McCormick’s fourth quarter ended Nov. 30 saw sales decline of 2% compared to the previous year. This includes a currency hit of 4% that, when taken into account, allowed sales to increase by 2% in the quarter. Chief Executive Lawrence Kurzius explained yesterday that the 9% price increase was partly offset by a 4% drop in underlying volume, product mix and a 2% expected decline due to the sale of the company’s Kitchen Basics business and other low margin businesses in India and Russia.
“While we were within our implied range of sales, the operating income for our fourth quarter fell short,” he said. This is because adjusted operating income fell by 9% in constant currency, while adjusted earnings per share fell 13%.
He said that the reason for the decline in sales of US spices and seasonings in the fourth-quarter was due to the fact that the company had extensive inventory restocking in 2021 and 2022. Likewise, lower-than-anticipated sales in China and fallout from two COVID-related plant shutdowns in China also took a toll on the company finances and operations.
McCormick wants $25m cost savings by’streamlining” workforce
“We are determined to increase our profit realization by 2023,” Kurzius attempted to reassure market analysts and investors during the company’s fourth quarter earnings conference.
He stated that the company will cut 100m in supply chain costs over two years, and another $25m by streamlining its workforce.
“A large part of our streamlining activities is a US voluntary pension program, which has a target separation date of February 1,,” he explained.
Supply chain labor costs are reduced by Automation and a revised production schedule
McCormick plans to reduce its supply chain workforce in Americas by 10%. This is half of the reductions that took place in the last three months.
Kurzius explained that this was possible partly because of the acceleration of automation. Kurzius also mentioned that a fully automated line was brought in for high-volume packaging formats and individual equipment pieces.
He also “optimized the leadership team throughout our facilities, and upgraded the talented key positions” during the quarter.
McCormick also decreased labor costs in the fourth quarter by reintroducing a “more regular shift schedule with most sites now operating on a 24-hour basis,” Kurzius stated. This allows us to eliminate inefficient, unpopular or difficult-to-staff shifts. We have also been able to eliminate the labor problems that plagued the entire industry during the pandemic. This has allowed us to stabilize absenteism and turnover rates and return to more standard staffing line em>
Layoffs in the food industry increase
McCormick isn’t the only CPG food or beverage company offering buyouts or layoffs to reduce costs and counter inflationary pressures.
Campbell Soup Co. had earlier this month announced that a few roles would be eliminatedin connection to the decision to close its snack division offices in Charlotte (NC) and Norwalk (Conn).
This was weeks after PepsiCo had announced in December that it would lay off hundreds of workers in North America. Also, after The Coca-Cola Co. offered selected employees in the US, Canada, and Puerto Rico buyouts, which will take effect in March.
General Mills and Beyond Meat are among other packaged food companies that will be closing in 2023. DoorDash, which has cut about 60% of its staff, is another foodservice provider that is cutting jobs.
