10-K: McCormick Reports Modest 2025 Growth, Eyes Mexico Expansion

McCormick & Company reported a 1.7% net sales increase in 2025, driven by volume and pricing, and projects 13-17% sales growth in 2026, significantly boosted by the McCormick de Mexico acquisition.

Summary

• Net sales grew 1.7% to $6,840.3 million in 2025 compared to 2024, with organic growth of 1.9%.
• Volume and product mix favorably impacted net sales by 1.2%, and pricing actions contributed 0.7%, while foreign currency rates negatively impacted sales by 0.2%.
• Operating income increased 1.0% to $1,070.8 million in 2025 from $1,060.3 million in 2024.
• Adjusted operating income rose 2.3% to $1,094.0 million in 2025 (2.8% in constant currency).
• Gross profit margin decreased by 60 basis points to 37.9% in 2025, primarily due to increased commodity costs (including tariffs), unfavorable product mix, and higher conversion costs, partially offset by pricing actions and CCI-led cost savings.
• Selling, general, and administrative (SG&A) expense as a percentage of sales decreased by 70 basis points to 21.9% in 2025, driven by lower performance-based employee compensation, reduced distribution expense, and CCI-led cost savings.
• Diluted earnings per share (EPS) was $2.93 in 2025, up from $2.92 in 2024. Adjusted diluted EPS increased 1.7% to $3.00.
• Net cash provided by operating activities was $962.2 million in 2025, compared to $921.9 million in 2024 and $1,237.3 million in 2023.
• An additional 25% ownership interest in McCormick de Mexico was acquired on January 2, 2026, for $750 million, increasing total ownership to a 75% controlling interest.
• The 2026 outlook projects net sales growth between 13% and 17% (1-3% organic), adjusted operating income growth of 16-20% (15-19% constant currency), and adjusted diluted EPS growth of 2-5% ($3.05-$3.13).

Sentiment

Score: 7

Explanation: McCormick demonstrated modest but positive growth in 2025 despite inflationary pressures and a challenging macro environment. The strategic acquisition of a controlling interest in McCormick de Mexico and strong 2026 outlook, coupled with consistent dividend increases and effective cost-saving programs, indicate a stable and forward-looking business. However, gross margin compression and increased inventory days are areas to monitor.

Positives

• Overall net sales grew 1.7% in 2025, with organic growth of 1.9%, demonstrating resilience in a challenging environment.
• Adjusted operating income increased 2.3% (2.8% in constant currency), indicating improved underlying operational performance.
• Adjusted diluted EPS increased 1.7% to $3.00, reflecting earnings growth.
• Strong net cash provided by operating activities of $962.2 million in 2025, supporting financial flexibility.
• The acquisition of a controlling interest in McCormick de Mexico is expected to drive significant net sales growth (11-13%) and adjusted operating income accretion in 2026, creating opportunities for further expansion in Latin America.
• The Comprehensive Continuous Improvement (CCI) program continues to generate cost savings and is expected to fuel growth investments and operating margin expansion in 2026.
• SG&A expense as a percentage of sales decreased by 70 basis points, driven by lower compensation, reduced distribution, and streamlining initiatives.
• The company has a history of 40 consecutive years of annual dividend increases, signaling a commitment to shareholder returns.
• Maintained effective internal control over financial reporting as of November 30, 2025, as affirmed by management and independent auditors.

Negatives

• Gross profit margin decreased by 60 basis points in 2025, primarily due to increased commodity costs (including tariffs), unfavorable product mix, and higher conversion costs.
• The Flavor Solutions segment experienced an unfavorable volume and product mix decrease of 0.2% in 2025, with EMEA sales declining 2.2% (4.3% organic) due to lower sales to packaged food customers.
• Net cash flow provided by operating activities decreased from $1,237.3 million in 2023 to $962.2 million in 2025.
• The Cash Conversion Cycle (CCC) increased from 36 days in 2024 to 42 days in 2025, mainly due to an increase in days in inventory.
• The projected adjusted effective tax rate for 2026 is 24.0%, an increase from 21.5% in 2025.
• Income from unconsolidated operations decreased by $2.0 million in 2025, primarily due to unfavorable foreign exchange rates impacting McCormick de Mexico.

Risks

• Deterioration of global economic conditions, recession, slow growth, inflation, or economic uncertainty may adversely affect customer and consumer spending and demand for products.
• Damage to reputation or brand name, loss of brand relevance, or increased use of private label or other competitive brands could negatively impact business.
• Product quality or safety concerns, food spoilage, contamination, product tampering, product recall, import alerts, and consumer product liability claims pose risks.
• Customer consolidation could lead to increased buying power, resistance to price increases, and demands for lower pricing or tailored products.
• Inability to maintain mutually beneficial relationships with large customers (Wal-Mart and PepsiCo each accounted for approximately 12% of consolidated sales in 2025) could adversely affect business.
• Issues regarding procurement of raw materials (dairy, pepper, garlic, onion, capsicums, salt, tomato products, sugar, soybean oil) are subject to price and availability fluctuations caused by inflation, weather, market conditions, and governmental actions.
• Reduced availability of transportation capacity due to labor shortages and higher fuel costs could increase transportation costs.
• Changes in global trade policies, including tariffs, have caused and may continue to cause inflationary pressures and higher costs.
• Disruption of the supply chain due to natural disasters, geopolitical tensions, cyber-attacks, health epidemics, governmental restrictions, or failure of third-party suppliers could impair ability to manufacture or sell products.
• Labor shortages, turnover, and labor cost increases could adversely affect operations and financial results.
• Inability to increase prices sufficiently or timely to offset inflationary and other cost pressures (raw materials, packaging, labor, distribution) may impact financial condition or results.
• Intense competition in the food industry based on price, product innovation, quality, brand recognition, and marketing could reduce profitability.
• Changing political and geopolitical conditions, including conflicts, sanctions, and trade barriers, may negatively impact operations and financial results.
• Operations may be impaired as a result of disasters, business interruptions, or similar events, especially for products highly concentrated at single locations.
• Inability to successfully consummate and manage ongoing acquisition, joint venture, and divestiture activities could impact results, including integration challenges and assumption of unknown liabilities.
• An impairment of the carrying value of goodwill (approximately $5.3 billion) or other indefinite-lived intangible assets (approximately $3.0 billion) could adversely affect results.
• Streamlining actions to reduce fixed costs, simplify processes, and improve competitiveness may have a negative effect on employee relations.
• Failure to fully realize the benefits from the CCI program or other streamlining actions could negatively affect financial results.
• Fluctuations in foreign currency markets (e.g., U.S. dollar versus Euro, British pound sterling, Chinese renminbi, Mexican peso) may negatively impact cash flows and translation of earnings.
• Risks associated with certain pension assets and obligations, including deterioration in asset value or increase in liability due to low interest rates, could increase contribution obligations.
• Climate change, or legal, regulatory, or market measures to address it, may negatively impact the price or availability of raw materials, water availability, manufacturing costs, and consumer preferences.
• Increased focus and activism on Environmental, Social, and Governance (ESG) matters could erode customer confidence, hinder access to capital, or lead to litigation.
• Increases in interest rates or changes in credit ratings may negatively impact borrowing costs and ability to issue commercial paper.
• Significant amount of indebtedness (approximately $4.0 billion) could limit ability to borrow additional funds, increase exposure to interest rate fluctuations, and reduce flexibility.
• Deterioration of credit and capital markets may adversely affect access to sources of funding.
• Uncertain global economic conditions expose the company to credit risks from customers and counterparties, especially highly leveraged ones.
• Intellectual property rights, and those of customers, could be infringed, challenged, or impaired, reducing the value of products and brands.
• Operations and reputation may be impaired if information technology systems fail or if the company is subject to a data breach or cyber-attack, especially with evolving threats and AI use.
• Inability to successfully implement the business transformation initiative, including a global enterprise resource planning (ERP) system, could negatively impact business.
• Laws and regulations (food safety, labeling, marketing, privacy, trade, environmental) could adversely affect business through increased compliance costs or restrictions.
• Litigation, legal, or administrative proceedings could have an adverse impact on business and financial condition or damage reputation.
• International and cross-border operations are subject to additional risks, including currency fluctuations, discriminatory fiscal policies, and economic or political uncertainties.
• The global nature of the business, changes in tax legislation, and resolution of tax uncertainties create volatility in the effective tax rate.

Future Outlook

McCormick projects 2026 net sales to grow between 13% and 17%, significantly driven by an 11-13% increase from the McCormick de Mexico acquisition, with organic growth of 1-3%. Adjusted operating income is expected to increase by 16-20% (15-19% constant currency), reflecting gross margin recovery, acquisition accretion, and cost savings from the CCI program, partially offset by increased commodity costs and a low to mid-teens digit increase in SG&A expense, including brand marketing investments. Adjusted diluted EPS is forecast to be $3.05 to $3.13, an increase of 2-5%. The adjusted effective tax rate is estimated at 24.0%, an increase from 21.5% in 2025.

Management Comments

• We believe the acquisition creates opportunities for further growth in the Mexican market and provides a strategic platform for further expansion in Latin America.
• Our fiscal 2026 outlook continues to reflect prioritized investments in key categories to sustain our volume trends and drive long-term profitable growth while appreciating the uncertainty of the consumer and macro environment, including global trade policies.
• Our CCI program is continuing to fuel growth investments while also driving operating margin expansion.
• We believe that our sources of liquidity, which include existing cash balances, cash flows from operations, existing credit facilities, our commercial paper program, and access to capital markets, will provide sufficient liquidity to meet our debt obligations, including any repayment or refinancing of debt, working capital needs, planned capital expenditures, the payment associated with an acquisition and payment of anticipated quarterly dividends for at least the next twelve months.

Industry Context

McCormick operates in a highly competitive global food and beverage industry, characterized by growing demand for flavor across various eating occasions. The company faces challenges from customer consolidation, which creates large, sophisticated buyers with increased leverage, and the accelerating growth of e-commerce, which introduces new competitors and business models. The industry is also subject to volatility in raw material prices due to agricultural factors and global trade policies, as well as inflationary pressures and geopolitical conditions impacting supply chains and consumer spending. McCormick aims to differentiate itself through innovation, brand marketing, and a broad range of flavor solutions, while also adapting to evolving consumer preferences for attributes like clean-label, organic, and reduced sodium products.

Comparison to Industry Standards

• McCormick is the brand leader globally and a category leader in its key markets within the spices and seasoning category.
• The company is one of the brand leaders globally and in the U.S. in the condiments and sauces category.
• McCormick's range of Flavor Solutions is noted as one of the broadest in the industry.
• The company maintains positive and constructive employee relations, with operations not significantly affected by work stoppages, which may compare favorably to some industry peers.

Management Changes

Corporate Governance

Legal Proceedings

• There are no material pending legal proceedings in which the company or any of its subsidiaries are a party or to which any of their property is the subject.

Related Party Transactions

• On November 11, 2025, various trusts affiliated with Lawrence Kurzius, former McCormick Chairman, President and CEO and current beneficial owner of more than five percent of the Common Stock, sold 39,014 shares of McCormick Common Stock as part of McCormick's authorized share repurchase program for $2,517,964.

Stakeholder Impact

• Shareholders: Continued dividend increases (40 consecutive years) and share repurchases, along with projected EPS growth, indicate a commitment to shareholder returns. The McCormick de Mexico acquisition aims for long-term value creation.
• Employees: The company emphasizes attracting, developing, and retaining talent, and maintaining positive employee relations. Streamlining actions, while potentially impacting some positions, are aimed at improving competitiveness. Total rewards programs support employee well-being.
• Customers: Innovation, brand marketing, and category management strategies are designed to optimize customer profitability and meet diverse consumer demands. However, supply chain disruptions and price increases could impact customer relationships.
• Suppliers: Raw material price volatility, transportation costs, and global trade policies can affect supplier relationships and costs. The Supply Chain Financing program offers flexibility for participating suppliers.
• Creditors: The company's commitment to maintaining investment-grade credit ratings and a prudent capital structure aims to ensure debt obligations are met, despite a significant level of outstanding indebtedness.

Next Steps

• Integrate the additional 25% ownership interest in McCormick de Mexico to realize expected growth opportunities in the Mexican and Latin American markets.
• Continue prioritized investments in key categories and brand marketing to sustain volume trends and drive long-term profitable growth.
• Implement the Comprehensive Continuous Improvement (CCI) program to drive operating margin expansion and cost savings.
• Proceed with the multi-year business transformation initiative, including the implementation of a global enterprise resource planning (ERP) system.
• Manage the maturity of $500.0 million, 0.90% notes due in February 2026.
• Evaluate and adopt new accounting guidance related to income tax disclosures, expense disaggregation, internal-use software, and hedge accounting improvements.
• Make anticipated pension plan contributions of approximately $13.0 million in 2026.

Key Dates

Recommendation

McCormick demonstrates resilience with modest sales and earnings growth in 2025 despite cost pressures and a challenging macro environment. The strategic acquisition of a controlling interest in McCormick de Mexico is a significant growth driver for 2026, projecting substantial sales and operating income increases. The company's consistent dividend history and ongoing cost-saving initiatives are positive. However, the decline in gross profit margin and increased cash conversion cycle in 2025, coupled with the projected increase in the effective tax rate for 2026, suggest some headwinds. While the outlook is positive due to the acquisition, the underlying organic growth remains modest, and the company faces ongoing risks from inflation, supply chain volatility, and intense competition. The stock appears to be a stable long-term investment, but the current filing does not present overwhelmingly strong catalysts for a 'buy' recommendation beyond the expected benefits of the recent acquisition, which may already be priced in.

Keywords

McCormick, flavor industry, spices, seasonings, condiments, SEC filing, 10-K, financial results, acquisition, McCormick de Mexico, organic growth, operating income, EPS, supply chain, inflation, tariffs, cybersecurity, ESG, consumer goods, food manufacturing, corporate governance