‘We are operating in a dynamic cost environment and … are raising prices where appropriate’

“We are operating in a dynamic cost environment and we’re certainly not unique in experiencing cost pressures,”​ CEO Lawrence Kurzius told investors July 1 during the company’s quarterly earnings call. “To offset rising costs, we are raising prices where appropriate, but usually there are lag times associated with pricing, particularly with how quickly costs are escalating. Therefore, most of our actions won’t go into effect until late 2021.”

The news comes as the company increases its estimated cost inflation, which previous guidance placed at low-single digits.

“We’ve moved that to mid-single-digit,”​ to better reflect increased inputs across three main components: freight, packaging and commodities, CFO Mike Smith said.

“The ocean freight we’ve talked about, which is hitting everyone. We source a lot of our products from the Asian market, so those rates are up. But also packaging due to resin costs and things like that going up, and then thirdly, commodities,”​ he explained.

Ocean freight costs

While the company is still in conversations with retailers about pricing and Kruzius recognizes “there is always an amount of commercial tension in our pricing discussion,”​ he said he is “really confident that we’re going to be able to get through the pricing that we need.”

He explained this is in part due to McCormick taking a “long-term perspective with our customers. They know that we are fair, that we are transparent in our cost.” ​They also know that there is broad-based inflation so that “it’s not just us that’s going up in isolation. The whole industry is moving.”

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