US sauces and spices heavyweight McCormick & Co. has issued a “cautious” outlook for its new financial year as cash-strapped consumers seek lower-cost alternatives.
The trend impacted its volumes in Q4 but sales revenue was aided by pricing.
Announcing fiscal year 2023 results to 30 November today (25 January), the Frank’s Red Hot sauces and French’s mustard brand owner said it is committed to “strengthen volume trends and prioritise investments to drive profitable results and return to differentiated volume-led growth as the year progresses”.
The company expects 2024 sales to range between -2% to 0%, compared to 2023.
Q4 sales benefited from a 5% increase from pricing actions but that was partially offset by a 3% volume decline.
Brendan Foley, president and CEO of the Maryland-based company, said: “While the fourth quarter was impacted by a pressured consumer exhibiting more value-seeking behaviour, our prioritised investments drove volume improvements in several key areas within our portfolio.
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“In areas that were below our expectations, we understand the challenges, are addressing them, and are confident we will drive improved volume trends in 2024.”
Foley added: “We ended 2023 meeting the cost-recovery plans we had in place as we entered the year. Additionally, we significantly improved our cash flow, paid down debt and reduced our leverage ratio.
"Our improved profitability and cash generation will help fuel continued business investments early in 2024 to drive improved volume performance, which will build throughout the year.”
Foley suggested initiatives within its “growth levers”, including targeted price-gap management, increased brand marketing, new products, and packaging renovation, have “already proven to strengthen our volume trends and drive momentum in these areas”.
He added: “I fully expect that the initiatives we have in place will position us to return to long-term differentiated growth and our cost-optimisation efforts will support our investments as well as drive enhanced profit realisation. For 2024, we appreciate the uncertainty in the consumer environment and we are taking a more cautious view in our outlook.”
McCormick posted sales of $1.75bn in Q4, a 3% increase year-on-year, while annual sales were up 5% at $6.66bn.
Operating income was up from $264.3m to $297.2m over the three months and increased over the12 months from $863m to $963m.
The company said it expects operating income in 2024 to grow by 8% to 10%.
Matthew Smith, an analyst with Stifel, commented: “The FY24 guidance is mostly in line with our estimates for the year, with the sales outlook slightly below our current estimates.”