Okay, good morning, everybody. I'm Steve Powers. I'm the head of Deutsche Bank's U.S. Consumer Packaged Goods Research, and I'm thrilled to welcome everybody to the 22nd installment of our Global Consumer Conference here in Paris. I am equally thrilled to welcome McCormick & Company back to the conference. As many of you know, McCormick is a global leader in flavor across consumer-focused spices, seasonings, and condiments, as well as B2B-focused Flavor Solutions. The company generated over $6.7 billion in revenue last year from products sold in 150 countries and territories around the world. I'm with us today from McCormick, as was the case last year. Welcome back, Brendan Foley, Chairman, President, and Chief Executive Officer, and Marcos Gabriel, Executive Vice President and Chief Financial Officer. Thanks, guys, for coming back.
Good to be here.
All right. Maybe we can both chime in on this question just to get us started. Given the heightened focus on tariffs and the evolving trade policy backdrop, maybe we can just level set on how current tariff dynamics are expected to influence your cost structure. Additionally, what specific actions you may be taking or thinking about taking to mitigate those potential impacts, whether through alternative sourcing strategies, pricing, cost optimization initiatives, et cetera.
Steve, I'll get us started and just provide a little bit of an overview and then ask Marcos to help me with some additional context. We think we're pretty well- positioned in environments like these. We've been around for over 135 years and been through a lot of different environments and evolving consumer behavior changes and everything else. This is just another one of those periods, I think, that we feel like we'll be able to navigate through. We have the capabilities and the teams in place to be able to manage through this. I think that's what's really important. We established sort of a dedicated cross-functional team a while ago, just dedicated to monitoring the developments and then sort of taking the immediate actions that we need to take just to sort of continue to mitigate the situation that we've got.
We are also confident in our competitive situation, too. I mean, all of our competitors have the same exact dilemma that we are going to have with regard to what the tariff impact might be overall. We are taking or planning for just mitigating actions both in the short-term and the long-term perspective as we look at this overall. I think one of the more important things is we are sort of navigating this period focused on what the consumer needs, what our customer needs. That is kind of like our ground zero on all of this. Our goal is to really just maintain and continue the positive momentum we have as a business throughout this period. That is a top priority for us. The tariff exposure that we have is primarily through importing agricultural raw materials. That is the primary area where we see the impact.
A significant portion of those materials either cannot be grown in the United States or they are not really commercially available in the U.S. for us to be able to use. That is a similar situation for our competitors, too. Our manufacturing footprint is also important to understand. It is designed such that whatever needs to be sold within a region is made locally within that region overall. We have a lot of strong local brands, too. That is additional context. When we think about mitigation overall, we first look to productivity programs. We call ours CCI, but we look to that first and all other types of cost savings and areas where we are going to try and make sure that we can offset that with everything we can, efficiencies and the like.
We will also look to revenue management and pricing if necessary for that, which we cannot cover. We will talk a lot with our customers to make sure that we do that in the right way to continue to maintain the volume momentum that we have in the category. We think that is really important with our retailers. Overall, we think we have the manufacturing location strategy. We have really a lot of strength and resiliency in our supply chain, as well as in global sourcing, as well as regional local brands. All of that kind of rolls up to competitive advantage during a period of time like this. We feel like we are well- positioned.
Anything, Marcos?
Yes, I will. Yes, thanks, Brendan. As you know, Steven, the situation is fluid. I mean, we are going to remain balanced, agile. We're going to be taking a surgical, data-driven approach in everything that we do. I mean, we're going to put the first, the consumers and the customers and balancing short-term and long-term commitments as we always have done it. We want to maintain our volume sales momentum. At the same time, we have to protect our profitability because we have to continue to invest in the business. It's kind of finding the balance between keeping the volume momentum that we have in place, but also protecting our profitability. Also, just to be clear, I mean, we are in the middle of the close of the Q2 books, and we are processing any new changes in tariffs right now.
We will provide more of a full update at the end of June as part of our Q2 earnings call. Building on what Brendan said in terms of the exposure today, we have about over 17,000 unique materials that we source across over 90 countries. No one single commodity has a disproportional material impact to our cost of sales. Also, it is important to say that over the last number of years, we have been decreasing the reliance on any one single geography. We do not have that as a headwind to us. Finished goods that are imported from Mexico and Canada are USMCA compliant, so those are exempt in terms of the tariffs right now. Also, it is important to say that across the biggest markets, U.S., Canada, and China, 85% or more than 85% of what we sell in those markets are manufactured in those markets.
In the U.S., over 90% of what we sell in the U.S., it's manufactured in the U.S. It is really about the ingredients that we bring from outside into these markets. In many of these markets, our share performance shows the benefits of our manufacturing strategy, as well as the strength of local brands in these regions. That is kind of the background. From a mitigation standpoint, we do have a number of levers that Brendan mentioned. We are actioning some, and we are staying agile for any other changes that potentially could happen. First, as I said on our first quarter earnings call, our guidance range already accounts for the latest tariffs that were initially implemented from China of 20%. That is already part of our guidance.
In addition, our typical sourcing strategy supported by we have a lot of data analytics is helping this year to mitigate our exposure. We look to continue to source from alternative places. That is also part of our strategy. Finally, I would say CCI across P&Ls. I mean, we have a very good CCI program across all lines of the P&L, and this continues to be a very important way of mitigating those impacts. At the end of the day, if there is a residual inflationary impact, we'll take revenue management as a lever. Obviously, we want to be very data-driven, surgical-specific, because as I said, we want to keep the momentum going, the volume momentum going, but we also have to protect OP. We're going to be very mindful on how we do it.
We will adjust our plans as things evolve, and we will be providing more detailed information at our Q2 earnings call in a few weeks.
Very good. You talked about volume momentum, and that's been—and I'll come back to that in a second—a lot of focus has been from investors on just the current state of the consumer in the U.S., as well as internationally, and how that impacts your ability to drive that volume. How do you assess consumer sentiment in the U.S. and some of your major markets abroad? How do you think consumer behaviors or sentiment have evolved over the recent months?
We're in a unique position across our portfolio, just with its breadth and stretch overall, especially also because, and I think more importantly even today, we sit at this intersection of just this search for value, but also this accelerated trends in health and wellness in the marketplace that we all see. McCormick is end-to-end flavor. So we play very deeply. When we think about the flavor world, when you think about those two areas, we have a strong understanding of consumers' needs, their behaviors, their trends. And most importantly, we don't compete for the calories. We flavor them. So that's really what our business is about. I'll just touch first on a regional basis and speak more broadly overall. On a regional basis, what we see in the U.S. and also in EMEA is still a very challenged consumer, but remaining pretty resilient.
I mean, if you take a look at the data, the spending is still pretty strong overall. This is also—take the U.S. specifically—you can see the declining consumer sentiment, but on top of that is a pretty stable unemployment environment and everything else. We see things very much as they were in 2024, just sort of continuing through. There is this search for value, value-seeking behavior. People are still making kind of quick shopping trips. They are not buying as much per trip. They are looking at larger sizes to kind of find even greater value overall. We even see a lot of increase in the use of leftovers as a behavior in the household. We track the household behavior every quarter just at a global level to understand what might be changing.
There is a lot of consistency in what we are seeing throughout 2024 into 2025, I think, from the consumer standpoint. There are a lot of offsetting sort of signals, but the bottom line is a challenged consumer still remaining resilient overall. I think it is important to talk about China a little bit. We still expect that market to have a challenged environment, but we expect a slight and gradual recovery on China in 2025. What we are seeing in that marketplace is very similar things in terms of value-seeking behavior, a lot of channel shifting and channel priorities. What we are seeing right now is a lot more strength in the smaller format stores, mini- marts is what our team would call them. Also, a lot more growth in smaller-tier cities, too. The larger formats like hypermarkets and large-tier cities are not necessarily growing as fast.
We're seeing a lot of our resources being allocated towards where we see those areas of growth. In Q1, we've seen a lot of that gradual slight improvement in the business, which has been pretty good. In fact, volume growth out of both markets when you look at China. Still, I go back to it's a similar condition that we're seeing in the U.S. and EMEA, not a ton of change from that challenged position that we see the consumer in right now. If we take a step back more broadly and walk away from regions for a moment and just think about overall consumer sentiment in terms of what they're looking for, we see this kind of intersection between the search for value, but also this acceleration on health and wellness trends going out there.
Our portfolio kind of sits quite nicely in that construct. We have to remember when consumers are challenged, they tend to cook at home more often. They shop the perimeter of the grocery store for fresh food. Those two things together sort of really speak, I think, to stronger trends within our categories. We definitely see that in herbs, spices, and seasonings. Right now in the U.S., it is number one in terms of unit growth in center of store overall. We are seeing that play out in our categories. At the same time, you see this acceleration in health and wellness trends by the consumer. Both of those can work together if you think about it that way. As a result of that, one of the things that we are seeing, and we track this, is 86% of households are making their meals at home.
We just see that more often. That is two points higher than pre-pandemic. It is still staying in there as sort of this learned behavior. Over the last several years, consumers have learned how to cook. They are having healthier meals at home. These meals are also cheaper because they are able to stretch their budgets. Overall, there is more eating around the table with the whole family. These are areas that we see as continuing sort of recurring evidence within the data that we see, but also we see that in the performance of the categories overall. At the same time, people are enjoying the creativity, flavor exploration. There is still joy in our categories in a lot of ways. Flavor is a long-term enduring trend in our view as a result of kind of taking a look at this.
This long-term trend really speaks, I think, to McCormick's focus in these categories and why we're performing well. Even in a value-driven environment, this is what we're seeing right now, I think, with the consumer overall. The good news is that we have a broad portfolio. We have an innovation agenda that really meets the needs of consumers in this area. We're pretty confident in terms of our performance so far and our plans. It gives us optimism as we look forward.
Okay. Those meals at home are spicier, too.
They're spicier.
That's good for you guys. As you just talked through, there are definitely some tailwinds on your categories. But there's the value-seeking behavior. As we look to the second half, you are starting to lap momentum that was built a year ago. I just want to kind of test that confidence a bit as we think about the back half, especially in the context of if we have to take revenue growth management actions in the face of tariffs. Just how you're thinking about that as you go into the second half.
Building off of the last question, if we just share with you kind of how we looked at 2025 when we began, we did not see a big rebound. We expected the consumer to remain pretty challenged. Therefore, we kind of thought about those trends carrying through 2025. If you compare that with what we are seeing right now, that is not necessarily a big surprise. You see that play out in overall industry volumes, too. Maybe a little bit softer than maybe all of us would like to see, but certainly that condition exists there. Importantly, though, our categories are performing much better than that overall. What we started in late 2023 and kind of executed through all of 2024 is just this increased investment in our core categories across the business to drive volume growth and drive healthy categories.
This is increased A&P that we've spent. We also launched incremental innovation. We started to really gain distribution on our core part of our portfolio. We also really talked a lot about this already, but we implemented price gap management initiatives to really sharpen our price points on the right items at shelf. All of that has really led to very strong performance across our consumer segment. We've seen really strong performance over the last four quarters in that part of our business. To your point, we're starting to lap some really strong performance. What I would tell you is just globally, it's not just the United States. We've seen very positive consumption and volume growth out of all of our markets. Globally, we've grown seasonings volume at a global level, not just the United States, but in other markets as well.
We are seeing great share performance in the U.S. and Canada, whether it be volume share or unit share. It is kind of where we are putting a lot of our focus right now. We like how we are performing. Broadly, we are outperforming edible and center of store. Those are really strong trends. We brought a lot of that into 2025. It still is increased investment in A&P over the prior year, increased innovation over the prior year. Price gap management plans kind of stayed in as the baseline. That is kind of embedded in the business from a baseline standpoint. What is on top of that as we go into the back half of, let us say, 2025 right now is we still see continued distribution growth. We still have accelerated innovation across our portfolio.
You'll see that through the example of we're starting to roll out that preferred consumer package across our grilling portfolio right now. We're launching more Cholula innovation. We're relaunching the Gourmet line in the back- half of the year. We have a lot of incremental activity on top of that, what is a really strong foundation in terms of performance on the business that we think is the right level of performance, being healthy volume growth overall. That gives us the optimism that we're going to continue to do this. I mean, we don't just repeat plans every year. We also build on top of them. That's what you can expect in terms of how we're looking at our business right now for the rest of 2025.
Great. That conversation was consumer-focused. If we pivot, Brendan, over to Flavor Solution, just how is the consumer environment influencing performance on the top line there and maybe any differences of note between the core flavors business and the food service, food away from home business?
Yeah, when you look at food away from home and also kind of our core sort of CPG business, when you think about flavors overall, we're definitely seeing softer trends. A lot of those trends are being reported by our peer companies or even our customers. That shouldn't be a big surprise. That certainly has been impacting our performance. We saw that in our first quarter overall. From a center of store perspective, overall, we're seeing that mostly happen with larger brands. At the same time, we're seeing pockets of growth with very fast-growing emerging brands, also emerging categories overall. It tends to be in the areas where you're seeing a lot of health and wellness- type sort of benefit focus. It could be hydration, functional food with functional food benefits. You're seeing it with a focus on proteins. There's a lot of focus around proteins.
All of that needs flavor. We see a lot of opportunity there. We're seeing that in our trends overall. That's helping to take the edge off, if you will, sort of what we're seeing in terms of performance of some of those larger brands and overall volumes. That's kind of our outlook when we think about our flavor businesses. We're seeing some offsets to that. In the food service marketplace, particularly when we think about Food Away From Home, right now, there is softness there. Our branded food service business in the Americas has been flat. We're gaining share in a tough marketplace right now because we're seeing sort of slower foot traffic with a lot of those customers. Again, we're seeing pockets of growth there, too. Like fast casual chains right now, we seem to do very well with.
Those are really doing pretty nicely in the food service marketplace. We are getting nice growth from them. In QSRs, those have been pretty soft, mostly at a global level. I will say in Asia-Pacific, they have been doing pretty well overall. In sort of North America and EMEA, those who are doing a really good job at promoting their business, we are seeing some strength there. One of the other unique things that we are seeing also is they are doing a lot of limited-time offers, and they are using our brands. That also creates growth for us, and it also helps our consumer business overall. I think if I were just to wrap up our thinking right now on Flavor Solutions, we just take a long-term view on the top line on this. We are not going to get caught up in the short-term issues.
We just see a lot of long-term opportunity. We do not think about our business as anchored by just certain key categories. We are really anchored up against four taste competencies. It is savory, it is naturally sweet, it is heat, it is citrus and fruit. Those are large addressable markets for us, and we see continued strong growth there. That is our optimism right now behind that part of our portfolio.
Just to follow up on the small brands versus the big brands, the economics of those contracts, contracting with small brands, is that more profitable growth, less profitable growth? Is there a rule of thumb?
We tend to win that business at a higher margin.
It is the higher margin.
Yeah, it is more favorable.
Okay. Marcos, that leads me to my next question on Flavor Solutions margin. I guess what is your current thinking on that traditionally hot topic for investors and just kind of where your confidence sits in terms of being able to get back to pre-COVID levels?
Yeah, the confidence is pretty high. I mean, I would say that. Before I talk about Flavor Solutions, let me just take a step back in terms of the overall company's profile. At Investor Day back in October, we laid out a path to get to 17.5% total company operating margin, which is by 2028, which is about 200 basis points margin expansion since 2023. The biggest contributor to this will be Flavor Solutions by growing 400 basis points from 2023 to 2028. On Flavor Solutions, more specifically, we are halfway towards that goal of reaching 14.5% operating margin by 2028. Over the last couple of years, we have improved the margins by 350 basis points, which shows that our plans are working, right? On the back of five main drivers, I would say, of margin expansion. Number one is volume growth.
As we get volume, you get operating leverage through the P&L, right? Number two is mix, really, as we continue to shift towards high margin categories such as flavors and branded food services that also contribute to margin expansion. Our CCI program, robust savings and efficiencies program that we have, it's a big component of it. We also continue to tweak our portfolio and exiting low-margin businesses. I'd say last but not least, there's always some small pricing actions that we take to offset inflation and FX impacts across the globe. Those are kind of the five levers that we have used and we'll continue to use going forward. Just to give a little bit more of a detailed element here, as you think about all these elements, we should expect roughly half of the improvement to come from volume mix and price.
The other half really to come from CCI program. That is kind of the way we are seeing it. Obviously, it can change on a quarterly basis depending on the environment, but we expect it to be around these averages over time. I would say finally, I think an important point is about top-line growth. I mean, we will continue to invest in our capabilities, technology, and R&D to continue to drive future growth in Flavor Solutions. Although we are very confident in terms of our ability to improve our margin profile, this is not just a margin objective. It is margin and top-line coming together. That is how we see it.
Great. Somewhat related topic, I guess. Brendan, the Make America Healthy Again movement and consumers' desire to eat healthier generally has put a lot of focus on reformulation across the packaged food industry. To what extent do you think your flavors business is positioned to net benefit from these trends? Because there are flips and takes. There is traditional business that will be reformulated away from you and then new business that you can win. What role does McCormick have in reformulation? Is it a net tailwind as you think about the next few years?
My context around this is, first of all, as an industry, the industry has always addressed these opportunity areas with innovation. I do not see this time as any different than that. We saw that with the removal of trans fats, or the reduction in sodium, or the introduction of just sort of non-GMO. All of these are areas in which the industry has had to address opportunity areas. When we look at this current period of time, I think this is going to be another one of those moments where you kind of go through and a lot of innovation is going to really start to address what the consumer is looking for here. There are a lot of long-term trends towards health and wellness.
Whether or not there's going to be regulatory action, companies, and McCormick included, are focused on what the consumer is looking for and what our customers are looking for. That's really what's driving a lot of our behavior. A lot of this attention has really been there well prior to even the new administration coming in. That's kind of the context that I would say overall that really applies here. Big customers are responding right now by innovating and taking on projects. We have an active role in that reformulation activity. We have much even prior to this, too. I mean, a lot of it would have been a lot of focus on removing artificial ingredients or reducing sodium, etc. That work continues, and we have been doing that really for some time. Having said that, we're really quite involved in that.
We're also really well positioned, I think, up against what the consumer is looking for today overall. We have just a very deep-seated expertise and capability. When you think about where we start is we do everything from natural ingredients. That's kind of how we approach things as a flavor company overall. That's one of the ways in which flavor companies are trying to address these issues. This is kind of a strength of McCormick. It's also sort of our overall culinary foundation kind of puts us in a pretty good place to address that. What we're seeing today, right now in the marketplace overall, is a lot of sort of increased active project work up against this. There was a lot before this, but there's still a lot more coming through.
We see a lot of companies active up against this, whether they be small emerging customers or really large CPG manufacturers. We see a significant amount of step-up in activity, and we're engaged in that, too. This reformulation activity, I think, is kind of important. It will create a lot of incremental opportunity, but it's also been there for a long time. This is part of the business, if you will, overall. We do think that this is an area in which McCormick will participate quite heavily.
Okay. Is the acceleration activity, does that lead to an acceleration in competition for this business? I mean, as you think about the race to be involved and be in the pole position to be at the table for reformulation, does that come with net benefits, or does it come with incremental costs to compete?
I don't see this coming with incremental costs to compete, but you're typically competing, especially with larger companies, with sort of a collection of flavor houses who are also approved to work on for that customer. If we're an incumbent on something, we're going to have the opportunity to really address what they're looking to do, take something out or add something in or remove an additive, whatever it might be. Those are areas that we get an opportunity to do for the things that we already work on today.
Great. Marcos, we heard Brendan express his confidence in the back- half. I just want to pivot back to that and get your perspective. You started 2025 with, I think, very solid first-quarter results, particularly on top line. As you think about what you've seen kind of quarter to date, year to date, and kind of think about the back- half, both across consumer and Flavor Solutions, where's your kind of personal confidence set for the remainder of the year?
Yeah. I mean, as you know, we cannot comment on current quarter. We just closed the books, closing the books this week, I would say. We are going to be reporting in a few weeks. We are going to be providing an update there. Let me just first highlight some of the areas of progress from our first-quarter earnings call. In Q1, we felt pretty good about our results because we continued to accomplish the things that we said we would accomplish. At a total level, we grew total organic net sales within our midpoint of our constant currency guidance range. In the consumer segment, we drove volume growth across all regions, which was very good results. In the fourth quarter in the world, growing consumer volume across the globe. As expected, operating profit was impacted by timing. EPS was also impacted by FX.
We talked about those items in Q1. We do not guide specifically to any quarter, as you know. As you think about the second quarter, some considerations to keep in mind. This is kind of mostly in line with what we said back in March. Starting with the top line, consumer segment, we expect to continue volume growth as consumption continues to be strong for us. On Flavor Solutions, as we said, volumes will fluctuate. Yes. That is due to the timing of customers' activities. As we said before, we are seeing softness in customers' volumes driven by large CPG companies, but also particularly in EMEA in the QSR segment. That will impact our results, right?
In terms of OP and EPS, I would say that we continue to expect that our growth will build throughout the year and will be more weighted towards the second half of the year. As I said before, earnings per share will be impacted on reported dollar basis, will be impacted by FX more so than the operating profit. That is due to our JV in Mexico. Although the Mexico business itself, that JV is performing extremely well. The FX translation year- over- year will continue to be a headwind for us. On tax, we still expect the tax to be at 22% for the year. In the second quarter, the tax will be higher due to timing of discrete tax items. It is a quarter-to-quarter movement that we'll see in terms of tax.
What is important is that we want to continue to maintain our flexibility to invest behind the growth levers that have yielded results for us so far. We'll continue to invest in supply chain to get the demand, support the demand that we have, as well as to optimize our operations. We'll continue to invest in A&P and R&D technology. CCI will always be kind of the way to provide the fuel for us for these investments.
Great. Are there any incremental considerations with respect to second quarter given tariffs that have took place since April? Obviously, the original China tariffs are embedded, but will you experience incremental costs from tariffs as of April 2nd and forward, or is that more a second-half issue?
It is more towards the second half. We might experience some. We're still closing the books in Q2, but it's more towards the second half of the year.
Okay. Great. A question for both of you, because, Marcos, you mentioned technology investments in your answer there. As we think about kind of panning back out, there is a pretty substantial digital transformation going on inside McCormick. Maybe just talk a little bit about that, what's going on and what the goals are, and how that's going to contribute to value creation over the next one, two, three years.
This is a pretty exciting area, I think, that we spend a lot of time. Both Marcos and I spend a lot of time on this. I would say that we're really proud to be a leader in flavor, also a leader in identifying trends. If you think about the future, you got to really be aligned with technology to be able to still do that. This is really all about continuing to hold that position that we have as a leader in the categories in which we operate, and that's end-to-end flavor. Technology is going to be an important part of that. We see digital acceleration remains as one of our top five global priorities that I set out. It will be there, and it remains there overall.
For us, what this means overall at a high level, what we're focused on is continuing to drive demand creation. That's one of the key priorities there. That's all about meeting consumers with where they are and allowing digital and data and AI as an example to really allow us to do that more effectively. It's also about accelerating product innovation on top of that. We're seeing already examples of that happening. It's also optimizing retail execution, whether it be online or offline. That's another part of what digital transformation is meant to do. Lastly, it's operational efficiency, whether it's on our plant floor or it's how we source raw materials. This all plays a role in that future competitiveness that we want to make sure that we continue to maintain that competitive advantage.
All of this enables us to just really better serve our consumers, better serve our customers, and continues to drive our leadership and differentiation. Marcos, you want to add more details on that?
Yes, I can. Yes. We are making investments in IT and technology to support digital transformation journey over the last few years. We are very pleased with the progress to date. First, I would say that we are strengthening our enterprise digital foundation. That is implementation of the S/4HANA across Americas, which is well underway right now. We've taken an intentionally de-risked approach to those implementations and through a functional deployment approach. Instead of going big bang, we're going on a functional deployment basis to avoid any disruption. That is going very well for us. We're also advancing our data analytics strategy. That's the use of AI, machine learning technologies across the globe. I would say that the other part of our global foundation is the Global Business Solutions Organization, or GBS. We have hubs in Americas, in Europe, and in Asia.
Those hubs play a critical role in standardizing and automating processes globally. That has kind of helped us with that foundation. It is not only about the technology, but it is also about the ways of working and transforming processes that come together. That is kind of the foundation. On top of it, we always think about, in a way, the strategic pillars that we have: Growth, performance, and people. How can technology influence and contribute to those three pillars? On growth, for example, we are enhancing how we serve consumers and customers with end-to-end experiences. Examples are targeted and tailored brand marketing content. That is helping us be more effective in terms of our media spend. We are enhancing revenue management capabilities with tools such as machine learning and predictive analytics in that space to keep our volume momentum going and be very surgical.
When we talk about surgical, being surgical, that is part of our strategy in terms of revenue management and enhancing the speed of innovation, both in the consumer and Flavor Solutions through the use of technology. That is kind of the top line. When you think about the performance pillar, there are several initiatives underway. For example, in procurement, we are leveraging machine- learning technology to identify historical patterns of cost and be able to predict future pricing. We are using that very effectively. We are deploying digital shop floor collaboration tools in some of the sites globally. We continue to enhance our forecasting capabilities. That is very important to us as we continue to drive working capital improvements.
I would say the last big piece is automating processes and getting more of the real data on a timely basis to improve our SG&A spend and where we spend the money around SG&A specifically. People, it's all about reinventing the ways of working through the use of technology and continuing to train and upskill our people. All of these elements that I just mentioned, we are realizing the benefits already, and we expect more to come in the future.
Great. I guess as you're answering, I was thinking about M&A and McCormick. Clearly, historically, M&A has been central to the strategy and presumably will be going forward. Related to that, one, just sort of an update on your kind of M&A stance and readiness for deals. Then, as you think about this digital transformation, does that make future M&A integration easier? Number one. Number two, would you consider M&A in terms of acquiring some of the capabilities you're trying to build as opposed to building them organically?
Yeah. Let me kick it off with a couple of observations and ask you that. When we think about, especially the S/4HANA and that implementation, a lot of that had to do with very much what you just said, Steve, which is that enables us to even more effectively do transitions and integrations if you have just a better platform from which to do it from. That is one of the, if there were 10 reasons, it was on the list if you think about it that way. When we think about also opportunities and assets that we evaluate, their current posture from a technology perspective certainly influences what we think about. What incremental cost might there be? Do we have to do any excessive lifting, or is that going to be maybe a capability that allows us to shortcut and be able to do things much more quickly?
We do think about that, and we sort of think through all of those different elements. Obviously, there would be a preference or a premium if we can find those capabilities somewhere else and adopt them in. I think our FONA acquisition was a good example of being willing to do that and change the way we operated based on the way that acquired company operated.
Yeah. I mean, what I would add is that the Global Business Solution, or the GBS organization, plays a critical role in terms of helping integrate new assets as we become more of a standardized company globally. Those hubs across the regions that we have, in addition to the technology that's going to enable it, I mean, process is really key. If you have processes standardized and good technology, you can integrate assets more quickly and realize the savings more quickly as well. In terms of your question about readiness for M&A, our balance sheet, it's in a good position, I would say. We've been paying down that over the last 18 months or so. We are in a position now that we're below three times leverage ratio, and we are in a comfortable position for acquisitions. We're going to stay disciplined.
We're going to stay disciplined in terms of the assets that we acquire. It has to be accretive from the standpoint of net sales, operating profit, and EPS. We're going to stay disciplined, but we do have the firepower to pursue acquisitions.
Great. Yeah. We've got a couple of minutes left. Brendan, if we think long term, five, 10 years in the future, as you plot the direction of the company in coordination with the board and with your leadership team, what are maybe one, two, or three trends that you think are most important, that you think investors are thinking most important in terms of the future direction of McCormick?
Yeah. The handful that I think about all the time, I would say the first was probably the role of flavor that plays with the consumer. We know flavor is an enduring trend, but we also expect a lot of change and dynamic change to happen over time, especially when you think about the acceleration of health and wellness. I mean, that's just a trend that we always knew was there just starts to accelerate right now. We think that's going to be a pretty hard part of it. That's how it shapes culinary trends and how we deliver flavor, etc. Not surprisingly, you might appreciate sourcing agility. It's something that we think about a lot. This would have been in my list well prior to April of this year. That is there's both climate change. There's also a political environment.
We have to think about where that sourcing is going to come from. We are really pretty good at it. We think very long term on this. I think about the supply, the integrity of what we source. We think about where there might be developing multiple origins. We spend a lot of time on this, I would say. Digital transformation is definitely sort of a third pillar. That speed of technology change, you need to really stay focused on that as an overall long-term trend. That really just affects how we work and how we compete. We think that is going to be one of those long-term trends. The last two I think about a lot is just flavor technology and R&D.
We have to keep investing in our business if we're going to stay ahead on those flavor trends that we're talking about. That is a big area, and that will continue to be an area of investment. Lastly, I think about McCormick people and culture. It's one of the most important things I think that's kind of stood the test of time at McCormick. Why spend more time thinking about that as a key trend is just when you think about us getting bigger, how do you retain that culture along the way and not lose it? That is a big area of priority. I think about that as a trend when you think about the incoming workforce, how are you going to source talent? Then combine that with what is traditional McCormick people culture. We want to retain that.
Those are the areas that I think about the most.
Okay. With that, we're right at time. Thank you, Brendan. Thank you, Marcos. Thank you, McCormick. Thank you all.
Appreciate it.