Good morning. This is Kasey Jenkins, Vice President of McCormick's Investor Relations. Thank you for joining today's third quarter earnings call. To accompany this call, we've posted a set of slides at ir.mccormick.com. Currently, all participants are in a listen-only mode. Following our remarks, we will begin a question and answer session. If you need to reach the operator at any time during the call, please press star zero. We'll begin with remarks from Lawrence Kurzius, Chairman, President, and CEO, and Mike Smith, Executive Vice President and CFO. During our remarks, we will refer to certain non-GAAP financial measures.
These include information in constant currency as well as adjusted operating income, adjusted income tax rates, and adjusted earnings per share that exclude the impact of special charges, as well as the net non-recurring income tax benefits associated with the December 2017 U.S. tax reform legislation and, for 2018, transaction and integration expenses related to the acquisition of our Frank's and French's brands. Reconciliation to the GAAP results are included in this morning's press release and slides. In our comments, certain percentages are rounded. Please refer to our presentation, which includes the complete information. As a reminder, today's presentation contains projections and other forward-looking statements. Actual results could differ materially from those projected. The company undertakes no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events, or other factors.
As seen on slide two, our forward-looking statement also provides information on risk factors that could affect our financial results. It is now my pleasure to turn the discussion over to Lawrence.
Thank you, Kasey. Good morning, everyone. Thanks for joining us. Our strong third quarter and year-to-date results reflect the successful execution of our strategies and engagement of employees around the world. We've driven strong sales, operating profit, and adjusted EPS growth, as well as operating margin expansion, while continuing to make targeted investments and fuel future growth. As we enter the last quarter of our fiscal year, we are confident in our growth trajectory and that we are well positioned to deliver strong results in 2019. Starting on slide four, our broad and advantaged global flavor portfolio continues to position us to meet the demand for flavor around the world and grow our business. The breadth and reach of our portfolio across segments, geographies, channels, customers, and product offerings creates a balanced portfolio to drive consistency in our performance in a volatile environment.
This quarter, our particularly strong consumer sales growth in the Americas and Asia Pacific regions outweighed Flavor Solutions softness in those same regions. Within our consumer segment, our third quarter highlights include broad-based U.S. and China growth with strong contributions from both base business and new products. In our Flavor Solutions segment, our EMEA region drove growth in flavors, branded food service, and condiments driven by new products and the base business. We're confident our breadth and reach will also continue to differentiate McCormick and be the foundation of our sales growth as consumers' demand for flavor continues to rise. Now let me go into more detail on our third quarter performance as seen on slide five, as well as provide some business comments before turning it over to Mike, who will go in more depth on the quarter-end results and discuss our 2019 financial guidance.
Starting with our top line for the third quarter, third quarter sales increased 1% from the year ago period. In constant currency, sales grew 2% for the total company, led by our Consumer segment, with growth attributable to higher volume and product mix driven by both base business and new products. In our Consumer segment, sales increased 3%, including a 1% unfavorable impact from currency. In constant currency, sales grew 4%, representing an acceleration from the first half trends. In our Flavor Solutions segment, sales decreased 2%. In constant currency, sales were flat following a strong first half growth of 5%. Those who follow us closely know that the Flavor Solutions segment tends to have some quarter-to-quarter volatility, largely attributable to customer activity. In addition to our top-line growth, we grew adjusted operating income and expanded our adjusted operating margin.
With our higher sales cost savings led by our comprehensive and continuous improvement program, CCI, and favorable product mix, we grew the third quarter's adjusted operating income 9%, or 10% in constant currency, and expanded our adjusted operating margin 160 basis points. At the bottom line, our third quarter adjusted earnings per share of $1.46 was 14% higher than $1.28 in the third quarter of 2018, driven primarily by our adjusted operating income growth and a lower adjusted tax rate. This 14% adjusted earnings per share growth includes an unfavorable impact from currency. Our strong third quarter performance is a continuation of the results we achieved in the first half of 2019. Year to date through the third quarter, we've grown our sales 1%, which is 3% in constant currency, and adjusted operating income 6%, or 8% in constant currency.
We continue to expect another year of strong performance in 2019. With one quarter remaining in the fiscal year, we've increased our adjusted earnings per share guidance to $5.30-$5.35 from our previous guidance of $5.20-$5.30. This updated guidance reflects a 7%-8% growth rate and importantly includes continued investments to drive growth. We are confident in our updated 2019 outlook, which Mike will provide more details on in a few moments. I'd like to now turn to some highlights from our consumer and Flavor Solutions segments. Starting on slide six with our consumer segment. As I just mentioned, we grew constant currency sales 4%, driven by the strong performance in the Americas and Asia Pacific regions. In the Americas, we grew constant currency sales 4%.
This growth was entirely organic and attributable to higher volume and product mix, driven by both our base business and new products. Our category management initiatives, effective marketing support and merchandising execution, expanded distribution, and new products all contributed to drive consumption growth across our Americas consumer portfolio. For the third quarter, our IRI data indicates our McCormick U.S. branded spices and seasoning scanner sales grew in line with the category, and we again had double-digit growth in unmeasured channels. Our McCormick branded dry recipe mixes continued their momentum of consumption and share growth. Our new products, including McCormick ONE and Street Taco dry recipe mixes, co-branded Tasty products, and Zatarain's frozen entrée bowls, continue to gain momentum and contribute to growth.
We won with our grilling season despite the delayed start, with our strong merchandising execution driving significant consumption growth on Grill Mates, Stubb's barbecue sauce, Frank's RedHot, and French's Mustard. As we continue to accelerate our condiment leadership, Stubb's barbecue consumption continues to outpace the barbecue category. Frank's RedHot continues strong performance with distribution gains and record-high household penetration. Broadening to the entire Frank's RedHot portfolio, including frozen wings, seasoning blends, and dry recipe mixes, we drove double-digit consumption growth as we continue to find opportunities to expand this brand. French's Mustard again grew consumption and share. In fact, the mustard category has returned to growth, and year to date, we have driven 100% of that growth through our category management initiatives and focused marketing support.
Our French's National Mustard Day campaign is a great example of how our marketing excellence organization continues to optimize our brand marketing spending and get more value out of each marketing dollar. The campaign will earn 15 times more media value than our actual investment and created quite a buzz around mustard-flavored ice cream with over 1 billion impressions. We're making brand marketing investments like this across our entire portfolio, and their effectiveness was particularly evident in our third quarter consumption and sales growth. Turning to Europe, Middle East, and Africa, the EMEA region, growth was tempered by unusually warm weather in Europe, particularly in France and Italy, which unfavorably impacted consumption. Extreme high temperatures were recorded during the first half of the quarter, and as they moderated, our second half performance also improved.
Our success with the new products has continued, particularly in the U.K., where they, with our other initiatives, drove growth. In the Asia Pacific region, our sales growth rate has accelerated from the first half of the year, driven by our effective merchandising execution as well as new products and expanded distribution. Last quarter, I mentioned recent macroeconomic pressures in China were impacting growth in this region. Although there is still pressure, we delivered strong third quarter growth. As evidenced by our overall sales growth this quarter, our fundamentals across the region remain strong. Across all regions, our strength in e-commerce is again evident with third quarter double-digit e-commerce growth. Our investments in content development, resources to support acceleration, as well as programs and items tailored to the e-commerce channel are paying off.
Our digital presence includes not only e-commerce, but advertising as well, which is beating the ROI norms in consumer products. As I mentioned earlier, as we continue to optimize our brand marketing spend, we are increasing our digital effectiveness. We are not only winning through our growth, our digital leadership was again recognized in 2019 by Gartner L2 Research. McCormick was ranked number one on their Digital IQ Index for Food, released in late August, the only food brand to earn the title of Genius, their top distinction. This marked our sixth consecutive year in the top five ranking of over 100 food and beverage brands on the effectiveness of our website, digital, social media, e-commerce, and mobile platforms. Turning now to slide seven.
In our Flavor Solutions segment, our constant currency sales were comparable to last year, with strength within EMEA being offset by declining sales in Americas and Asia Pacific regions. In the Americas, our third quarter sales declined compared to last year. We experienced planned declines this quarter from the timing of our customers' promotional activities and new products following a strong first half. Additionally, due to the significant demand we've seen in this business and continue to project, we needed to increase our warehouse capacity. During the third quarter, we began a transition to a larger raw material warehouse, and this briefly constrained our growth. Our growth momentum in snack seasonings has continued, as well as our strong performance in branded food service. Overall, the demand from our Americas Flavor Solutions customers remains strong. Turning to EMEA. We drove strong constant currency sales growth.
We grew sales to quick service restaurants, partially driven by their strong promotional activities and new products, and to packaged food companies attributable to both new products and base business growth. We're continuing to win with our customers through new products, expanded distribution, and promotional activity. Finally, in the Asia Pacific region, our sales were impacted by both the timing of our customers' initiatives, including a lower level of Limited Time Offers in this year's third quarter, as well as the exit of some low margin business in the region. I already mentioned, sales in our Flavor Solutions segment can be volatile from quarter to quarter, and we've seen this in our quarterly results so far this year. Our third quarter performance was impacted by several factors, which we anticipate will not impact us as significantly in future quarters.
In constant currency, we've driven 3% total Flavor Solution sales growth year to date and are confident in our expectation for fourth quarter growth. Now I'd like to provide a few summary comments as seen on slide eight before turning it over to Mike. At the foundation of our sales growth is the rising consumer demand for flavor. We're aligned with the consumer's continued interest in bolder flavors, demand for convenience, and focus on fresh, natural ingredients, as well as with emerging purchase drivers such as greater transparency around the sourcing and quality of food. With this increased interest, flavor continues to be an advantaged global category, which, combined with our execution against effective strategies, will drive strong results. We have a solid foundation, and in an environment that continues to be dynamic and fast-paced, we are ensuring we remain agile, relevant, and focused on sustainable growth.
Our experienced leaders and employees are executing against our strategies, which are designed to build long-term value for our shareholders. Our strong third quarter financial results were a continuation of the great results we achieved in the first half of 2019. Our fundamentals are strong, and we are confident the initiatives we have underway position us to continue our growth trajectory. We're balancing our resources and efforts to drive sales with the work to lower cost, to build fuel for growth and higher margin while we're making investments in our future. We have confidence in our updated fiscal year outlook and are well-positioned to deliver another strong year in 2019. Around the world, McCormick employees are driving our momentum and success, and I thank them for their efforts and engagement.
Thank you for your attention, and it's now my pleasure to turn it over to Mike for additional remarks on our third quarter financial results and our updated 2019 outlook.
Thanks, Lawrence, good morning, everyone. As Lawrence indicated, we delivered strong growth in the third quarter. I'll begin with a discussion of our results, then follow with details on our updated full year 2019 financial outlook. Starting on slide 10, we grew sales 2% constant currency. This growth was driven by the base business and new products and was led by our Consumer segment. The Consumer segment sales rose 4% in constant currency. This growth was driven by the Americas and Asia Pacific regions and was attributable to higher volume and product mix of both base business and new products. Turning to slide 11, we grew Consumer segment sales in the Americas 4% in constant currency versus the third quarter of 2018 due to higher volume and product mix.
New products, category management, and strong brand marketing drove broad-based growth across the portfolio, both from a brand and a product category perspective, with private label also contributing to the growth. Constant currency Consumer sales in EMEA were down 2% from a year ago. Sales growth in the region was impacted by extreme high temperatures, as Lawrence already mentioned, as well as a decline in private label sales and unfavorable pricing actions related to planned trade promotional activity for new products. In the Asia Pacific region, we grew constant currency sales 15%, led by China. Higher volume and product mix, as well as pricing, drove the increase with strength in herbs and spices, world flavor sauces, and chicken bouillon. The earlier timing of a China national holiday versus last year partially contributed to the third quarter's increased sales volume.
Turning to our Flavor Solutions segment on slide 14, third quarter constant currency sales were comparable to the year ago period, with growth in EMEA offset by declines in the Americas and Asia Pacific regions. In the Americas, Flavor Solutions constant currency sales declined 2%. As Lawrence mentioned, this decline was driven primarily by the timing of our customer promotions and new products, which were stronger in the first half of the year, as well as warehouse transition activities, which temporarily constrained growth. These declines were partially offset by growth in snack seasonings and branded food service. In EMEA, we grew Flavor Solutions sales 4% in constant currency. This growth was driven by new products, pricing, and base business volume growth.
In the Asia Pacific region, Flavor Solutions sales and constant currency were down 1% versus the year-ago period, driven by both the timing of customer activities versus the year-ago period, as well as the exit of some low-margin business. Adjusted operating income, which excludes special charges, increased 9% in the third quarter versus the year-ago period and excluding the impact of unfavorable currency rose 10%. Adjusted operating income in the Consumer segment rose to $177 million, a 16% increase, and in constant currency, the increase was 17%. In the Flavor Solutions segment, adjusted operating income declined 2% to $85 million, which in constant currency was a 1% decline. Growth in our Consumer segment was primarily driven by higher sales, while the decline in our Flavor Solutions segment was primarily driven by lower sales.
Both segments were favorably impacted by CCI-led cost savings, a one-time 2019 global benefit plan alignment, and favorable product mix, with partial offsets from business transformation expenses driven by our ERP replacement and higher planned brand marketing investments. An unfavorable transactional impact of foreign currency exchange rates versus the year-ago period also impacted the Flavor Solutions segment. As seen on slide 19, we expanded our third quarter gross profit margin 100 basis points year-on-year, driven by CCI-led cost savings, as well as favorable product mix. On a year-to-date basis, we expanded 40 basis points. For the 2019 full year, gross profit margin is expected to be 50-75 basis points higher than 2018, which narrows our range from our previous expectation. Our selling general and administrative expense as a percentage of net sales decreased by 60 basis points from the third quarter of 2018.
This decrease was primarily driven by higher sales, as well as the net impact of the other adjusted operating income changes I just mentioned a moment ago. These changes include a 5% increase in our brand marketing versus the third quarter last year. As a reminder, while our year-to-date brand marketing is lower than last year, we are planning to spend brand marketing comparable to 2018, partially by reinvesting our continued marketing excellence cost savings and non-working spend reductions into working media. We are planning further brand marketing increases in the fourth quarter. In the fourth quarter, we are projecting further increases in business transformation investments related to our ERP replacement program, which we expect to continue to ramp up into 2020, correlated to our most substantial global deployment activity.
The combined impact of the gross margin expansion and SG&A leverage resulted in an adjusted operating margin expansion of 160 basis points from the third quarter of 2018. Turning to income taxes on Slide 20, our third quarter adjusted effective income tax rate was 17.6% as compared to 18.8% in the year-ago period. Our third quarter adjusted rate was favorably impacted by discrete tax items, with the largest contributor due to stock option exercises. As we have discussed in previous quarters, favorable tax rate impacts of option exercises are partially offset by payroll and social related taxes, which unfavorably impact operating profit. Considering the year-to-date favorable impact from discrete items, we now expect our full year 2019 adjusted effective tax rate will be approximately 20%.
There can be volatility in that rate quarter to quarter due to the unpredictability of discrete items, changes to our forecasted mix of earnings, including currency impacts, and interpretation of regulations continuing to be released clarifying the impacts of the 2017 U.S. tax act. Income from unconsolidated operations was $10 million compared to $8 million in the third quarter of 2018, a 14% increase. At the bottom line, as shown on Slide 22, third quarter 2019 adjusted earnings per share was $1.46, up 14% from $1.28 for the year-ago period, primarily due to growth in our operating performance, lower interest expense, and a lower adjusted income tax rate. This increase included an unfavorable impact from currency. The company continues to generate strong cash flow. On Slide 23, we summarize highlights for cash flow and the quarter end balance sheet.
Our cash flow provided from operations was $495 million through the third quarter of 2019, compared to $389 million through the third quarter of 2018. This increase was primarily driven by higher operating income. We continue to see improvements in our cash conversion cycle, finishing the third quarter down nine days versus our fiscal year end. A portion of this cash was used to pay down $206 million of acquisition debt as we continue to focus on paying down debt. We have now paid down almost 70% of our term notes related to our Frank's and French's acquisition, which along with the lower interest rate environment, has lowered our interest expense versus last year, as well as our debt leverage ratio.
We finished the third quarter with a debt to adjusted EBITDA ratio of 3.7 times, which is pacing us ahead of our target of 3.0 times by the end of 2020. As we have mentioned previously, while our priority is paying down debt, with a clear line of sight to our 2020 leverage target, we are continuing to explore acquisition opportunities which represent a key part of our long-term growth strategy. Through the third quarter of 2019, we returned $226 million of cash to shareholders through dividends and used $107 million for capital expenditures. Our priority is to continue to have a balanced use of cash, making investments to drive growth, returning a significant portion to our shareholders through dividends and to pay down debt.
Let's now move to our current financial outlook for 2019 on Slide 24. We continue to expect another year of strong performance in 2019 with our broad and advantaged flavor portfolio, effective growth strategies, and focus on profit realization. We are narrowing our projected growth ranges for sales, operating profit, and earnings per share and increasing our earnings per share outlook. We continue to estimate, based on prevailing rates, a two percentage point unfavorable impact from currency rates on net sales, adjusted operating income, and adjusted earnings per share. At the top line, based on our year-to-date results through the third quarter, we are narrowing our sales guidance range to grow sales 1%-2%, which in constant currency is 3%-4% projected growth rate. As a reminder, this will be entirely organic growth driven primarily by higher volume and product mix, as well as the impact of pricing.
We are also narrowing our adjusted operating income growth to be 6%-7% from $930 million in 2018, which in constant currency is an 8%-9% projected growth rate and reflects our continued focus on profit realization. Our adjusted operating income growth rate reflects our expected strong performance while also making investments for growth, as well as our continued focus on profit realization. Following an increase in our second quarter earnings call, we are again increasing our guidance for 2019 adjusted earnings per share to be in the range of $5.30-$5.35, which compares to $4.97 of adjusted earnings per share in 2018 and represents a 7%-8% increase, or in constant currency, 9%-10%. This increase reflects the projected lower adjusted effective tax rate, as I mentioned earlier, as well as the narrowing of our adjusted operating profit range.
In summary, we are projecting strong growth in our 2019 constant currency outlook for sales, adjusted operating profit, and adjusted earnings per share following record double-digit performance across each objective in 2018 and while continuing to invest for future growth. I'd like to now turn it back to Lawrence for some additional remarks before we move to your questions.
Thank you, Mike. Now that Mike has shared our financial results and outlook in more detail, I'd like to recap the key takeaways as seen on slide 25. Our third quarter results were a continuation of our strong first half. In addition to sales growth, we drove strong operating profit growth, which delivered significant operating margin expansion. We're delivering against our plans and are confident in the momentum of the business. With our year-to-date results, we are well-positioned entering our final quarter of 2019. Our 2019 outlook continues to reflect strong operating performance, delivering strong sales growth as well as significant profit realization while continuing to invest in the business. Finally, we are sustainably positioned for growth and are continuing to deliver differentiated results while also building the McCormick of the future. Now let's turn to your questions.
Thank you. At this time, we'll be conducting a question and answer session. If you would like to ask a question, please press *1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press *2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from the line of Andrew Lazar with Barclays. Please proceed with your question.
Good morning, everybody.
Morning, Andrew.
Morning.
Hi. I guess first off, when we look at the new full-year guidance on sales and EBIT, I guess they both imply a 4Q that looks a bit below at least where sort of current street models would be. I'm just curious if there are any sort of discrete issues that you'd point out for that. You did mention some increased marketing investment, which obviously would impact EBIT a bit. Just because also the comparison obviously year-over-year gets quite a bit easier given the inventory issues of last year.
Andrew, I'll start if Lawrence has anything. Year to date, we're really happy with our performance at 3% constant currency growth. Once you start looking at the math, if we would've kept our guidance at the original 3%-5%, we would had to grow sales growth almost 9%. We tightened the range a bit on both sales and operating profit. You talked about the EMEA weather in the third quarter. That's not going to be recovered. A few things like that that happened, but 3%-4%, we still feel like that's really good net sales performance. We do see the underlying strength in Americas Consumer continuing, which we talked about on the last call.
Great. Thank you for that.
Yeah. That covers it.
Appreciate that. I guess one follow-up would just be, it doesn't sound like this was a benefit much at all because you didn't mention it. The acceleration you saw in Consumer Americas, you talked about it being broad-based and such. Just want to make sure there didn't seem to be, because you talked about takeaway and shipments being in line broadly, but I'm assuming there was no pull forward, if you will, in Consumer Americas that would've benefited shipments just given the easier comparison or the fact that you would've replenished inventory, if you will, going into fourth quarter. It doesn't sound like that was a benefit, but just wanted to make sure.
No. Hey Andrew, this is Lawrence. We really shipped to consumption in the third quarter and would expect to ship to consumption again going into the fourth quarter. We signaled on our last call that we'd have an acceleration as we went into the second half of the year. You're starting to see that read through in our consumer business overall. We feel very confident in our results and our outlook for the fourth quarter. One of the reasons that the third quarter might have looked stronger in our shipments than in maybe some of the scanner data, which was actually pretty good, is that, again, unmeasured channels were really strong for us. That was a bit of a benefit in the third quarter. That's been a consistent thing where that group of customers has been growing faster than the general market.
In terms of whether there was any kind of unusual inventory activity or any kind of pull forward, that wasn't the case.
If you look at last year, third quarter, we grew about 4% in Americas Consumer, so roughly about the same.
Great. Thank you so much.
Actually, we feel really good about the third quarter.
Yeah.
It was up against a pretty tough comparison a year ago.
Yeah, absolutely. Thank you very much.
Thank you. Our next question comes from the line of Ken Goldman with JP Morgan. Please proceed with your question.
Hi, good morning, and thank you.
Hey, Ken.
Hey, guys. My first question is: In your slide deck, you called out a one-time benefit from the global benefit plan alignment. I don't think you quantified this for us. I'm just curious, how much was it? I don't think it was included in that net special charges of $7.7 million, but I just wanted to make sure for our modeling purposes.
No, we haven't quantified it, Ken. We've talked about it, I think, pretty much every quarter.
Yep
We're not going to quantify that.
Okay.
We've had something like-
Moving the shot next week.
Every year-
We've had something like this.
Every year, we've looked at our benefit plans with an eye to cost.
That's not going to stop me from asking every quarter, though. I'll keep trying.
You get one quarter left, Ken.
That's okay.
One quarter left.
All right. Well, when you guys do well, it's hard to find questions, so we got to figure some out here. I guess my next question would be, a couple of U.S.-based staples companies that have multinational businesses, they have highlighted maybe some modest softness in demand from emerging markets lately. It doesn't sound like you're experiencing this, but are there any, I don't want to call them red flags, maybe yellow flags that you're seeing that would indicate some consumer slippage in terms of their demand in some developed markets, or developing rather, or is this not really something that you're experiencing yet?
Yeah. I think the comparison between us and some of our peer companies might just be the mix of markets that we're in. We're cautious about China. We just had a great quarter in China, but we're aware of the volatile environment that we're in. The consumer results that we've had in China have been pretty good. We had a slow start to the year. We expected a strong second half there as well, and we're experiencing it. I'd say that in our international business, if there was an area that was slow for us over the third quarter, it was EMEA was a little slow. That was strictly related to the tremendous heat wave that impacted cooking and that's where a lot of our consumer products are used. We don't see anything general in the emerging markets. With that said, we're not taking it for granted.
We're one tweet away from more volatility.
That's well said. Thank you so much.
Thank you. Our next question comes from line of Alexia Howard with Bernstein. Please proceed with your question.
Good morning, everyone.
Morning.
Morning, Alexia.
Hi. Two quick questions. I guess on the top line guidance, I know you trimmed it down a little bit for the full year this quarter, but it still kind of implies that things will get sequentially better, next quarter, and I'm wondering if that's particularly on the Flavor Solutions side of things that you've got. Have you got visibility into things picking up on that side? That's my first question. The second one on a very different topic, you mentioned acquisitions as something that you're keeping a close eye on. Could you talk to us a little bit about, where you're fishing at the moment, I guess, given that the RB Foods deal was very U.S.-centric, is it likely that if you do another deal of scale that would be maybe more overseas focused, and are you likely to be looking at consumer versus Flavor Solutions ?
Just any guidance or any thoughts on that front would be helpful. Thank you.
Sure. Well, I'll start on the first one. Yes, we do expect an acceleration in the Flavor Solutions part of the business. It was impacted in Q3 by some relatively short-term factors. There's some customer activity differences, and we're also comparing to an incredible third quarter, a year ago, which you may recall, had 6% growth in the third quarter of last year. It was up against a particularly strong comparison. Then we had just as an operating matter, a transition to a new warehouse in the U.S. that also was a very brief constraint on growth in the quarter. I think that we're confident that the fourth quarter will be strong in Flavor Solutions.
I think we've been messaging for the last couple of quarters that we expect the second half to be good on our consumer business, and our outlook for that remains that way. Mike, do you want to add anything to that?
No, that's perfect.
I'll say on acquisitions, so we don't want to get overly granular, in discussion of acquisitions, but as we've shared previously, as we've deleveraged, and you just heard from Mike that we finished Q3 at a 3.7, and you know we're going into our highest cash time of the year, so some additional deleveraging would happen as we go through the fourth quarter. We've got very clear line of sight to getting to that 3.0 target that we set for the end of 2020 early. As a result, it's just time to start considering, we've got more financial flexibility now than we had a year ago, and it's time to look at new things.
I'd say that, as you noted, the RB Foods acquisition did skew us more to the Americas than we were, and it also skewed us a bit more to the consumer business than we were pre-acquisition, and we would hope to, over time, balance that.
Great. Thank you very much. I'll pass it on.
Thank you. Our next question comes from line of Robert Moskow with Credit Suisse. Please proceed with your question.
Hi, thanks. Good morning.
Hey, good morning, Rob.
Good morning. The thing that really stood out to me was the operating leverage in the Consumer division . You had high teens operating income growth in the quarter, and obviously some strong sales too. Can you help us break down, though, how much of that growth was from operating leverage from the volume? How much of it was from maybe cost reductions related to the special charges? Thanks.
Well, I'd say, this is Mike, it's really not related to the special charges at all. We have an underlying CCI program which continues to accelerate during the year. We have really good product mix and category mix. The brands that did really well, such as French's and Frank's, our core business, have very high margins. I think you're getting a bit of product mix, or I know you're getting a bit of product mix in there as well.
I think if anything, there may have even been some operating cost headwinds related to our ERP program that would've run through both segments.
Got it. That's really high quality. Great.
I'm very hopeful.
All right, great. Then on the fourth quarter, or actually just on Flavor Solutions in general, can you be a little more specific about the constraints you had in the warehousing? Is that for raw materials for spices and seasonings, or is it for the liquid fill part of your business that was growing so strong? Then a follow-up would be, you mentioned a customer that had some timing issues. Is that in the restaurant sector or is it consumer sector? Could you be more specific there?
Well, the warehouse was a move to a raw material, a new, larger, and I would say more functional, raw material warehouse. It actually was on the higher margin side of the business and had a bigger impact on our flavor and seasoning business, where we've had a lot of growth. In addition to our overall growth that you've seen in our Flavor Solutions business over the last several years, there's also been a shift in the portfolio towards that higher margin end of the business. The growth in that part has been particularly strong. We just outgrown the space and needed to make a move. Just the logistics of physically transferring the goods and coming up with a new warehouse put a short-term constraint on our growth that we've really, at this point in time, are almost through.
I think that gives us a lot of confidence in the Q4 number over there. Rob, remind me, what was the second part of the question?
You mentioned a customer that had some timing issues for flavor.
It's not a customer. This is just broad-based ebb and flow in the business. There is some customer concentration, but I wouldn't read into this any particular new customer.
Yeah, a lot of times it's timing of new promotions they have and things like that.
Exactly.
You saw year to date, we're up 5% in Americas, so good, strong performance through the first half. Good underlying performance still and strong demand.
Okay. Can I assume that's the restaurant channel, or is this?
I would not.
I would not assume that.
No.
Would not assume.
Both sides. Yeah, do not assume.
Okay. Thank you.
Thanks.
Thank you. Our next question comes from line of Chris Growe with Stifel. Please proceed with your question.
Thank you. Good morning.
Morning, Chris.
Good morning, Chris.
Hi, I just had a question for you if I could, and just to make sure I get it straight around the upcoming fourth quarter, you had that shipment timing factor in the prior year. Have you said what that adds to the fourth quarter this year? I know we've talked about this, but have you given some dynamic around how much that could be for revenue growth in the fourth quarter?
We haven't specifically called that out. We know it's a tailwind to us in the fourth quarter. We knew that there's always trade loading and things like that that happen during the year, about 100 basis points, but we haven't quantified the bounce back. It should be positive to growth and margin.
Especially in the Consumer division, correct? That's the main area where we saw that we missed in the fourth quarter of a year ago.
Yeah.
All right. Okay, and then I just had a question with, you had pricing down in two of the Consumer segments and two of the Flavor Solutions segments. I'm just curious, I guess, from a higher level, how much inflation was up in the quarter, and did pricing not fully offset the cost inflation? Was this promotional driven by any chance? Just, are you seeing any kind of change in promotional dynamic in your categories? I'm thinking especially on the Consumer side.
That's a good question. What you're saying, we'd said at the beginning of the year, cost inflation was low single digits, and we have taken specific pricing in markets. What you're seeing in some of the markets, such as EMEA or even in the Americas a bit. We've talked a lot about new products on this call, as you see. As they roll out, there's some promotional activities to drive them. That has a bit of a negative on price, but we have taken pricing this year. We've gotten that through, and we're actually talking to customers now about pricing for next year as some of the tariffs and things become more solid.
Okay, great. Thank you for the time.
Thank you. Our next question comes from line of Steven Strycula with UBS. Please proceed with your question.
Hi, good morning.
Hey, good morning.
Good morning.
First question, just wanted to kind of drill into the revised guidance and focus in on what you're really implying for the fourth quarter outlook. Mike, should I think about the midpoint of what you're saying for organic net sales to be around 5%? What are the key drivers then? That'd be question one, then I have a follow-up.
Based on our math, Steve, we're implying about 2%-5%, so somewhere in the middle there, which is a bit up versus the first three quarters, but we talked about before some of the tailwinds going into the fourth quarter, and that's reported, by the way. Continuing strength as we saw in this quarter and a little bit of acceleration with Flavor Solutions in the fourth quarter, as Lawrence just discussed.
Yeah, the change in the guidance for the full year reflects more that we've only got one quarter to go, and we've got three in the bag, and we know where we are. The previous high end of the range implied a number that you guys would laugh at.
Which you did last year.
We wanted to narrow it.
Takes a lot to make me laugh, Lawrence. No, no. Just moving along, though. What would you say, if anything, not to pick at it, because I know you guys have good results year to date, but what, if anything, came in like a touch lighter to kind of nudge it down the full year guidance a touch on the sales? Is it a reflection of maybe just the EMEA weather? Is there anything else you'd call out through the first nine months, or maybe something that you see in line of sight for the fourth quarter?
Well, definitely EMEA weather. Back in June, we weren't thinking it was going to be that hot and impact consumption. The warehouse transition that Lawrence talked about did impact a bit, but I wouldn't call it one big thing specifically.
Right. As far as looking ahead, I'd say that I think that we've got a balanced view of our risks and our opportunity. That narrowed range does include all organic growth, it's primarily volume and mix. That's pretty strong versus peers, so we understand that. We've got a lot of reasons to be confident that we can deliver that. The kind of surprise would be something that we don't know. I think if there was a surprise anywhere, maybe it might be more on the cost side than on the sales side, where there could be some issue. It's possible that we might have a little bit more ERP expense in the fourth quarter than we've been guiding.
Than we had in the third quarter.
Than we had in the third quarter. I think we would take that in stride, and if that were the case, we would certainly highlight it.
Yeah. Even our underlying guidance implied reported is 5.5%-9% almost. It's good underlying operating profit performance still.
Right.
At this point, we got a pretty good idea of customer performance for the holidays. It's all pretty well lined up.
Okay. Lawrence, then one quick strategy question, then I'll pass it along. On private label, any given quarter, it's a smaller piece of your business, the next quarter it's growing again. How do we think about it strategically? Did the growth that you see in private label in Americas this quarter, is that mainly coming from measured channels, unmeasured channels? How do we think about how you guys think about it within your total customer solution set? Thank you.
Yeah. First of all, generally, private label growth, not just for us, but for herbs and spices category has moderated significantly. We talked about in the last couple of years that we thought the numbers were inflated by a couple of factors that I'm not going to review. The growth in private label has moderated. In the current timeframe, the growth that we're seeing in private label is more in the unmeasured channel than in the measured channel. We think about private label in terms of its profitability, in terms of the customer relationship, and in terms of offering a customer a full solution for the category. There aren't any customers that we are just providing private label. It's always in conjunction with a branded program as well. Does that get at your question there?
It did. Thank you.
Okay, great.
Thank you. Our next question comes from the line of Adam Samuelson with Goldman Sachs. Please proceed with your question.
Yes, thanks. Good morning, everyone.
Good morning.
A question, not so much about the quarter, but just thinking about the outlook and ramp into 2020. On the Flavor Solutions side , which in the last couple of years has been a really important contributor to the margins and earnings algorithm for the company. Margins year to date have been basically flat. I'm just trying to think about drivers of why that margin expansion has slowed down as it has. I know this quarter, you had some lumpy growth and you had the warehousing expense, so not necessarily this quarter, but thinking about the nine months in totality and how we think about that into next year.
Yeah, I think you got to step back and think about the progress we've made over the past four or five years. We've increased, and this is both organic and acquisition-based, about 500 basis points in the operating profit line. This year has been a little lumpy. We were up in one quarter, even another quarter and down in this quarter. Some of the discrete items that happened this quarter really around some really negative FX trends that hit in the EMEA primarily versus what we were thinking back in June.
That would be transactional.
Go through transactional, it goes through the costs of goods sold as you reevaluate your balance sheet. We see those are risks that you always have based on world economies and things like that. We continue to look at taking our portfolio to higher margin business. Some of the other things that hit us this year that hopefully will turn next year, you think about APZ, where a lot of We talk about our Flavor Solutions business with Limited Time Offers. That mean with some of the economies in China and APZ, they really shifted away from Limited Time Offers where we make higher margin business to more base business, which is lower margin. That was some of the challenges we've had this year that hopefully as economies and companies realize they need to drive LTOs to drive consumer traffic will reverse.
We continue to believe that over time we have significant runway for margin improvement in our Flavor Solutions segment.
Okay. That's helpful. Then just a bit of clarification, just any way to quantify how much ERP has been year-to-date? Do we think, does that any way quantify how big a step up, if any, there is into next year from ERP?
We'll talk about that more at our earnings or when we give guidance in January, but we have had some ERP expenses, as Lawrence alluded to. Last call we said mostly second and third quarter. It has been a little bit of a shift out into the fourth quarter from the expense perspective, but we do see 2020, that's where a lot of our big go lives are going to be. There will be a significant step up in ERP, but we'll give you more clarity in January.
Okay. I appreciate the color. Thanks very much.
Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Mr. Kurzius for any final comments.
Great. Thanks everyone for your questions and for participating in today's call. McCormick is a global leader in flavor, and we're differentiated with a broad and advantaged portfolio, which continues to drive growth. We have a growing and profitable business and operate in an environment that is changing at an ever faster pace. We are responding readily to changes in the industry with new ideas, innovation and purpose. With a relentless focus on growth, performance and people, we continue to perform strong globally and build shareholder value. I'm pleased with the strength of our year-to-date results, and as we enter the last quarter of our fiscal year, have confidence in our fiscal year outlook and we're well positioned to deliver another strong year in 2019.
Thank you, Lawrence, and thanks to everyone for joining today's call and navigating through some of the technical call issues we had at the beginning. If you have any further questions regarding today's information, please do not hesitate to reach out to me. This concludes this morning's conference call.