McCormick & Co. Inc. sales fell alongside profits in the 2nd quarter 2022 in the face of ongoing supply chain issues, rising inflation, Covid-related lockdowns in China and the ongoing crisis in Ukraine.
The major spice producer saw earnings tumbled more than 35% to US$118.5 million compared to US$183.7 million in the 2nd quarter 2021.
According to McCormick report, its domestic (US) consumer sales declined 4%, while consumer sales in the EMEA region (Europe, Middle East and Africa) and the Asia Pacific region declined 18%.
Despite the decline in consumer sales, McCormick’s flavor solutions sales increased 12% both in the domestic and EMEA region. However, its flavor solutions sales declined by 8% in the Asia Pacific region due to pandemic restrictions.
McCormick attributed its sales decline to a few major factors. In the domestic market, the main factor was supply chain issues related to packaging and organic products. Whereas its international sales fell mainly due to pandemic restrictions and the military conflict in Ukraine. In China, for example, McCormick had to suspend its operations in Shanghai for 2 weeks due to lockdowns. McCormick’s Shanghai facility is responsible for approximately 40% of its sales in China.
McCormick plans to increase prices of its products to respond to declining sales, however for the China market, this is not possible, according to McCormick CEO Lawrence Kurzius. McCormick exited the Russian market after the Ukraine invasion however this has minimal impact on its sales (<1%).
Despite the negative results, McCormick is optimistic that demand for its condiments will continue to be strong as ‘home cooking’ will continue to drive sales in the post-pandemic era.