outlook on Slide 18. Our outlook reflects our continued investments in key categories to sustain volumes and drive long-term profitable growth, while appreciating the uncertainty of the consumer and macro environment, including global trade policies. In addition, this outlook reflects the contributions of our recent M&A transaction, the acquisition of a controlling interest in McCormick de Mexico.

Turning to the details. First, currency rates are expected to have a 1 point positive impact on net sales, adjusted operating income and adjusted earnings per share. At the top line, we expect organic net sales growth to range between 1% and 3%. Growth will be supported by sustained volumes growth and a higher contribution from pricing across both segments compared to the prior year.

In our Consumer segment, we anticipate some volume impact from price elasticity early in the year, followed by solid volume growth as the year progresses. In our Flavor Solutions segment, we expect volumes to recover and deliver full year volume growth for the segment. We expect the acquisition of McCormick de Mexico to contribute 11% to 13% to our top line, leading to total constant currency sales of 12% to 16%.

Along with this top line performance, we anticipate full year gross margin expansion, reflecting recovery from the compression experienced in 2025. This expansion reflects favorable impacts from product mix, cost savings from our CCI program and margin accretion from McCormick de Mexico, partially offset by the anticipated impact of a mid-single-digit increase in cost inflation.

In addition to our gross margin expansion, we expect SG&A benefits from cost savings to be offset by investments to drive volume growth, including brand marketing and digital investments, most notably our ERP implementation as well as a build back in incentive compensation.

In terms of our ERP implementation, we're still taking a phased rollout approach. We made significant progress and our deployments to date have been successful. To further minimize execution risk, we decided to consolidate the number of waves within the upcoming deployment phase, which moves forward our time line. Overall, program costs remain unchanged. However, this refined execution plan shifts more expense into 2026 than originally planned.

For the year, we expect our brand marketing spend to increase in the low to mid-teens as we continue to invest behind our brands and reflect the brand marketing investments of McCormick de Mexico. As a result, our adjusted operating income is expected to grow 15% to 19% in constant currency. In terms of tax, we expect our adjusted effective tax rate to be approximately 24% for 2026 compared to 22% in 2025, where we benefited from a number of discrete tax items that are not expected to repeat in 2026 in addition to a higher tax rate in Mexico.

Notably, we now expect an expense from unconsolidated operations in 2026, which reflects the elimination of the minority interest or 25% of McCormick de Mexico net income attributable to Grupo Herdez from our consolidated earnings. In addition, we expect net interest expense to increase compared to 2025, primarily due to the funding of the McCormick de Mexico transaction.

Our 2026 adjusted earnings per share is projected to range from $3.05 to $3.13 on a reported dollar basis, reflecting benefits from operating income, offset by unconsolidated expense, the impact of the increased tax rate relative to the prior year and higher interest expense. Overall, we believe our outlook is balanced and give us flexibility to continue to invest in the business, while expanding margins.

Moving to Slide 19. This slide summarizes the cost headwinds for 2026 and how we plan to offset them. Our guidance reflects strong underlying base business performance and growth from acquisitions with pressures from cost inflation, tariffs and the review of incentive compensation that are expected to be offset through tariff mitigation plans, CCI initiatives and SG&A streamlining. Our digital investments, most notably the refined ERP implementation plan, along with a higher tax rate are impacting underlying growth, but will become part of our base as we look beyond 2026.

Importantly, we remain on track to sustain our volume momentum and drive strong top line growth. Despite higher costs, we're investing strategically, executing with discipline and driving efficiencies, enabling us to deliver strong operating income growth and sustain our differentiation. We are confident in our ability to deliver 2026 outlook and in achieving our long-term objectives.

Thank you, Marcos. Before moving to Q&A, I would like to close with our key takeaways on Slide 20. The long-term trends that fuel our attractive categories, consumer interest in healthy, flavorful cooking, flavor exploration and trusted brands are enduring trends. They continue to reinforce the relevance and resilience of our portfolio.

In 2025, we drove differentiated volume growth and share gains across our core categories. Our results demonstrate that we are investing in the areas that drive the most value for consumers, customers and shareholders. As we enter 2026, McCormick is operating from a position of strength with a solid foundation and disciplined execution. Despite ongoing macro and cost headwinds, we remain positioned for sustainable, profitable growth.

Our 2026 outlook reflects continued top line momentum, margin recovery and strong operating profit growth, anchored by innovation, efficiency and our acquisition of McCormick de Mexico. While global trade dynamics continue to drive cost inflation, we are leveraging our competitive advantages, productivity initiatives and cost management discipline to mitigate these pressures, sustain volume growth and fund our investments for the future.

Looking beyond 2026, these incremental costs are expected to remain in our base. However, our enhanced CCI plans and SG&A streamlining discipline positions us to manage these pressures effectively, while sustaining investment and delivering growth in line with our long-term algorithm. Ultimately, we remain a global leader in flavor, driving growth that is both sustainable and differentiated.

Finally, I want to recognize all McCormick employees for their dedication and contributions. Your commitment and passion continue to drive our success. I'm confident that together, we will continue to deliver differentiated results and long-term shareholder value.

Now for your questions.

[Operator Instructions] And our first question is from the line of Andrew Lazar with Barclays.

Maybe to start, your '26 outlook is predicated on continued volume momentum. I was hoping you could talk a bit more about the key drivers underpinning your view. And in particular, maybe you can speak to expectations in consumer Americas, just given recent scanner trends have decelerated a bit. I'm assuming on elasticity, but perhaps you can clarify that.

Sure. Well, a couple of thoughts just I think, in terms of top line. I think our guide for '26 reflects obviously, both segments and factors in, obviously, the uncertainty environment. But when we look at kind of the range that we're providing, I think, everyone, consumer drives sort of the mid- to high end of that range. And then Flavor Solutions is probably the low to the mid end of that range. Overall, we expect pricing to contribute more to our growth rate than it did in 2025, but we also expect to maintain volume growth for the year with volume growth in both segments.

I might just speak maybe to each segment just to give a little bit more color on that. On Consumer, we expect to continue delivering volume growth. It will have higher pricing, I think, compared to, let's say, the last year. We've driven volume over the last 1.5 years, and it has been driven by a lot of our actions and plans and a number of things that obviously we've talked about in the past.

And as I look to '26, a lot of those levers really remain in place. We'll continue to increase our A&P with really strong messaging that resonates. We'll continue to benefit from the innovation that we launched in '25. And those are things like the U.S. Cholula expansion or McCormick innovation like finishing salts or the type of innovation that we've launched in EMEA behind air fryer seasonings.

And I think one of the positive things, now it got launched in sort of towards the tail end of '25 and really started to hit the shelf, but this U.S. Gourmet relaunch, McCormick Gourmet we really think is driving a lot of positive velocities right now, and we like what we're seeing on shelf. And so that we'll get a full 3 quarters of the year on that innovation. And the whole price gap management plan also still remains in our base as it did in '25. Incremental to this, we're expanding distribution across our core categories. We'll continue to launch new innovation.

And we'll also continue to renovate parts of the portfolio. And one of the ones I'm also excited about is we're going to be relaunching our entire blends and seasonings line, and that's really quite exciting. So we like that, that's another renovation that's going to be coming out in '26. And then we're just going to continue to sort of focus on these high-growth channels that we're seeing a lot of success in. And so those are the things that are really driving, I think, an underpin and underwrite the consumer growth.

In Flavor Solutions, we expect to do better than we did in '25. We know '25 was impacted by large CPG customer volumes and being soft as well as in branded foodservice. But we do expect improvement, particularly as we continue to grow with those high-growth innovators and private label customers. We're acknowledging that we are lapping a difficult '25, so expect to do better. But it's difficult to predict the level and pace of that improvement. So I still expect some lumpiness in this business as we've experienced in the past.

But the things that give me, I think, more optimism, if you will, is just I'm encouraged by the scope of our innovation pipeline in that part of our business. It's really healthy across a lot of our customer segments. The reformulation projects are increasing, and we've talked about that before, particularly with large CPG customers. And we're partnering with a lot of emerging brands and private label players to sort of really work on flavor there. And it's an exciting categories like protein-based beverages or fiber-based snacks or these are the types of health and wellness trends that we're seeing getting a lot of activity that gives us some reason for optimism.

And our win rate on health and wellness briefs remains strong. So we have, I think, a realistically positive outlook. But we're also remembering what happened in '25 and not counting on all of that to sort of necessarily rebound back really strongly, but we do think it's going to be positive improvement over the year, and it will be volume growth in both segments.

That's really helpful. And then just a very quick one for Marcos. Just anything to keep in mind on sort of the cadence of EPS growth as we think through the 4 quarters ahead? Just things discrete to keep in mind, whether it's year-over-year issues or things of that nature.

Yes. So in terms of the EPS, EPS should follow the operating profit over the quarter. So we'll see operating profit fluctuating over the next few quarters. OP growth will be in Q1 will not reflect the full quarter of McCormick de Mexico. So we'll be slightly below guidance. So if you think about it that way, earnings per share will follow that fluctuations of OP. And we should see a Q1 that will be in line, I would say, with mid- to high end of our guidance range, but then it will build up as we progress over the next few quarters.

The next question is from the line of Peter Galbo with Bank of America.

Marcos, I just -- I wanted to ask a bit on the gross margin, in particular, just given some of the nuance of what happened in the quarter, I think it came in obviously below even your expectations. You've talked a bit about the core inflation components maybe being stickier even though we've had some tariff relief and the outlook for '26 kind of implies gross margin expansion. I think you said recovery. I didn't know if that meant full recovery of '25 into '26. But maybe you can put some more parameters just around how you all are thinking about the gross margin expansion for '26 relative to '25, again, in light of kind of it coming in light of your expectations in the fourth quarter.

Yes, sure. Let me just explain the 2025 Q4 results, and then I'll go into 2026. So at a high level, if you take a step back, the external environment continued to create the volatility in terms of our commodity costs. And we continue to focus on the elements within our control. We delivered CCI, enhanced CCI even to offset the additional tariffs impact that we saw in the year. We executed on pricing in line with our plans, and we continue to grow volume in the Consumer business in Q4 despite all the pricing actions that we've taken.

More specifically to the drivers of the gross margin, there's 2 main drivers. One is the indirect consequences of the tariff-related market pressures that we've been talking about over the last couple of quarters, and it actually accelerated in Q4 relative to Q3, which means that it was more than we expected, meaning that we saw more inflation coming through our P&L through the balance of the year.

And then the second point is the direct impact of tariffs, which is about recognizing more of those tariff inventory in our P&L than we originally planned. So we had -- it's a bit of the product mix in Q4 that had tariffs on it, and those got sold through it, and we saw the impact of that additional cost hitting our P&L in Q4. So the combination of the 2 elements is the broader commodity cost is impacting our gross margin plus the impact of tariffs were what changed versus our expectations as we came in Q4.

But also, I think it's important to mention, Peter, in this time of volatility, we are focused on managing the P&L holistically, not only the gross margin line. And that's where we drove a lot of SG&A savings. We had done a lot of -- made a lot of progress in terms of SG&A over the last few quarters. Q4 was also a quarter in which we focused on streamlining SG&A, while increasing investments to drive growth and marketing and digital investments. So managing the P&L holistically and getting to the OP number that was in line with our expectations, meaning SG&A offsetting the gross margin piece.

But obviously, the gross margin is something that we want to recover. Our expectations going into 2026 is that we are expecting to recover the margin compression that we saw of 60 basis points in 2025. And we provided a qualitative guidance in terms of gross margin as it is a bit difficult to be precise at this time. Given the uncertainty that we're facing in the market and the macroeconomics, it is a little bit difficult to be precise in terms of gross margin. So we provided that view. But at the end of the day, the focus will be in recovering the margin compression that we saw in 2025.

Great. Okay. And Brendan, maybe if I could ask just more directly on Slide 19, where you kind of have the bridge on base business to the guidance. The ERP, I know has kind of been discussed in the past now and maybe you put a more concrete number around it. But I want to make sure I understood you clearly that you're accelerating the spend or some of the projects into '26, but then those costs are actually expected to remain in the base, so we don't really expect maybe not even any relief on that in '27. Maybe you can just clarify specifically around the ERP and how we should think about the phasing of projects in '26 and then how to think about it for '27 and beyond.

Sure, Peter. Peter, first, let me provide some -- just some broad perspective on sort of what we were communicating, I think, throughout the script, but also on Slide 19. And then I'll ask Marcos to speak more specifically to how to think about ERP beyond '26 overall.

Broadly, as we kind of thought about the year for 2026, our top priority was to really think about how we maintain sales momentum, that being a top priority in terms of having a very healthy top line. And we're balancing volume and price. And so -- and still achieving sort of healthy sales growth and still invest in the business also at the same time. But in 2025 and 2026, we certainly saw a lot more costs come into our P&L, whether it be through inflation or tariffs or in this case, as we go to '26, building back incentive compensation. And we're offsetting that with targeted pricing, productivity initiatives, cost savings initiatives, but we can't fully offset everything.

And so those are the elements that you see in that bridge, which were -- which are tax and ERP. But I would say that the fundamentals and the health of our business are doing really well. And we just need to work through this dynamic environment in terms of cost. Now in ERP, we decided that as this program is going well, and we are seeing success in a number of our go-lives already to date, as we assess sort of the next one, it just felt prudent for us to minimize the number of waves that we would have to go through.

Marcos, do you want to add on top of that?

Yes. So we have been very successful in deploying our ERP implementation over the last couple of years. There's a lot of work, as you can imagine. We've taken a very integrated approach in terms of how we deploy the ERP, not only the ERP implementation team, but it is them working together with the business as well as the technology teams with strong support from our external partners. So that is going very well.

And these programs, you learn, you adapt and you evolve. And one of the things that we were considering over the last 3 to 4 months is really about the number of waves within the next deployment phase that we have, whether we would actually compress the waves to minimize risks. And that happens because as you shorten the periods between -- of dual operations between legacy systems and new systems, that minimize data reconciliation interface risks. So that is the key element of compressing the phases, which is you eliminate that interfaces between the 2 systems for a longer period of time.

So by doing that, we believe we are further minimizing risk. But as we do that, we bring forward the time line of development and preparedness into 2026 as this last go-live will take effect in early 2027. So as you do that, you shift costs into 2026, which is different than we had originally planned. Overall, costs for the program remain the same, but it's just a shift in timing of expenses between '27 and '26 due to this change in the approach that we're taking. In 2027, we should see that cost moderating, and then we should see further moderation down into 2028.

Our next question is from the line of Tom Palmer with JPMorgan.

I wanted to follow up on Pete's question and clarify on the unexpected inflation you noted in the fourth quarter, really with implications as we think about '26. I think you typically carry more than a quarter's worth of inventory on your balance sheet, and you did give the guidance a month into the quarter.

So I'm trying to think through to what extent this added inflationary pressure that maybe had some impact in 4Q might be even more of a consideration as we start out 2026. And kind of in that context, any help on thinking through that mid-single-digit inflation and the cadence of it in the coming year?

So we -- Tom, thanks for the question. So we exited the year at mid-single-digit inflation. If you think about Q4 versus the prior year, it was the highest quarter of inflation that we saw coming into our P&L. And that is a combination of tariffs, but also commodity costs more broadly. As you know, we have a broad basket of commodities. We source from 80 countries, 17,000 ingredients. We have a broad basket, and we saw inflation in the core commodity piece, but also tariffs coming in as well as packaging. We saw packaging as well up in Q4.

So we are exiting at a high cost with a high cost base. As we go into 2026, despite the moderation of tariffs, we'll still see a middle -- mid-single-digit inflation hitting the P&L, and that's our expectations into 2026. It could improve, but if it does improve, we will be later in the year. Right now, we're estimating that it's going to continue to be at the same run rate of Q4 into 2026.

Okay. And then on the Consumer segment, you noted the expectation for volume impact from price elasticity but recovery subsequently. What drives the outsized price elasticity in the first quarter? And is there anything maybe related to shipment timing when we think about 4Q that relates back to that?

Sure. As we think about the consumer business and as we go into Q1 and then we think about the rest of the year, we do expect an impact from elasticities in the first quarter. And I think one of the things that underpins that assumption is really that we have some pricing that we put in place targeted in surgical in 2025, but we also have additional pricing to come on beginning in February, which is a reflection of this inflation that we've been referring to as well as the -- to some degree, partly offsetting tariffs.

And so we expect some of that elasticity impact to really hit more in Q1 overall. And I wouldn't be surprised if we see volumes either flat to slightly negative in Q1 as a result of that. However, we do expect to sort of then improve upon that as we go throughout the rest of the year. And that there's a transition period that we're going through right now in Q1 where we're seeing more pricing coming into the shelf just as you try to offset these costs. But then we also have other programs in order to sort of recognize the reduction in tariffs and everything else that really starts to kind of find its way to, I think, our consumption profile starting in Q2 and going through the rest of the year.

Our next question is from the line of Alexia Howard with Bernstein.

Can I just ask about the sort of -- you've talked about the confidence that you have in the long-term objectives. On paper, you have a number of tailwinds. You're very on trend with consumer dynamics, interest in health and wellness and cooking from scratch, et cetera. The tariffs seem to be easing, reformulation seems to be picking up. And yet, this seems -- I think we're now on year 5 where the earnings expectations are below your long-term algorithm.

So I'm just trying to sort of square that away and thinking about what you said at the Investor Day in September, I think, in 2024 about the outlook for 2028. When might we expect to get back on algorithm? And are those 2028 goals still realistic from here? And then I have a follow-up.

Sure. Well, Alexia, let me address the first one then, and thank you for the question. If you reflect back on the targets that we shared at Investor Day, that reflected, obviously, as we called out then, our organic growth ambitions. And many of those targets were established before the onset of much of this uncertainty that we've been seeing from a global trade standpoint over the last, let's say, year. And also, it was established before our acquisition of McCormick de Mexico.

Given everything that's kind of continued to sort of develop since Investor Day, we are aligning our commentary to the long-term objectives, which include organic growth and also accretive M&A. And I think from a sales standpoint, we really feel pretty good about being able to hit those targets by 2028 from a top line perspective. But we're also working very hard right now to offset the impact of what has been substantial incremental costs coming into our P&L over the course of 2025 and also as we look ahead to '26. And so a lot of our focus right now is on additional efforts to address these as quickly as we can.

And then our plan at CAGNY is to provide more color on how we look at the entire set of targets that we laid out to make sure that we have illustrated sort of any adjustments in our pathway with regard to those targets set out at Investor Day. I'd just come back to from a top line perspective, we feel really quite good and quite confident of our ability to hit those. But we got to work through right now on a short-term basis, just really the amount of incremental cost activity that we're seeing in our P&L. And we have to -- we'll provide you more perspective on how we look at that at CAGNY.

Great. And a quick follow-up. On the reformulation activity, you've talked, I think, for much of the last year about how that's picking up, particularly with private label and with some of your larger CPG clients. Are you still in an investment phase on that? Because obviously, you have to go through the process of actually figuring out how the innovation -- the reformulation will work before you really get that revenue stream in the door once the product is launched. Is that expected to sort of pick up through the course of 2026?

Yes. If I think I understand the context of your question, Alexia, and let me know if I didn't get it right. It's about -- from a development perspective, how are we looking at reformulation activity in '26. But also, I think maybe your question also had to do with as you think about the commercialization of that development, how might we think about that in '26.

So if I look at sort of both ends of that question, from a development perspective, I do expect the development activity to continue to pick up. We've definitely seen that as we went through the course, especially the back half of '25, and we expect to see more of that come through in '26. And it is a reasonably sort of, as we talked about before, a big tick up in our activity, and I expect that to continue to increase overall.

From a commercialization perspective, sort of, i.e., when it hits the market, I think that's a bit more delayed. I think late '26 is probably an early indicator when we start to expect to see that, but definitely more in '27 would be my expectation, particularly as you think about maybe sort of large CPG customer type activity. At the same time, there's a lot of emerging brand activity going on, and they tend to move to shelf a little bit faster.

Our next question comes from the line of Robert Moskow with TD Cowen.

Brendan, I think Andrew Lazar asked about the Nielsen tracking data for Spices and Seasonings in the U.S. and some weakening sales growth, shares are down both on -- in our data, both in terms of volume and value in the last 12 weeks. And I was hoping you could be a little more specific as to whether that reflects what you're seeing or not and whether there's any implications as to what the sell-through was from your holiday shipments in fourth quarter?

Sure. We had -- well, there's a number of different variables in your question. So I'm going to try and make sure I address them all, Rob. First of all, I'm going to maybe hit the last point first, which is if I think about overall, our inventory in the channel, meaning the comparison between our sales and our consumption in the fourth quarter, it is exactly -- it's really where we thought we think it should be. And we don't see any anomalies at this point that would make us think that we have to speak to any differences that are unusual as we think about sort of the seasonality of our business. So that component feels very much in line overall.

When I think about just overall the performance of the fourth quarter, we saw a really very good holiday performance, especially when you look at our business in the Americas. Specifically, we were certainly delivered very much on what we expect would happen, both from a price and a volume standpoint from a sales perspective. But as we think about consumption, we believe that we had reasonably good consumption performance. I will say that there was a period there -- so many things happen and change, obviously, in the news, but there was a period there where we saw broadly in the market a bit of a slowdown for probably a couple of weeks related to sort of the news regarding SNAP funding, et cetera. And there was a little bit of a contraction period that we saw there broadly in grocery in terms of total results. And so a little bit of a dip.

But then things started to come back as we got closer to the holiday season, and we saw consumers really kind of purchase more closely to the holiday, which is reflective of sort of that budget sort of control behavior or that value-seeking behavior. And so we saw certainly that type of profile, if you will, in the holiday consumption, et cetera. As we go into Q1, we still have to wait and see what that post-holiday consumption looks like in terms of do consumers kind of maintain that level or do they moderate a little bit after broadly what was a successful holiday season.

But also keep in mind that we expect some price elasticity impact in there, too, as we talked about. And we certainly see that coming through a little bit. The price elasticities are operating as expected. So that is nothing that has, at this point in time, leave us to think that we didn't really have a good handle on what that might be.

And as we go through Q1, as I mentioned on a previous question, we expect maybe a little bit more variability in terms of price elasticity impact because there is a little bit more pricing coming to shelf as we offset these costs that we're talking about. And we are taking a very targeted surgical approach in our pricing. I mentioned a lot of things there, but I think I'm trying to get at the spirit of your question. Let me know if I did not.

I think it's fine.

Our next question is from the line of Max Gumport with BNP Paribas.

First, just a housekeeping one on tariffs. So gross annualized tariff exposure has fallen from $140 million as of last quarter to $70 million today. You also said you expect to book $50 million of incremental tariffs in FY '26. So my simple reading would suggest that this means you expect to book $70 million [indiscernible] this would imply you only booked $20 million of gross tariffs in '25. However, I know last quarter, you said you expected to book $70 million of gross tariffs in '25. And it sounds like if anything, it came in higher than that number. So I was hoping you could just give us a bit of clarity and tell us what was the final gross and net tariff number that you booked in FY '25?

Yes. Sure, Max. I appreciate this can create a bit of confusion giving so many numbers from last year into 2026. So let me try to clarify that. So in 2025, first, starting with our last call was a gross impact of $70 million, and we mitigated $50 million out of the $70 million last year to a net impact of $20 million in 2025. Going into 2026, the annualized number now is $70 million, coincidentally the same. As we have already absorbed $20 million in the base, the incremental gross year-on-year impact is $50 million. So that's our call, the $50 million.

And if you look on Slide 19, that is the 5% of incremental tariff impact that we're seeing now '26 versus '25, and we plan to offset most of it as we go into 2026 with the same strategy that we had before, supply chain savings, procurement initiatives as well as some surgical pricing that will take place next year.

Okay. It also looks like on that slide that you're referencing that you're offsetting all the tariffs. So if the net impact was $20 million in '25, it looks like the net impact was going to 0 in year-over-year terms in '26. Is that fair?

Yes, that's fair.

Okay. And then just actually one other housekeeping one. Just with regard to your response to Andrew on cadence for EPS throughout the year, it sounded like you were saying EPS cadence will follow operating profit cadence. And then I thought you said that operating profit starts off slightly below the guidance in 1Q because you don't have a full quarter of Mexico, which makes sense. And then it also sounded like you said that 1Q EPS is at the mid- to high end of the guidance range. So if that's true, why is that?

And then I think you said it even then builds further from there, which might you'd be towards the high end of guidance for the full year. So I'm assuming I misheard you that 1Q EPS is at the mid- to high end of guidance and maybe it's below to mid-end, but just hoping for more clarity there.

So yes. So it's a little bit of -- between OP and EPS. So OP will be soft because of the, Max, McCormick de Mexico not being included fully in the base. However, EPS will be at the mid- to high in Q1, and then it will normalize towards the range throughout the year, as we said. So it's a Q1, a bit of a different equation between OP and EPS, but then it gets more aligned to the OP flow between Q2 and Q4.

Our final question is from the line of Scott Marks with Jefferies.

I wanted to just ask a little bit just if we kind of take a step back and look around the world, I know you've made comments about some different regions today. Just wondering if you can share maybe a little bit more detail in terms of how you're thinking about different parts of the world. What is encouraging to you right now? Where do you see some challenges maybe? And just any thoughts you have on kind of growth profiles in '26 in some of the different regions?

Certainly. And what I might do is not speak to the Americas first because it feels like we sort of tended to focus a little bit more on that and some of the questions that we got. I'll start with Asia Pacific. And in fact, Marcos and I were just in China 2 weeks ago. So we've been in the region, and we'll go back out to the region here in a couple of weeks. And my outlook on Asia overall is I'll focus a little bit more on China and then the rest of the -- that region.

When we look at '25, we got that gradual growth that we were projecting that we would get. And so we feel pretty good about sort of the performance broadly in China. And we still see continued gradual improvement in that marketplace as we look at 2026. The parts of our business that are performing well there are broadly -- we feel are going to continue throughout the year. We see strength in our retail grocery business there, certainly good trends driven by increased distribution and stronger marketing across that business.

We also see strength in the business that we have in the middle of China, which really focuses a lot on more Chinese cuisine in terms of foodservice and catering and a little bit on retail shelves. And that business has been strengthening as we take a look at going from '24 to '25 and then '25 to '26. And our QSR business there is also doing really well, and we see just a lot of strong consumption happening in that channel. The only part of that business that's been soft is really our foodservice business, which tends to serve the higher-end restaurants, more Western cuisine, and that's been soft just due to a lot of different conditions in that marketplace.

But overall, we expect China to be doing reasonably well in terms of slight gradual growth again in 2026. And in the rest of that region, we continue to see pretty good growth in Australia and in Southeast Asia. And we're still going to continue to build our plan for India, as we've talked about before.

If I look to EMEA, we continue to see like the U.S. and the Americas, continued strength in our consumer business. It will be volume growth with some pricing, and that's consistent with what we saw in 2025 and obviously led by continued sort of all the things that we talk about, stronger brand marketing, increased distribution. And also even in those high-growth channels like e-commerce, we see a lot of growth there right now overall in our EMEA consumer business.

When I look at Flavor Solutions there, I do feel like we're going to have a stronger year than we did in 2025 because we just feel like the stabilization of that QSR marketplace starts to really show a little bit more improvement. I'm not counting on a lot, but I am counting on it being better than 2025, and that gives us some optimism in terms of that part of our -- that segment in EMEA.

And then coming back to the Americas, we just feel again, a reasonable amount of optimism as you see in our guidance for sales, both on the consumer business and also Flavor Solutions for the reasons that I mentioned on an earlier question. I just don't want to repeat all that, obviously, because it would be redundant, but we feel some really strength there. And then lastly, I'll wrap it up with Latin America and obviously, our -- the McCormick de Mexico business, and we anticipate having a good year there, too, largely being driven by obviously that being the consumer segment.

I have no further questions at this time. I'd like to turn the floor back over to management for closing comments.

Thank you, and thanks, everyone, for joining today's call. If you have any further questions on today's information, please feel free to contact me, and this concludes this morning's conference call. Thank you.

Good morning. This is Faten Freiha, VP of Investor Relations. Thank you for joining today's third quarter earnings call. To accompany this call, we've posted a set of slides on our IR website, ir.mccormick.com.

With me this morning are Brendan Foley, Chairman, President and CEO; and Marcos Gabriel, Executive Vice President and CFO.

During this call, we will refer to certain non-GAAP financial measures. The nature of those non-GAAP financial measures and the related reconciliations to the GAAP results are included in this morning's press release and slides. In our comments, certain percentages are rounded. Please refer to our presentation for complete information.

Today's presentation contains projections and other forward-looking statements. Actual results could differ materially from those projected. The company undertakes no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events or other factors. Please refer to our forward-looking statement on Slide 2 for more information.

I'll now turn the discussion over to Brendan.

Good morning, everyone, and thank you for joining us.

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.

This morning, I will begin my remarks with an overview of our third quarter results, focusing mostly on top line drivers. Next, I will review how McCormick is positioned relative to an evolving consumer landscape for the remainder of this year and into 2026. Then 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. And finally, before your questions, I will have some closing comments.

Turning now to our results on Slide 4. 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. In Asia Pacific, our China retail business continued to deliver growth. However, our foodservice 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 foodservice customers volumes was also more than offset by QSR growth in both Americas and Asia Pacific. Also, we are increasingly benefiting from continued momentum in health and wellness categories, driven by both high-growth innovators and private label customers. Lastly, in EMEA, QSR trends began to stabilize, marking an improvement relative to recent periods.

Let me now share our current view on the state of the consumer and considerations for 2026. The environment remains challenging across our key markets with market dynamics pointing to continued pressure into 2026. Consumers, especially low- to middle-income households, are adapting to the economic environment by adjusting how they shop, making more frequent trips with fewer items per basket, choosing larger pack sizes to maximize value and stretching meals across a number of occasions. In addition, they continue to cook at home more often and shop the perimeter for fresh foods to help lower overall meal costs. These behaviors reinforce the demand for flavor, particularly in our core categories, with herbs and spices continuing to lead center of store unit consumption.

Health and wellness trends continue to gain momentum. Consumers are preparing healthier, more affordable meals at home, while exploring new flavors and culinary creativity. High protein and healthy claims are driving purchase trends across retail and foodservice, alongside growth in functional foods that deliver great taste with added benefits such as protein, fiber, hydration, energy and better sleep. Convenience, paired with flavor exploration, remains an area where consumers are willing to pay more, and e-commerce growth continues to accelerate across our core categories. These trends are fundamental, long-lasting and support the continued demand for flavor, benefiting both the Consumer and Flavor Solutions segments. With our broad global reach, strong local brands, ongoing innovation and strategic pricing, we're well positioned to meet the needs of consumers and continue to deliver value through flavor.

As we address immediate priorities in today's rising cost environment, it's important to reiterate that our strategy remains consistent. We remain committed to delivering volume growth and investing in our brands, technology and digital transformation as we continue to reinforce the structural advantages that will drive our future success. We are balancing volume and profitability. And this year, we expect to offset rising commodity costs and tariffs as much as we can. Our global manufacturing location strategy, resilient supply chain, global sourcing capabilities and collaborative efforts across the organization continue to be competitive advantages, enabling us to mitigate the impact of tariff and tariff-related costs and maintain business momentum.

We are absorbing some incremental costs this year, which has a near-term impact on our profitability. This approach enables us to maintain our volume momentum and sustain investment in our growth initiatives while still delivering operating profit growth for the year. As a result, we reaffirmed our volume-led sales growth and expect to deliver at least the midpoint of the range. In addition, we revised our profitability outlook to the low end of the range provided in January. This reflects the updated net impact of rising commodity costs and tariffs since our second quarter call.

As we look ahead to 2026 and beyond, we will remain consumer-centric, committed to delivering value, flavor and quality while maintaining our volumes and protecting our profitability.

Let's move to Slide 5, and let me highlight for the quarter some of the key areas of success. Across the Global Consumer segment, we continue to successfully execute on our plans. We have held steady or improved share across many core categories in key markets for the last 5 quarters. McCormick branded unit consumption growth continues to outpace the broader edible category in the U.S. In EMEA, unit and dollar consumption are outpacing branded and private label fast-moving consumer goods or FMCG food.

Let me provide some additional color. Starting with Spices and Seasonings, we drove strong volume growth across all regions. In the U.S., volume growth continued to outpace private label for the fifth consecutive quarter. In Canada, we continue to grow overall share. In France and Poland, share gains in Spices and Seasonings are contributing meaningfully to EMEA's gains. This quarter, the strong performance in our grilling portfolio was supported by the rollout of our new consumer-preferred packaging for Grill Mates as well as increased Frank's RedHot promotions and innovation.

In mustard, we are pleased to see that our plans are continuing to drive great results. For the third quarter in a row, we drove dollar unit and volume share gains in the Americas. In EMEA, we drove unit and dollar share gains in mustard for the last 2 quarters. In hot sauce, we continue to achieve good results. In the U.S., we continue to drive unit share gains fueled by expanded distribution as well as investments in differentiated brand marketing and innovation. In the U.K., we accelerated unit consumption, leading to dollar share gains.

We continue to make progress on total distribution points, or TDPs. In the Americas, we expanded TDPs across Spices and Seasonings, recipe mixes, hot sauce and mustard. In the Americas and EMEA, we continue to gain distribution in high-growth channels like e-commerce. In Flavor Solutions, we continue to see strength in our technically insulated high-margin product category, flavors. In flavors, in the Americas, we continue to diversify our customer base by winning new customers and gaining share, increasingly benefiting from both high-growth innovators and private label customers. In addition, we are seeing an increase in reformulation projects, particularly with larger customers.

Lastly, we outperformed the industry across many end categories, including nutrition bars, alcoholic and nonalcoholic beverages, and we continue to win business across snack seasonings in better-for-you categories. QSR performance remained strong in both the Americas and Asia Pacific, and volumes have stabilized in EMEA relative to recent trends. In the Americas, performance was driven by innovation, customer growth and continued share gains. In China and Southeast Asia, our customers' new products and promotions continue to drive strong volume growth.

Let me now touch on some areas where we are seeing some pressure. Starting with Global Consumer. In recipe mixes, we continue to demonstrate underlying strength in our base business and strong consumer loyalty. We saw growth across many product lines. However, total growth was pressured by increased competition in the U.S., particularly within the Mexican flavor category. We expect these trends to improve as we launch new innovation, gain distribution, leverage our authentic Mexican brands, like Cholula, and invest behind our brand marketing initiatives. In Asia Pacific Consumer, as I mentioned, the foodservice business faced softer demand in certain channels. Looking ahead to the fourth quarter, we continue to diversify into high-growth channels and expand our distribution. As a result, we remain confident in a gradual full year recovery in China consumer for 2025.

Moving to Flavor Solutions. In the Americas and EMEA, within Flavors, some of our large CPG customers continue to experience softness in volumes within their own businesses. We continue to work on offsetting these trends through innovation and collaboration and by winning new customers. In branded foodservice, foot traffic remains soft, which continues to impact our customers' volumes. We are seeing sequential improvement in our underlying business performance, driven by noncommercial customers. This includes places of employment, hospitals and colleges and universities.

As outlined on Slide 6, our growth levers remain consistent to drive growth through category management, brand marketing, new products, proprietary technologies and our differentiated customer engagement. These levers are supported and enhanced through data and analytics as we continue to accelerate our digital transformation. The strength of our base business continues across major markets and core categories, and we have a number of initiatives in flight that will continue to support our performance for the fourth quarter. I am excited about the growth opportunities ahead.

In the Consumer segment, our investments to drive volume growth remain in place, including increased brand marketing, innovation and revenue management initiatives. They have driven strong and differentiated performance over the last 6 quarters. We continue to see strong consumption trends and expect continued volume growth for the fourth quarter. We expect distribution growth, accelerated innovation and renovation across the portfolio and brand marketing investments to drive increased purchase interest and velocity and support volume performance.

Let me provide a couple of examples. We are seeing great early results from the relaunch of our McCormick Gourmet line with countertop-worthy new packaging, including a vibrant gold cap that seals in freshness, provides a modern look and highlights that we only use the best raw materials. In addition, we secured incremental distribution, which will support strong growth in the fourth quarter. In terms of new products, the Cholula line of Cremosas and cooking sauces in addition to a new McCormick Finishing Sugars that were launched for the holiday season are also yielding great results.

Shifting to EMEA. Schwartz air fryer seasonings continue to be successful, addressing consumers' increased appetite for air fryer-focused seasonings. In addition, our new all-purpose seasonings are performing well with younger consumers, meeting demand for enhanced flavor without being specific to one type of meal.

Lastly, we are excited about the holiday season and are well positioned with our promotion and innovation plans. We are increasing our merchandising levels, supporting our portfolio with holiday brand marketing campaigns and are expecting a strong holiday season.

Moving now to the Flavor Solutions segment, starting with branded foodservice. We are leveraging our iconic brands in the food away-from-home channel. For example, driving strong growth in Cholula Hot Sauce in the front of the house and increasingly in back of the house, leading to share gains. French's mustard continues to perform well, with share gains across regional and national chains for the last 4 quarters. Furthermore, we are fueling growth with operator relevant non-trend innovation with products like McCormick Blackened and Korean Barbecue seasonings and our Flavor of the Year, Aji Amarillo, as well as Cattlemen's Memphis Sweet barbecue dip.

Lastly, we are expanding distribution in growing channels, including cash and carry, noncommercial and e-commerce, where we are seeing good momentum.

Shifting to flavors. We are leveraging our culinary heritage, regulatory, research and innovation and product development expertise to support customers in navigating, evolving regulatory environment and meeting consumer needs for health and wellness with innovation. We are seeing an increase in reformulation projects, particularly with large CPG customers. Momentum is building and the execution and impact are expected to materialize over time. This is due to extended validation and launch time lines of these projects.

In terms of innovation, we are collaborating with large and emerging brands to flavor energy, hydration, protein-based beverages, protein or fiber snacks and zero sugar drinks. We are increasingly benefiting from growth in health and wellness categories, driven by high-growth innovator customers with emerging brands and private label customers. In addition, we are leveraging our expertise in functional ingredients and our technologies to help customers mask off notes or enhance flavors as they add protein across categories like protein-based snacks. Our win rate in health and wellness-related briefs is strong across our regions, and we continue to dedicate resources to where we have the right to win.

To wrap up our growth plans and specifically our view for the remainder of the year, we remain confident in the long-term health of our business, our fundamentals and in delivering on our plans to continue to drive industry-leading differentiated performance.

Now over to Marcos.

Thank you, Brendan, and good morning, everyone.

Let's start on Slide 8. Total organic sales grew 2% for the quarter, driven by volume and mix. This reflects total volume-led growth for the last 5 quarters and underscores our differentiation and ability to drive growth even in a consumer backdrop that remains challenging overall.

Moving to our Consumer segment on Slide 9. Organic sales increased 3%, driven primarily by volume and mix with minimal benefit from pricing. Consumer organic sales in the Americas grew 3%, with 3% volume growth and flat pricing. Volume growth was strong across our core categories and was driven by our investments in brand marketing, innovation and category management. In EMEA, we grew consumer organic sales 4%, driven by a 1% increase in volume and 3% increase in price, related to targeted actions taken as a result of increased commodity costs. We're pleased with the sustained volume growth in EMEA despite price increases. Consumer organic sales in the Asia Pacific region decreased by 1%. This decline was driven primarily by softness in the foodservice business in China that Brendan mentioned earlier.

Turning to our Flavor Solutions segment on Slide 10. Third quarter organic sales were up 1%, driven by price contributions of 1% and flat volume and mix. Volumes for the quarter were impacted by unfavorable comparisons related to the timing of customers' activities in the prior year. Underlying volume was positive for the quarter. In the Americas, Flavor Solutions organic sales increased 1%, reflecting a 2% price contribution, partially offset by a 1% decline in volume. Our results include the unfavorable comparison I mentioned earlier and reflect strong performance with faster-growing flavor customers and continued QSR growth, partially offset by softness in CPG customers' volumes. The price contribution is primarily related to currency in Latin America.

In EMEA, organic sales decreased by 3%, including a 2% decline from price and a 1% impact of lower volume, reflecting soft CPG customers' volumes. We're pleased to see that volumes have stabilized in EMEA relative to recent trends. In the Asia Pacific region, Flavor Solutions organic sales increased 6%, with volume growth of 9%, driven by QSR customer promotions and limited time offers, partially offset by price of 3%.

Moving to Slide 11. Adjusted gross profit margin was down 120 basis points in the third quarter due to higher commodity costs, tariffs and costs to support increased capacity for future growth, partially offset by savings from our Comprehensive Continuous Improvement program, or CCI. Overall, gross margins came in below our expectations as we're seeing incremental cost pressures due to the global trade environment. In the fourth quarter, more of our mitigation efforts will come through, leading to gross margin improvement.

Selling, general and administrative expenses, or SG&A, decreased 100 basis points relative to the third quarter of last year, driven by lower employee-related benefits expenses as well as CCI savings, including our SG&A streamlining initiatives, partially offset by continued investments in brand marketing and technology. For the quarter, adjusted operating income increased by 2% with minimal impact from currency. This increase was driven by improved SG&A, partially offset by gross margin and increased investments to drive growth. Our third quarter adjusted effective tax rate was 16% and comparable with the year ago period rate of 17%. Our tax rate in both periods benefited from favorable discrete tax items. Our income from unconsolidated operations in the third quarter decreased 6% as the strong operational performance from our largest joint venture, McCormick de Mexico was more than offset by the strengthening of the U.S. dollar against the Mexican peso.

Turning to segment operational results on Slide 12. Adjusted operating income in the Consumer segment increased 4% or 3% in constant currency. The increase was driven by sales growth and improved SG&A, partially offset by increased tariffs and commodity costs. In Flavor Solutions, adjusted operating income declined by 2%, with minimal impact from currency as we lapped a strong quarter in the prior year and faced increased tariff and commodity costs. These headwinds were partially offset by pricing and improved SG&A. Year-to-date, Flavor Solutions adjusted operating income increased by 10% or 12% in constant currency, in line with our expectations. We continue to make progress in expanding our Flavor Solutions operating margin and expect our total adjusted operating margin expansion for the year to be led by this segment.

At the bottom line, as shown on Slide 13, third quarter 2025 adjusted earnings per share was $0.85, an increase of 2% compared to the year ago period, driven primarily by increased adjusted operating income.

On Slide 14, we've summarized highlights for cash flow and balance sheet. Our cash flow from operations for the third quarter of 2025 was $420 million compared to $463 million in 2024. The decrease was driven by higher cash used due to the timing of working capital. We returned $362 million of cash to shareholders through dividends and used $138 million for capital expenditure. The timing of capital expenditure depends on the phasing of initiatives, including projects to increase capacity and capabilities to meet growing demand, advance our digital transformation and optimize our costs structure. Our priority remains to have a balance use of cash. This means funding investments to drive growth, returning a significant portion of cash to our shareholders through dividends and maintaining a strong balance sheet. We remain committed to a strong investment-grade rating and expect to continue to deliver strong cash flow in 2025, driven by profit and working capital initiatives.

Before turning to our outlook, let me provide an update on our tariff exposure and mitigation plans on Slide 15. Since our last earnings call, new and higher tariff rates have been introduced. As this situation remains fluid, it's important to call out that our views reflect tariffs as they currently stand. As you can see on the slide, our current gross tariff costs for 2025 are now expected to be approximately $70 million compared to the $50 million we provided on our last call. Our total gross annualized tariff exposure is now approximately $140 million compared to $90 million we provided previously. For 2025, we continue to expect to offset most of the tariff impact. But it's worth noting that not all of our mitigation efforts are permanent, and this will need to be addressed next year.

As we look ahead to 2026, we plan to offset as much of the incremental impact as we can with productivity savings across the P&L, alternative sourcing, supply chain initiatives and, of course, leverage our revenue management capabilities, including pricing. As you know, this is an evolving situation, and we'll continue to monitor how policies impact rates and therefore, our costs. We expect to provide more color on this when we report our fourth quarter results in January and share our outlook for 2026.

It's worth noting that we have begun implementing targeted tariff pricing, and we'll be monitoring elasticities to help inform our plans for 2026. As we said, we're taking a very surgical approach to pricing and leveraging robust analytics and planning tools to ensure we maintain volume growth and continue to meet consumers and customers' needs for both value and flavor. We're staying agile with mitigation plans across all lines of the P&L to protect our profitability.

In summary, we see tariffs as a discrete headwind to work through. However, we remain committed to our strategic priorities to continue to drive a healthy top line, invest in the business and maximize our profitability.

Now let's turn to our updated 2025 financial outlook on Slide 16. We're maintaining our net sales and revising adjusted operating income and adjusted earnings per share guidance for the year to reflect our updated estimates on the impact of higher commodity costs and tariffs. Overall, in terms of currency, our assumptions remain about the same. At the top line, we continue to expect organic net sales growth to range between 1% and 3% and expect to achieve at least the midpoint of our guidance range. Growth remains volume-led and primarily driven by our Consumer segment, with Flavor Solutions continuing to be flat for the year. In terms of price, we continue to expect a contribution primarily through the Flavor Solutions segment and tariff-related pricing will mostly come through in the fourth quarter.

For China, our outlook continues to assume a gradual recovery, and we expect China consumer sales to improve slightly year-over-year. We saw this come through in the year-to-date period, and we expect it to continue for the rest of the year. In terms of inflation, excluding the impact of tariffs, our estimate has changed for the year to low to mid-single digits compared to low single digits in our prior outlook. Our 2025 gross margin is now projected to be flat for the year compared to our prior guidance of flat to 50 basis points. This reflects elevated costs of commodities and tariffs coming in higher than we had planned. As we look ahead to the fourth quarter, we expect gross margins to improve as more of our mitigation efforts will be in place.

On SG&A, we expect CCI savings, inclusive of our streamlining initiatives to be offset by investments in technology as well as brand marketing to drive volume growth. We continue to invest in brand marketing in line with our guidance, and we're driving more efficiencies through the use of technology as well as our CCI program. Adjusted operating income growth is now expected to be 3% to 5% in constant currency compared to a prior range of 4% to 6%. The decrease of 1 point represents the incremental increase in tariff and commodity costs. It's worth noting that our revised range brackets the low end of our prior guidance, which was set back in January of this year prior to the changes in the global trade environment. In addition, we want to maintain a balanced outlook that gives us the flexibility to continue to invest in the business, while growing adjusted operating income.

In terms of tax, we expect our tax rate to be approximately 22% for the year compared to 20.5% in 2024, where we benefit from a number of discrete tax items that are not expected to repeat in 2025. Our income from unconsolidated operations is expected to decline in the high single-digit range in 2025, reflecting the strengthening of the U.S. dollar against the Mexican peso, which is impacting the strong results of our largest joint venture, McCormick de Mexico. The business continues to perform well and is contributing to our net income and operating cash flow results. We continue to expect to close the McCormick de Mexico transaction early in 2026. In the meantime, we're developing plans to support our integration efforts, and we look forward to providing an update on our fourth quarter call.

In summary, our 2025 adjusted earnings per share projection is now $3 to $3.05 compared to our prior guidance of $3.03 to $3.08 on a reported dollar basis, reflecting the impact of our updated adjusted operating income outlook. Year-over-year, adjusted EPS growth is impacted by currency headwinds and increased tax rate compared to the prior year. On a constant currency basis, adjusted EPS is expected to grow between 4% and 6% compared to our prior guidance of 5% to 7%.

In closing, we remain on track to deliver volume-led constant currency top line growth. Despite higher costs, we're investing strategically, executing with discipline and driving efficiencies, enabling us to deliver operating profit growth and sustain our differentiation. We're confident in our ability to deliver on our updated 2025 outlook and long-term objectives.

Thank you, Marcos. Before moving to Q&A, I would like to close with our key takeaways on Slide 17. We expect to continue to execute our proven strategies in alignment with consumer trends and with speed and agility. The long-term trends that fuel our attractive categories, consumer interest in healthy, flavorful cooking, flavor exploration and trusted brands are enduring trends. We continue to drive differentiated volume-led top line growth and share gains across our core categories. Our results demonstrate that we are investing in the areas that drive the most value, and we expect to maintain this momentum.

Similar to many of our peers, we are facing rising costs due to the global trade environment, and we are leveraging our competitive advantages and cost savings initiatives to lessen the impact of these costs, maintain our volume momentum, fuel our investments and drive profitable growth. Importantly, we view tariffs as a discrete headwind to work through. However, we remain committed to our strategic priorities, sustaining a healthy top line, investing in the business and maximizing profitability. Ultimately, we believe the execution of our growth plans will be a win for consumers, customers, our categories and McCormick, which will continue to differentiate and strengthen our leadership.

Finally, I want to recognize all McCormick employees for their dedication and contributions and reiterate my confidence that together, we will continue to drive differentiated results and shareholder value.

Now for your questions.

[Operator Instructions] And the first question comes from the line of Andrew Lazar, Barclays.

Brendan, you reiterated again today, your expectation for positive volume in the Consumer segment in your fiscal fourth quarter. Volume in Consumer was again positive in 3Q, but did decelerate sequentially from 2Q, and we see that a bit in the recent data, too. I guess now that you'll have some incremental pricing flowing through in the fourth quarter, I guess, what's your visibility to a positive volume outcome given potential elasticity? And what are you seeing in the quarter so far around elasticities given that you're kind of more than a month in?

Well, thanks for the question, Andrew. This is another strong quarter of sales growth for us, and our Consumer business continues to drive differentiated performance really driven by volume. And so is our Flavor Solutions business, too, and we can talk more about that, if necessary. But when I think about any deceleration that you might have noted, I think that's a function, first, just of overall food unit growth was down in the quarter, like almost a full percent. So that's going to impact us a little bit in terms of some element of deceleration. I see that less about our -- the consequence of our plans and our activity, but more about what's just going on broadly in grocery and food in the industry, we definitely saw a deceleration overall in the third quarter.

Now having said that, though, we're working with our customers to identify the appropriate offset for the impact of tariffs. And as we've been talking about pricing, in Consumer, we're focused on maintaining our volume momentum and ensuring that we have the right price at shelf that meets the consumer demand for value. So we're pleased with the way those conversations have gone. It also demonstrates just broad consumer -- customer alignment with our approach. And I think both of us are committed to making sure that we maintain consumer affordability in our category. So that's kind of an underlying element, I think, with regard to our consumer base.

So in the fourth quarter, the levers that remain in place will be continued increased investment in A&P. It will be messaging that resonates and is targeted and digitally enabled. We'll continue to benefit from innovation launched in 2024. And that's items like Frank's squeeze bottles of new flavors of Frank's RedHot, Cholula Extra Hot is out there also on shelf. It's going to get some benefit year-over-year. And price gap management remains part of our baseline overall. What's been incremental to that has just expanded core distribution across our categories. As you heard on the prepared remarks, we continue to see growth in [indiscernible].

Innovation and renovation launches are looking also quite strong. And we're expecting strong and good growth from expanding Cholula in the U.S. We're expanding that into Cremosas and cooking sauces. We have launched another year of McCormick Finishing Sugars and people start to see that in stores right now. And we've also started the relaunch of McCormick Gourmet with that countertop-worthy packaging, and that's starting to appear on shelf right now, too. And even across -- in markets like in EMEA, we're seeing growth on things like air fryer seasonings and all-purpose seasonings that are new to the market, if you look at this fourth quarter over last year. We also have a strong holiday merchandising plan overall.

So we have confidence in our plans broadly that we'll continue to deliver value to the consumers, which also means we're going to drive positive volume growth in the quarter. But a lot of those price gap management efforts do remain in place. We've been very surgical and strategic as to how we've looked at pricing. And we're using the same sort of very robust and disciplined analytics led by our revenue growth management team to make sure that we drive this offset as much as we can from a tariff standpoint in the areas where we think we can -- certainly, the elasticities can support it overall. But we like our progress so far this year, and we keep running the same place, and that's what's been driving, I think, a lot of our growth.

Appreciate it. And then I know it's way too early to get specific on fiscal '26. But obviously, you would seem you'll still have some underlying inflation to deal with as well as incremental tariffs. I guess at this stage, how do we think about the magnitude of potential further mitigation opportunities in both CCI and RGM levers as we all sort of work through whether or not in an algorithm here is reasonable to expect in fiscal '26? And because Marcos, I think you mentioned some of your current mitigation efforts are not permanent. And so you have to kind of keep generating, I guess, incremental ones as you go forward.

Yes, Marcos, [ why don't you take that? ]

Yes, that's right, Andrew. So yes, it is a little bit early to predict what the exact impact of tariffs for 2026. We wanted to provide an updated view of the growth number. That is $140 million now versus the $90 million that we provided before due to the new tariffs that were in place as of August. We'll continue to -- there's a lot of factors that we have to take it into account as we think about next year. One is obviously closing the year, continue to monitoring the tariff rates and the situation around that. There could be potential changes there.

Our own mitigation plans, we have very solid mitigation plans in place right now, as you saw, around productivity savings, alternative sourcing as well as surgical pricing coming through. We've been relatively successful this year, offsetting most of the impact in 2025. Those will continue. We're going to scale them up into next year. They will continue with the objective is really to lessen the impact as much as we can going into next year.

So as I said before, we're pulling all the levers that we can across the P&L to minimize all these impacts. We'll continue to monitor the plans that we have now in place, some pricing now coming in Q4. We do have robust analytics, as Brendan mentioned, in terms of elasticity, but we're going to continue to monitor elasticity. That will also help us refine the plans as we go into 2026. But I would say we are confident that we are going to be able to lessen the impact as we move into 2026.

Yes. One thing to add to Marcos' remarks there, Andrew, is we meet on this weekly. So -- and we see changes every week as we continue to go through this and identify new opportunities and breakthroughs in terms of how we can think about next year. So this is something that I think we'll continue to build over the next few months just to make sure that we have the best approach towards 2026 regarding sort of the incremental tariff impact.

Our next question is from the line of Peter Galbo with Bank of America.

Marcos, I was hoping to start -- you took the cost inflation guidance for the year up even excluding the tariff in '25. So maybe you can just unpack a bit of what actually accelerated through the quarter? What's kind of driving that change again, given that it seems like it's not solely tied to the increase in the tariff rate.

Yes, Peter. No, thanks for the question. I mean in Q3, just to take a step back in Q3, our gross margin was down 120 basis points versus last year. A couple of buckets, I would say. The bucket number one is around increased commodity costs and existing and new tariffs that were in place, existing from April, new tariffs as of August. That is about 2/3 of the impact that you saw in the quarter. And then in addition to that, the remaining 1/3 was related to costs to support capacity for future growth, primarily related to our heat platform. So that is investments that we're putting within supply chain.

As I alluded to it in the Q2 call as well as in the last investor conference, I mean, we were seeing the rise of commodity costs in Q2, and they actually accelerated in Q3. And plus the new tariffs in place made us revise the guide. It was -- I would call it a modest update to the guide to reflect those impacts. It is around commodity costs and tariffs primarily, but also we are seeing input costs in general coming through. Packaging is one example that we're seeing come through.

So all in all, we've revised the guide a little bit as a way also to provide the latest view that we have, but also to be able to continue to invest in the business and having -- and giving us the flexibility and the latitude to continue to invest in brand marketing in Q4.

And maybe a follow-up also on the gross margin. I mean, I think, even with the revised guidance that you provided this morning, it would imply that the fourth quarter gross margin needs to step up closer to something like 41% to hit comparable for the year-on-year. That would not only be a normal, I think, sequential step-up in Q4, but it would be margins actually up versus the fourth quarter last year. So, a, I just want to make sure that I have that right, or if there's any nuance as we think about the fourth quarter gross margin specifically.

Yes, Peter, you're seeing that right. I mean we're seeing the flat to modest bps as a percentage of net sales expansion in the fourth quarter.

The next question is from the line of Tom Palmer with JPMorgan.

Maybe first, I just want to clarify on tariffs. A quarter ago, I think the expectation on kind of round 1 was to fully offset it both for this year and for next year. And I know the number has moved higher. So maybe when we think about that initial number, does that still hold? You would expect to fully offset it? And now there are maybe more decisions still to be made in terms of your ability to fully mitigate the incremental step-up that we've seen since?

No. Let me just give you a little bit of a color there, Tom. I mean when we talked about the $50 million for [ in year ], the year-on-year impact before and the $90 million for 2026 at that time, we talked about offsetting 2025, the $50 million in 2025 only number with the mitigations that I mentioned before and continue obviously to work through the mitigations going into 2026. So we did not talk really much about 2026 or the annualized net impact going into 2026 as we're still working through those mitigation plans.

Okay. Understood. And on the gross margin for 3Q, look, maybe the Street misunderstood, but I think we were looking at more flattish year-over-year initially for the third quarter. It does sound like tariffs were an impact. I guess I'm trying to understand the timing of how it flowed through so quickly in 3Q. I think a lot of the step-up was more August, and I would have thought more of a lag in terms of how it flowed through COGS. So what really was the, I guess, incremental step-up to think about in 3Q versus more of this increased tariff burden really kicking in come 4Q?

Yes, you're right. I mean tariffs was a piece of that -- the new tariffs was a piece of the impact in Q3 as tariffs came in, in August. The main impact was higher commodity costs that accelerated in Q3. When we were at guiding Q2, we talked about guiding the profitability to be more weighted towards Q4. So we were seeing some of the rise of commodity costs in Q2, and that would impact Q3. But in fact, it accelerated, and we saw more inflation come through this quarter than we expected.

So Tom, just to build on a little bit of what Marcos said. When we think about this incremental commodity costs that we're definitely observing, I would say there's sort of 2 drivers to call out. There's broad uncertainty that's kind of driving suppliers to sort of stand still. They're pausing and waiting for more information to see how the market moves. And I think this slows down difficult forces of supply and demand. And so that's definitely been an element that we've seen even as early as the second quarter. But more recently, we certainly start to see that they're passing along their tariff impact, it's expressed as our overall inflation, although indirectly, that impact coming through tariffs. So we have a very diverse basket of commodities and input costs, and this is where we're seeing this come through.

The next question is from the line of Alexia Howard with Bernstein.

Can I start with the reformulation comments you made in the prepared remarks? Specifically, you talked about gaining customers on the Flavor Solutions side. Which customers or what types of customers, what types of categories are you gaining the customers in? And I'm particularly curious about Walmart announced last week that I think across the whole of their private label business, they're planning to eliminate 30 additives, which is much broader than the 8 artificial dyes that have already been put on the chopping block for 2027. Do you expect to see an acceleration in private label and maybe branded CPG efforts to reformulate, particularly in light of that Walmart announcement? And then I have a follow-up.

Sure, Alexia. There's a couple of vantage points in your question there. I'll try to address most of them if I recall them all. First of all, you asked where we're getting the new customers or where are we getting sort of this increased share. And a lot of that's happening with what we said earlier, which is the high-growth innovator emerging brands and even private label customers. And so we definitely see continued accelerated growth in that part of our customer portfolio. And even like an increasing amount of that started to come through in the third quarter. But that's consistent with what we've said previously when we think about where new customers are coming from overall.

In terms of the heightened reformulation activity, this is consistent also with what we said in the second quarter, but it's a focus on a shift from natural colors from synthetic ones. So it's also reduced sugar, reduced salt, natural and healthy ingredients from artificial -- eliminating ingredients of concern. And so that's the type of activity that we're seeing. And it's somewhat expected, I think, with what you've seen broadly reported in the media in terms of where consumer concerns are. And I would just say a lot of this is based in just staying close to the consumer. A lot of the food industry is focused around that. And so we've been looking at this and working on it for some time.

Related to the announcement that you talked about, Alexia, I think that's good news in terms of an announcement from that large retailer. And that's an example of the type of activity I think that one will see, and it's consistent with what other branded CPG companies have announced more recently.

Now you said you have a follow-up question.

Yes. I want to ask about acquisitions, and I'm trying to figure out how to ask this delicately. You obviously already got your Mexico JV announcement out there, so that's set up for early next year. There's concerns that I've heard from investors about whether you might be interested in the very large taste elevation company that will be split off from Kraft Heinz's North American grocery business next year. I mean, frankly, on paper, it's 2.5x the size of McCormick. It's on both the top and the bottom line, it looks too big even though the Heinz brand might be quite attractive.

Could you talk about maybe just in broad terms, what your acquisition strategy is and the magnitude of the types of deals that you might be prepared to take on, maybe taking that one off the table because it just looks so vast. And are you interested more in condiments at this point, maybe at a more bolt-on level and/or other capabilities that you need to pick up on the Flavor Solutions side.

I hope that was delicate enough, but anything you can say on that front would be helpful.

Appreciate the diplomatic question. We -- when we think about M&A, and we don't comment on any sort of speculation going on out there or anything of that sort. So I'm not speaking directly to any investor concern or whatever it might be. But I would tell you just broadly to kind of go back to what we said previously about how we think about M&A. Obviously, we think about both of our segments first, Consumer and Flavor Solutions. And I'll first unpack Consumer and then I'll unpack Flavor Solutions because they're both important to us. We still believe in our 2-segment strategy as we look at our business. And we'll consider both bolt-on and transformative opportunities as they present themselves. And this is something that we're working on all the time, as we said before.

From a Consumer perspective, the 2 areas that are of most interest to us as we think about our portfolio is remaining focused in flavor. And in many ways, we express that through herbs, spices and seasonings at a global level as well as condiments and sauces at a global level. And so we're thinking about this across all of our regions overall. But we like those 2 areas of category focus, and we believe there's a lot of opportunity still for us to think about it that way. And it can be in any form, whether it be bolt-on or transformational overall.

When we think about Flavor Solutions, we think about it through the lens of what enhances our ability from a technology standpoint, the taste competencies that we're particularly strong at, can we reinforce those with not only great technology but also great talent. And so we think about it that way in terms of what is a complementary or incremental fit to our business when we think about flavor. And again, we think about those across all the regions in which we compete and operate in. And that's another high area of interest that we have across our business.

So we have a broad set of opportunities that we look at. We like the fact that we have a broad set of opportunities to consider. Our most recent sort of transaction, we think, is very much aligned strategically with what we're trying to accomplish. And in the present moment right now, we're focused on making sure that we close that in early 2026, which is our plan.

Next question is from the line of Robert Moskow with TD Cowen.

Brendan, it's very noticeable in the remarks that you're highlighting the importance of differentiated volume-led growth compared to food peers. But you're heading into an environment where you definitely need more pricing to offset higher costs. So I'm just curious if you could articulate your priorities. It sounds like if the priority is really volume growth, to what extent are you willing to let volume dip into negative territory, maybe even just temporarily to -- as you try to raise prices to offset costs?

Well, we try to balance those 2 points that you brought up, Rob. And we take a very long-term view. So I'm not going to sort of lay out here sort of the certain numbers and where they can land, et cetera, in terms of growth or decline. Our goal right now is consistent with our goal for the last 2 years, which is to be volume-led in terms of our momentum and take a long-term view on making sure that we do what's right as we think about growth of the consumer, meeting their needs, meeting the benefits that they're looking for. And we've seen a real convergence around value, but also health and wellness. And those are things that we think will continue to drive our categories. Yet we have to deal with realities, obviously, of offsetting what is a reasonable amount of sort of discrete new costs coming into our P&L as we think about 2025 and 2026. And so far, we've been able to find a way to offset that in really productive ways, but yet still maintain that focus on sort of really healthy volume-driven growth. As we go into '26, it's going to be -- our ambition is to do the very same thing.

Do I know exactly what level that will be? I don't. I think it will be in positive territory. I can't tell you right now how high. But that's going to be part of as we wrap up our planning for 2026, and we'll share that at the end of our fourth quarter and our fourth quarter call in January. But this is something that we talk about a lot within the company and leadership and across our business units and think about the right balance that we need to strike. It's also a function of the conversations that we're having with customers. And we're both looking at it in very much similar ways, which is we want to drive affordability for consumers. We also have to find ways to offset this cost. I'm not sure that we're going to offset all of the cost, but it is something that we are taking a very hard look at in terms of what's striking the right balance.

And maybe a follow-up. In those conversations with customers, I would imagine they're a little bit less willing to raise prices for tariffs given that the tariffs may not be permanent. Is that part of the discussion, too? And can you come up with temporary measures with customers that can be reversed, if necessary?

Well, one adjustment to some of the assumptions you laid in your question there is whether or not tariffs are permanent. We're seeing it as a discrete onetime impact at this point. And so we do view those as staying in the cost structure. So whatever we do, whether it's in the near term or in the long term, we look to offset that over time overall. And in our conversations with customers, we're thinking very collaboratively about how do we deal with what a real true input costs, but also thinking about continued volume growth with consumers. And so that mutual sort of alignment around priorities, I think, has helped us navigate what have been productive conversations with customers.

Our next question is from the line of Max Gumport with BNP Paribas.

I wanted to come back to what we're seeing in the U.S. scanner data and thinking through how to square that with your still robust volume-led growth in Consumer Americas.

So specifically, Consumer Americas, the volume growth still looks quite strong, running roughly 3%, roughly similar to what we saw in 2Q. I think it's fair to say the U.S. scanner data has shown some deceleration from 2Q to 3Q and now into early starts of 4Q with regard to volume performance. I know you mentioned that you can attribute part of that to just what we're seeing in the broader U.S. food industry. But when we're thinking through why that gap is not showing up as fully in your Consumer Americas results, can we attribute it to other countries outside of the U.S.? Or is it non-tracked channels? Or is it the stronger performance we're now seeing from private label? Just trying to get a sense for what's helping to blunt the gap that we are seeing or the slowdown that we are seeing in scanner.

Max, I just want to clarify what I think your question is, which is speaking specifically to a U.S. perspective or broadly globally.

Yes. It's really looking at, I think, what is a pretty clear slowdown in the U.S. scanner data for McCormick branded, but not as clear slowdown in your Consumer Americas results. I'm trying to understand why those 2 are no longer as tightly correlated. What's propping up Consumer Americas when we are seeing a slowdown in McCormick's branded U.S. [ mealtime business ]?

I think my reply might get to the spirit of your question in terms of sort of you think about measured channels and unmeasured channels, we are seeing an acceleration in e-commerce as well as in the club store channel, too. And so that might speak a little bit to what might be sort of any difference that you might see, Max, overall? And also we have our Canadian business in there, too, and it's also performing well also. So I think that those might -- from a -- if you think about what might be the points to talk more about, I would just lay out those 3.

I might just sort of dwell a little bit on e-commerce. We're certainly seeing an acceleration there. And we're seeing -- what's interesting about value with consumers is they're willing to pay for this increased value on delivery, the sort of ease of use with e-commerce and click and collect, et cetera. And that has been a part of our business that is only quarter-by-quarter just continues to get stronger and certainly growing as a percentage of overall total net sales. And so I think this unmeasured versus measured channels might explain some of the points that you're talking about. And we're seeing more growth shift towards unmeasured.

Great. And then turning to cash flow. I realize you started off the year pretty far behind where you were a year ago. You're catching up now as of 3Q, but you're still a bit below where you were a year ago in terms of operating cash flow. You're still attributing it to higher cash needs for working capital. Can you just double-click on what exactly when working capital is driving this and how you expect to end the year of '25? It sounds like you do expect a strong cash flow year. We're just hoping for a little bit more color on the working capital needs and what you expect to see in 4Q.

Yes, Max, I mean, that's a good question. I mean we have very strong confidence about the cash flow for the year. As you said, we are catching up now in Q3 year-to-date. We are -- we had a bigger lag in Q2. We got caught up a little bit more in Q3. We had a little bit more use of working capital through inventories. So we purchased some inventories, bought some inventories, specifically some raw materials in the quarter. But we expect this to normalize going into the back half of the year and continue to deliver very strong cash flow performance for the full year 2025. Just to recall, I mean, Q4 is our biggest quarter, not only in terms of P&L, but also in terms of cash. So you will see that cash come through in Q4.

The next question is from the line of Stephen Powers with Deutsche Bank.

So just I think we've been circling around this a little bit. I just want to get a little bit more sense of your planning posture around pricing as you begin to implement pricing in response to tariffs. Focusing on the Consumer business, just maybe a little bit more detail on what you've seen so far in early elasticity and analytics and where -- maybe where you think -- sorry, consumers are likely to be more accepting of pricing versus more price sensitive. I guess just what your kind of going-in base case expectations are as you -- around elasticity as you layer in this early pricing?

Steve, it's really early. In fact, I don't even think we've got a whole lot of -- we've got a little bit of data maybe on September that would maybe give us some indication. So what I would share with you right now is too early to give you any sort of real insight around trends or outcomes regarding that. But we believe in sort of the analytics that we use to predict these things. And so I would say that right now, we feel really pretty confident with what we think the impact will be, but it's very early.

Okay. Okay. And then maybe, Marcos, as you think about '26, and you talked about sourcing and productivity cost savings as well as pricing as the different levers you have to mitigate cost inflation and tariffs into next year. As a starting point, is the -- is your kind of working assumption that there's a balance that's kind of an even balance between pricing and some of the sourcing and savings initiatives? Or is it skewed towards savings or is it skewed towards pricing? Just a little sense of just early planning thoughts as you approach the year.

Yes. It is -- Steve, it is more skewed towards savings. CCI savings overall. We talked about productivity savings as well as alternative sourcing, but also think about it as a way of all lines of the P&L, CCI across all lines of the P&L. You've seen this quarter, SG&A came in strong for us. We continue to drive CCI savings in that part of our P&L. So that should continue going into 2026. So I would say it's more skewed towards savings and productivity initiatives that we have in place and more to come. And then the residual will be through surgical price initiatives.

The next question is from the line of Scott Marks with Jefferies.

First thing I wanted to ask about, you noted some softness in the China foodservice arena, still expecting a gradual recovery kind of for the rest of this year and it sounds like maybe a little stronger for next year. Just wondering if you can share some thoughts on maybe what you're seeing and what gives you the confidence in that gradual recovery continuing.

Sure, Scott. Our third quarter results were definitely impacted by what we saw as a reaction to sort of these austerity measures that were put in place. A lot of it was focused on sort of high-end dining catering. And we saw that consumption shift out into other out-of-home channels that sort of might be either lower cost or greater value. And so we've diversified -- and that -- by the way, that tended to impact the part of our foodservice business that serves that part of the marketplace. And so as we think about diversifying and also looking for more distribution, we're certainly following those trends in the marketplace. But we're also seeing strength in our retail business. And our team identified a lot of high-growth opportunities as we think about the channel shifting that's going on in China, and there's quite a bit of it, and it's been going on for at least the last year, if not longer. And we continue to strengthen distribution in those areas where we think consumers are shifting to.

And in the case of our retail business, it happens to be more smaller format stores. And so getting more distribution in those locations has helped us continue to drive growth, which we think based on the data that we're seeing, is slightly stronger than the marketplace itself. And so that gives us the confidence to think about for the total year, we think we're headed in that same direction with having that slight to gradual growth in our business in China. And it's also worth adding that as we look at the fourth quarter, we're lapping an easier comparison relative to the fourth quarter of the prior year.

So year-to-date, our results are in line with our expectations for this gradual recovery. I think we're up like 2% year-to-date within total Asia Pacific. And we do expect that our business in China to improve slightly in the context of that. And long term, we believe in the opportunity of China. It's a strong market where we have good penetration right now, but we still have room for growth. And so we're strengthening our plans and capabilities to make sure that we serve sort of the Chinese marketplace, where we see opportunities.

Appreciate the answer there. And then just a quick follow-up. Just coming back to the topic of reformulation. Wondering maybe if you can give us a sense of magnitude of impact, let's say, for the reformulations as it relates to maybe more pressure on some of the legacy branded products. Just trying to gauge how we should be thinking about offsets to what we see from broader food softness, let's say.

Well, I think about reformulations is broadly continue to address what we hear from consumers and what they're looking for. And that will have a positive impact on brands, whether it be so-called legacy brands or even new emerging brands. And as broadly, the food industry continues to address what consumers are asking for, we see that as having a positive outcome. The magnitude, I probably would maybe shift my reply into -- think about it from a timing perspective. It may take some time for some of these larger projects to go through validation and get out into the marketplace. So I don't see it as being necessarily immediate or happening right away.

In the case of announcements that have been made, people are suggesting 2027 as an example. But every company is going to be different in terms of what types of changes and reformulations we're trying to drive. But I see this as a continuation of innovation within the industry, and it's all about making brands relevant.

Our last question is from the line of Bryan Adams with UBS.

Just a quick one here for me. On the 4Q growth, I think if you look at what you said, Marcos, about midpoint or better of the 1% to 3% top line guide for the year implies something like 2.5% or so growth for the fourth quarter or more. So just in terms of that improvement exiting the year, I assume that's mostly pricing net of any elasticity impact, along with maybe some of the easier 4Q APAC comp that you just mentioned, Brendan. But just beyond that, is there anything else I'm missing there in terms of what drives the conviction in the step-up in 4Q versus 3Q?

Yes. So we talked about the midpoint of the guidance range on top line for the full year. That implies the same level of growth in the fourth quarter and in constant currency, obviously. So that will continue. We still -- despite the price increases that we're having taken in the Americas, we also see volume growth in the Americas. We see growth across, I would say, pretty much all regions in the Consumer segment going into the balance of the year. And then in Flavor Solutions, you will see more of a moderation of volume and price. We guided price to be -- volume to be flat in the Flavor Solutions for the full year, given a little bit more pricing there. So that's how we're seeing Q4 play.

I'll now turn the floor back to management for closing remarks.

Thank you, and thanks, everybody, for joining today's call. If you have any additional questions regarding today's information, please feel free to contact me. And this concludes this morning's call. Thank you.

Great. Well, thanks, everybody. Welcome back for our next session with McCormick. We're really pleased to have with us today President and CEO, Brendan Foley; and CFO, Marcos Gabriel. Welcome, gentlemen. Thank you.

Thank you.

Thank you.

It's really great to have you back with us in Boston. So thanks a lot.

Brendan and Marcos, maybe at a good place to start. You had some recent news. You recently announced the acquisition of an incremental 25% ownership in McCormick de Mexico. Maybe you can walk through the sort of the strategic rationale for the deal, financial impact on total McCormick following the close of the transaction.

We're excited about this transaction, and it's been part of our pipeline for a long time. So we were really thrilled to get it off and running. It's very much aligned with our strategic priorities. And it really allows us to sort of strengthen our global flavor leadership but also participate in fast-growing markets. And this also really does a nice job of sort of really diversifying our geographic mix. So just to give you some numbers to give it some context. After we close on this transaction, Mexico will be greater than 10% of our overall sales. The U.S. as a percentage of our total portfolio will move from 60% to 55%, and emerging markets will move from 20% to 25%. So it really does a nice job sort of providing some diversity across our portfolio, which we think is healthy overall for our business.

Near term, we like this because it allows us to participate even more fully in the strong fast-growing market. It allows us to increase our exposure, our participation in condiments and sauces through the strength of Mayonesa in that part of our business. And also, it allows us to allocate, I think, a little bit more freely the resources and the capabilities to continue driving growth in McCormick de Mexico, overall. And plus, those are things that we can -- as we set that up, we can start to think about bringing more McCormick products into the market.

And it also really strengthens our Flavor Solutions business, particularly with the strength of that foodservice business that we have there. So those are initial reasons that we felt really good about this. From a mid- to long-term perspective, this is about really, I think, providing us more of a foundation for growth in the Latin America region.

We already have a presence in Central America directly. But this plus McCormick de Mexico just allows us to use those resources, think about growth more aggressively overall. And it also opens up the door for us to think more holistically about growth in the Latin America region, both organically and also inorganically.

Overall, ultimately, what this does is it opens up a very attractive market for us. It's a business that we know well and also it's with a proven brand in the region. McCormick has a lot of consumer loyalty in Mexico. And on top of that, a lot of household penetration. And we think the brand travels very well within the region overall. So when we think broadly about this acquisition, this really lines up very nicely with what we're trying to accomplish. I mean, Marcos, do you want to cover anything I missed?

Yes. I mean in addition to the strategic benefits that Brendan just mentioned, the transaction delivers solid financial upside. It is accretive throughout the P&L. It maintains the strength of our balance sheet, right? So let me walk you through the P&L a little bit. So it adds more than $800 million in net sales in emerging markets, $180 million of operating profit, and it is margin accretive, about 60 basis points, gross margin and operating margin accretive.

From an EPS perspective, this is also accretive on year 1. Delivered a strong cash conversion cycle, which is incremental to total McCormick cash from operations. And finally, it has a minimal impact on leverage ratio. I mean we are at 3x today. Upon close, in the beginning of next year, we're going to be -- continue to be within that range below 3x. And the ROIC metric is also really not impacted by this deal. So it adds a meaningful scale, as Brendan mentioned, creates a strategic platform for us to continue to grow in LatAm, and maintain the balance sheet flexibility that we have to pursue other investments in the future.

Great. Great. Thank you for that. Brendan, maybe you could share your perspective on sort of what you're seeing in terms of consumer trends, especially in the U.S. How consumer shopping behaviors and sentiment evolved even over the past few months? And how does it influence the growth strategy going forward?

Well, from a very high-level perspective, the demand for flavor continues to be pretty strong. And that just really fuels, I think, the foundation of our growth trajectory overall. And our growth strategy is aligned with where consumers are going. They're looking for value. They're looking for health and wellness. They're also looking for convenience. We see those three as really occupying like kind of the key themes that we're seeing out there in the marketplace.

Right now, I'd say broadly, the environment remains pretty challenged in the U.S. We definitely see continued and we talked about this even earlier this year, there's continued sort of weakness in consumer sentiment and pressure, especially on the middle to lower income consumer. We still see a lot of value-seeking behaviors out there. We would characterize that as shorter shopping trips, smaller baskets, more frequent shopping trips, I should say.

And those things continue to kind of characterize what we're seeing out there in the marketplace overall. And consumers are intentionally -- they're being very intentional on their spending habits. They're trying to balance value with health and wellness and also convenience at the same time. And so these are the factors that we see playing out.

When consumers are pressured, they tend to cook at home more often. They also shop the perimeter of the grocery store for fresh food. And that allows them to make meals cheaper at home, overall. And so that continues to reinforce this demand for flavor, and we see that in our categories overall. The other thing, we research this every quarter, we kind of try to understand consumer sentiment and behaviors.

And flavor is still the most important thing to think about when they think about putting a meal on the table. And so that is regardless of income level or health preferences, that's still one of the most important things that they're trying to accomplish. So these are some of the insights that are really affecting everything.

Now consumer is really focused on health and wellness at the same time. Those two sort of broad trends put together really kind of illustrate what's going on in the marketplace. 86% of meals are still mostly cooked at home. That still remains about 2 points higher than the pandemic. We've always talked about this as a long-term secular trend. It just sort of accelerated during that period of time.

In the last few years, consumers increasingly learn how to cook, and they like it. So they're getting better at it. And we think that's also good for our portfolio and our business and they're making healthier and cheaper meals. And so -- this is where we see consumers kind of finding their way through that resiliency that we've talked about. We're also seeing a lot of growth in functional foods, a lot focused on health and wellness benefits.

And we start to see that in categories like snacks and beverages where they're trying to add fiber or they're trying to add protein or they're putting a lot more focus on areas like hydration. We're also seeing in areas like we're looking for more energy or even just better sleep. All of that needs flavor, the way we look at it. And so those are opportunities for growth that we see in the marketplace.

The other thing I just want to add is that convenience is definitely accelerating to the need for that. We're seeing in our e-commerce numbers. The percentage of sales that's coming from e-commerce continues to grow in our portfolio. We don't see that stopping. And what's interesting that's happened as they're also seeking for value. So they're ready to pay for it.

And that's kind of, I think, when you think about sort of the trends in all of this together, they're sort of all having to come together and the consumers find their way to make it all work. And where McCormick lands and all of this is we have a broad portfolio with a very focused innovation agenda up against these trends. And we think that's really been driving, I think, the health of our business overall in our consumer business.

And the other thing I would say is that we've been very aggressive in making sure that we meet consumers with where they are. And this is really, I think, really helped us. And we think that's the right thing to do in this environment. It creates consumer loyalty, and it's the foundation of really sustainable long-term growth.

Thank you for that. I guess for Brendan and Marcos, McCormick has been differentiated, frankly, from a lot of your peers with its volume growth over the last several quarters. What gives you the confidence that this momentum can continue particularly in light of upcoming tariff-related price increases. Do you see opportunities for incremental price investments in the future to help drive growth? And will innovation be a larger driver going forward as well?

Well, all of those are factors that we're going to have to think about as we move forward. But if we just look at our performance so far, I mean, first of all, we operate in great categories. It starts with that. And I just talked about the consumer trends that are really influencing the marketplace and the categories that we operate in.

And we think those trends are pretty sticky, overall. Our Consumer segment performance has been strong for the last 5 quarters, and we're doing what we said we would do. We're seeing the results from our plan. So we're growing share. We're growing volume in many of the key categories in a lot of our key markets overall.

McCormick unit consumption in the U.S. is beating total grocery. And so we do like the trends that we're seeing. As we move into the second half, we're continuing to see that momentum. And a lot of that is driven by the continued increase in A&P. Our messaging is resonating. It's targeted, it's digitally enabled. We're also seeing a lot of focus and reward right now from the innovation that we launched in 2024. I mean a good example of that is like Cholula Extra Hot, that's doing really well is one example. And the price gap management plans that we put in place, back in early -- sort of late '23, those are not part of the baseline that we talked about.

On top of that, what we have going on is expanded distribution across our core categories overall. We're seeing the benefit of even new innovation now coming out in 2025. And so you see that in continued expansion of the Cholula line. For example, we've just launched Cremosas. The McCormick brand, this summer launched finishing salts as part of our portfolio. And then we're doing another wave in both the fall and the holiday on finishing sugars, and those have been very popular.

In EMEA, we're seeing a lot of growth right now from air fryer seasonings and all-purpose seasonings. And then we're relaunching our whole gourmet line right now and starting to sort of appear on shelf, bottle by bottle. That will be a flow in, and that's that countertop worthy sort of benefit that consumers are looking for. And so that's really, I think, driving a lot of growth. And so throughout this, we have a lot of confidence in terms of how our consumer business is performing. And that aggressive poster that I talked about earlier, it's kind of reflected in all those plans and those activities.

When you think about pricing, I think, as you know, we started investing in price in late 2023, and we're really early in identifying the need for value and delivering that for consumers. And so these are plans that have been working not only for us, but most importantly, for our customers. And that's put us in a pretty neat situation as we continue to move forward in this current environment. Now I'll let Marcos talk a little bit more about pricing.

Yes. I'll add some color on that. So growth in our consumer business is driven by multiple levers, right? Pricing is one area, and that is part of our base right now. So as Brendan alluded to, last year, we invested in price behind the most less SKUs. We fully lapped these investments in Q2. And these SKUs continue to perform really well. I mean we have elevated velocities out of these SKUs. So that's a very positive for us.

As we look to the remainder of the year, I mean, it is important to address the tariff environment. New tariffs have been introduced since our last earnings call. And as you know, it is a fluid environment. But our approach in principle remains the same. We're going to offset as much as we can with the use of CCI programs. Efficiencies across the P&L, alternative sourcing and obviously, pricing for the residual impacts. And you will see some of that starting in Q4 of 2025.

We do have a very experienced revenue growth, revenue management team in place, supported by data and analytics. And they have to -- they continue to have a disciplined approach towards pricing as we think about all the moving parts there. But then in Q4, we anticipate some elasticity impact. But still, we expect the volume growth in the Consumer segment. And we'll be monitoring elasticities, obviously, to help inform our plans beyond 2025.

Additional context, I would say, is that price gaps, they continue to narrow as we see prices climbing on private label and we are monitoring that very closely. And then finally, I would say that, as Brendan said, I mean, our approach is really aligned to the strategy of meeting the consumer where they are, being relevant in the moment. And we'll remain balanced in terms of our execution to sustain our volume momentum as well as protect our profitability.

Great. Brendan, maybe you can frame the opportunity you have with some of the high-growth innovators that you talk about in the flavor business. How big is the opportunity? Do you expect to continue to soften the volume weakness we continue to see across the larger CPG customers as well as the weakness across the QSR channel?

Our view of the food industry is there's constant innovation going on at all times to really address what are the latest in consumer trends. And right now, we've talked about that as prioritizing health and affordability. And you see that certainly play out in the regulatory landscape or also in health and wellness trends, and that is helping to shape the competitive landscape in food broadly, overall. And companies are responding with faster innovation and trying to meet this agenda and these needs and these trends and they're focused on better-for-you offerings, more regional flavors, even premiumization, -- that's where we're seeing a lot more activity, I think, in the food industry overall. And in this environment, we're leveraging what is strong flavor capabilities and innovation to make sure that we can help our customers continue to grow. And that's the environment that we feel like we're operating in right now.

For McCormick, if I could just describe a little bit of how we look at our customer base because it's very diverse in a lot of ways. So think about it as a combination of large global CPG companies, foodservice operators and QSRs, regional CPG leaders, they might not operate around the world, but certainly are strong within the markets in which they operate in.

And we also operate a lot with private label brands, as customer -- part of our customer base. And then what we're calling high-growth innovator customers, which tend to be smaller, faster growing, sort of emerging, particularly in sort of fast-growing categories. And so we see broadly a lot of this growth happening across these health and wellness categories being right now, driven by those high-growth innovator customers in private label brands. And that's what we're seeing.

So let me talk a little bit about sort of each group individually just to provide some context overall on them. On the high-growth innovator customers, these are companies right now that are distinguished by just -- certainly, very high growth rates compared to the categories in which they're operating in. So they're growing volume within the industry, they're grabbing share, and they're disruptive with innovation and unique positioning overall.

I called out some of these examples before, but it's probably worth talking about it because it's a very large group of activity, but snacks, hydration, bars, energy drinks, gummies that recently was in the news, I think, in the last 24 hours, but flavoring those -- and we see even pet food. So we're seeing a lot of flavor opportunities in some of these fast-growing emerging brands. And that helps fuel our growth and definitely helps offset what we're seeing in terms of trends with other customer bases overall. But we're not only just helping them reformulate, we're also helping them innovate and scale for growth because they're smaller operations. And so we're gaining share in that customer segment.

Private label is also another area. I don't think it's growing necessarily as fast, but it's definitely providing us some pretty nice growth. And those types of customers right now are certainly putting a lot of momentum around sort of health and wellness offerings overall in their portfolio. And this is a pretty broad set of categories that we would participate in. What gives us a kind of strategic advantage in this part of the marketplace is they also have to be our customers in our Consumer segment. And so we know them well. We talk with them a lot about how we can help them with flavor across their store. And so that tends to be a growing area.

And then I kind of conclude lastly, with these large growing sort of CPG customers at a global level. And definitely, there's been some softening certainly within this last year. But historically, we've driven growth with this group, and we believe that we will in the future. And the way we measure success is, are we gaining share with them? Are we driving sort of being on the core list of some of these companies more often? Are we driving innovation and reformulation for them overall or we cross-selling our technologies with these customers. And that allows us to offer soften the blow, but we're seeing just an overall Circana data coming through in terms of overall consumption happening in the market.

So when we take a look, ultimately, we remain, I think, pretty positive about how we look at this part of our business moving forward. Across these customer segments, we believe our results are better than the food industry at large. And so we believe that we're performing pretty well in what has been a soft marketplace right now, but it is the combination of all these different customer segments and this diversity that's helping us deliver the type of performance that we're delivering right now.

Got it. Got it. Brendan, can you speak to the current trends in your China business? Is the pace of recovery still in line with your expectation? And sort of what are your perspectives over the longer term in China, which is a significant business for McCormick.

As we said at the beginning of the year, we expect that market to remain challenged, but we are expecting sort of this, we called it slight to gradual growth in 2025. And broadly, I will tell you that is what we're seeing, but just some context in terms of our thoughts on China. With our team on the ground and also Marcos and I were just there earlier this year. We still can see sort of consumer weakness in their sentiment overall, a lot of activity in those, value-seeking behaviors is also present there, too.

I think what's even more fascinating is just the shaping of the retail environment there, we still see a lot of change happening. A lot of growth in the small format stores, especially also in smaller cities, and there's been more of a move away from the large format, high sort of hyper stores and even in the large cities overall. So our team has been doing a really good job in execution and trying to pivot on how we sort of respond to this change in the marketplace that we've seen over the last 2 years. And so importantly, I think we're seeing some good execution there.

Year-to-date, our business in China has been performing relatively close to what we said we thought would happen overall. In our consumer business, we're seeing growth in herbs and spices, driven by a lot of strong brand marketing as well as this new penetration in these new formats. And in our foodservice business, we're seeing growth there, too. Through a lot of sort of limited time offer type and promotions that we're seeing in the marketplace with existing but also new QSR customers that we're finding in the market there.

So Broadly speaking, we think we're performing year-to-date with the way we thought we would, that gradual level of growth. But in this market, it's kind of unique. Public policy can really change things pretty quickly. And so we watch that very closely just to make sure that we're staying very close to what the trends are. But so far, we think it's performing like we thought it would.

Great. Marcos, McCormick delivered solid year-to-date results, particularly on the top line. How do you think the business is performing both in Consumer and Flavor Solutions. And sort of what are your expectations for the remainder of the year, which is, admittedly, as you've all acknowledged, fourth quarter weighted in terms of profitability?

Yes, that's right. So as you know, Andrew, we cannot speak to the current quarter. We are closing the books right now and be reporting in about a few weeks from now. So -- but just to give a little bit of context. I mean, year-to-date, we have -- we continue to accomplish the things that we said we would accomplish. We delivered total organic growth at the midpoint of our constant currency guidance range.

In Consumer segment, we drove volume growth across all regions. In Flavor Solutions, despite softer industry trends, I would say that we're performing well in this environment. And then we delivered operating profit growth of 4%. So year-to-date, we delivered top line and we expanded margins at the same time. As you think about the third and fourth quarters, some of the things that we -- you can have -- to keep in mind, I would say, which is pretty much consistent with what we said at the Q2 earnings call.

Starting with the top line. First, in the Consumer segment, we expect the continued volume growth for both quarters as consumption remains strong. And in addition to that, we're going to realize additional benefit from pricing, surgical pricing due to tariff that's going to kick in, in Q4.

In Flavor Solutions, as we said for both quarters, we expect softness in customer volumes driven by large CPG customers as well as the QSR channel softness, particularly in EMEA. This is being offset by high-growth innovators as well as the QSR channel in APAC, which is performing well, right?

Also in Flavor Solutions, you will see benefits from FX and tariff-related pricing in Q4. So you're going to see pricing in Q4 for both segments coming in and benefiting the P&L. So that is on top line.

In terms of profitability, Q3 results will be impacted by increased commodity costs and tariffs as well as continued SG&A investments. We continue to invest behind our brands and brand marketing and continue to invest behind our digital transformation agenda around technology, digital transformation in general, I would say. In the fourth quarter, though, we expect the benefits from the pricing plans that we have in place as well as increased productivity savings. This is why the profitability is expected to be more weighted towards Q4 than Q3.

Also, we want to maintain our flexibility to continue to invest behind our proven strategies that have yielded great results so far. We're making investments in supply chain for capacity, optimizing our operations there. We'll continue to make investments in brand marketing, in R&D and in technology. And as always, our CCI program is very robust and we'll continue across all lines of the P&L, including the SG&A space to generate fuel for these investments.

Great. And maybe, Marcos, sticking with you for a minute. How do you see the trajectory of your gross and operating margins over the next few quarters, just given commodity cost trends, tariffs, which are still moving target to some extent, productivity initiatives, SG&A streamlining and the pricing dynamics. And then perhaps also you can remind us of what tariff impacts are currently embedded in your outlook and how the mitigation actions are taking hold. And again, given it's a bit of a moving target, I guess, when might you be in a position to provide any update around incremental tariff impact to the extent updates are needed?

Yes, absolutely. Yes, sure. So near term, there's certainly pressure on gross margin, driven by raising commodity costs and tariffs. But we're staying agile with mitigation plans in place across all lines of the P&L and with the goal of maintaining our volume momentum but also protecting profitability. In terms of tariffs, we remain well positioned with our manufacturing and sourcing strategies. Our exposure is primarily related to raw materials. Ingredients that are now grown in the U.S. that we have to bring from over 80 countries into the U.S. And just for perspective, more than 90% of what we sell in the U.S. is manufactured in the U.S., right? So it's really about the raw materials piece that we bring in from outside of the U.S.

We do have a dedicated cross-functional team, monitoring developments and developing mitigating strategies. Brendan and I meet with this team on a very regular basis, and we are always considering options on how to go about and always having the consumer in mind and how we can continue to protect the debt volume that we earned over the last 18 months, but also with an eye on profitability.

So we're going to remain balanced, as I said. I mean, first, we're going to use CCI productivity savings. And we're pulling all the levers that we can across the P&L to be able to offset as much as we can of the tariffs impact. Data analytics will continue to play a role in terms of our sourcing capabilities as well as the revenue management capabilities. So data analytics is playing a very important role these days for us. But then obviously, there's going to be some surgical price increases, and we're going to be very specific and very surgical to those increases.

To the point about the impact that we mentioned in the Q2 call, so we said that our gross annualized impact from tariffs is about $90 million, of which $50 million impacting 2025, right? And this projection assumed an incremental 30% from China, 10% from rest of the world. And then we also assumed USMCA compliant for imports from Canada and Mexico. So that goes to 0.

So since then, tariffs have continued to evolve, continue to change. We're right now fully assessing the impact of those tariffs, and we'll be in a position to provide an update on the exposure as well as the mitigating strategies for our Q3 earnings call in about a few weeks.

Great. Maybe a question for both of you. With balance sheet flexibility that you have, even following the close of the McCormick de Mexico transaction that we talked about earlier. What are you focused on in terms of M&A? Is there a segment or a market focus? And will you be looking to pursue larger transactions or smaller ones, McCormick has considered both in the past. Just trying to get a little bit more sense of how you're thinking about it. I know M&A is obviously part of your sort of DNA. But if that's changed or evolved at all over the last couple of, call it, 2 years?

Indeed, it is. And I don't think our attitude towards M&A has really changed broadly in the last 2 years. It's been pretty consistent. But let me just -- from a high level, first start off, and that is when we think about M&A., we believe there are opportunities across the world geographically, but also across a lot of flavor categories in which we compete. And we always view McCormick as having a very broad set of opportunities as we think about what we're focused on overall. And our pipeline reflects this overall. We look for opportunities that give us greater penetration in existing markets or in existing categories. And that's certainly something that we try to do. But we also consider when we look at all that consider bolt-on opportunities, and we consider transformational opportunities at the same time because we have done both overall.

But importantly, our focus is on that long-term organic growth. Can we still deliver on that based on the acquisitions that we bring in, so it's kind of an important principle, if you will, that we focus on. Geographically, we like the places that we are, and we look to expand our scale in the markets that we already operate in. But having said that, there are many opportunities around the world where we don't have really a strong presence that has high flavor growth. And so that becomes an opportunity, too, which includes emerging markets.

And I'd point to the transaction with McCormick de Mexico is a good example of that type of application of our thinking and our strategy overall. From a category perspective, we're looking to advance our Flavor leadership across both segments, both Consumer and also Flavor Solutions. And as we talked about before, our broader M&A strategy is underpinned by a couple of things. One is it's 1/3 of our growth algorithm. So that's one of the thing to keep -- kind of keep in mind long term. And we've delivered on that historically overall. I think the targets need to strengthen our flavor leadership globally, first and foremost. We also need -- they need to be accretive or at least match the type of sales growth rate and margin that we currently operate at. And then it also has to be sort of financially sound and create value, overall across our portfolio.

So those are the kind of the underpinnings. And we typically ask ourselves, are we the right owner for either this particular business or brand? Or said another way, what does this business or brand going to do for McCormick? And what will McCormick able to do for that business or brand? When we look at Consumer, we're looking for brands that operate in the seasonings and spices and herbs category and also condiments and sauces. And ideally, we're looking for brands that offer still a lot of upside in terms of household penetration growth.

But we've also looked at brands also that offer -- that they're still kind of fundamentally healthy, but we think we can really drive and improve the growth rate of those businesses. And so we look at both of those, and that kind of how we think about what is the right asset for us to go after, whether it be bolt-on or transformative.

On the Flavor Solutions side of our portfolio, we kind of look at three things. And we call them the 3 Ts. That's a little bit of a thing we've found out more recently as they all started with a T, and that is: First of all, does it reinforce our taste competencies. We've been very clear. We have a lot of focus in savory, heat, naturally sweet and also in an emerging area, we think in citrus overall. The third area is, does it really allow us to [indiscernible] that is so critical for us in the flavor industry is without really strong talent, it's hard to compete really well. And so we're always looking to upgrade from a talent perspective.

And then lastly, it's technology. And are we able to acquire technologies that add to our capabilities overall. Sometimes, when you're looking at assets, and we see 1 of those 3 missing. And then that doesn't really starts to fall apart for us. But when we hit all 3, it really does become the right target. FONA was a good example that overall. And so that's broadly how we look at M&A and what's interesting to us and whether or not it needs to be a bolt-on or transformational. And I mean, am I missing anything, Marcos?

Yes. I mean, just building on what you said, I mean we are going to continue to be focused on growing all of our core categories, Consumer, Flavor Solutions in the U.S., outside of the U.S. And this growth is going to be both organic and inorganic. It is difficult to speculate on future deals or size. But as we have demonstrated in our most recent transaction, the McCormick de Mexico transaction, we are going to stay very disciplined.

It depends on, obviously, on the opportunities being presented and the integration required. We evaluate assets as they become available. And we have been successful in both bolt-on and transformative acquisitions in the past. And we do have a track record of selecting the right assets and integrating them well right away and getting the synergies right away. So we're going to continue with that playbook going forward.

All right. So perhaps in our remaining moments, Brendan. I guess looking longer term, over the next sort of 5 to 10 years, what are the sort of 2 or 3 trends that would be top of mind for you?

I'm frequently thinking about 5, so it's not 2 or 3. First is the role of flavor. That's central to our company. And trends are constantly changing. Consumer behavior is constantly changing. So I think about the role of flavor is almost an evergreen opportunity for us because it's always at the top of the list for consumers. It's something that you never give up or compromise on. And so that's really important because it shapes culinary trends and it's all about us being at the forefront of that and making sure that we're leading the thinking when it comes to flavor in terms of what trends are emerging or how do we mainstream them overall.

More recently, I think what's really occupying a lot of my thinking right now from a trend standpoint is how we think about organizational and importantly operational resiliency. And I would say even more pointed, it's about sourcing agility, overall. There's a lot of change going on in the marketplace, whether it be climate, geopolitical, trade policies. And this is an area we spend a lot of time on. We think we're one of the best out there in the industry on this, but you can't be complacent about that because there's always a lot of constant change there, and we expect it to continue. But that supply integrity for our part of the -- for our business is really pretty important. And so that could be agricultural practices or different sources of supply or it could be, I mean a lot of things. We have a lot of active effort going on there.

I think digital transformation really impacts the way we think, we work, the way we compete, overall. The speed of technology is certainly inspiring at times, overall. But right now, we have a very focused agenda. It's an ERP platform. It's data synchronization, it's analytical maturity. And these are trends that I think I spend a lot of time thinking about and talking about with our leadership team.

And I'll just wrap it up. Our business is really driven by innovation. And so from a flavor company standpoint, what new platforms through our R&D organization are we going to create and develop for the future to address those needs of the future. And so that's a big area that we focus on.

And I'll just wrap it up. It is -- McCormick, it's a lot about culture of the company. And when you think about our ambition to get bigger, how do you retain the culture as you try to get bigger overall. And within that, we're trying to develop those leaders and those capabilities that we're going to rely on in the future. At the same time, we need to make that entire workforce future ready. If you think about really the impact of that digital has in all of our organizations. So those are the trends I keep thinking about. It's those 5, sometimes they morph into 4 and sometimes less than that, but they're always around those 4, it seems.

Great. Perfect. All right. I think that's a great time to cut it there. Just a reminder, McCormick is not holding a breakout session, given where they are in their fiscal quarter. And please join me in thanking Brendan and Marcos for being here. Appreciate it.

Thank you.

Thank you.

Thanks.