Good morning. This is Kasey Jenkins, Vice President of McCormick Investor Relations. Thank you for joining today’s First Quarter Earnings Call. To accompany this call, we posted 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.

We will 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 and constant currency, as well as adjusted gross margin, adjusted operating income, adjusted income tax rate and adjusted earnings per share that exclude the impact of special charges, transaction and innovation expenses related to the acquisition of Cholula and FONA..

Thank you, Kasey. Good morning, everyone. Thanks for joining us. Starting on slide four, our first quarter results were outstanding. As we said in our year-end earnings call in January, we have confidence in our strategies and are well-positioned to deliver another year of differentiated growth in 2021.

Following an extraordinary in 2020, in 2021 we expect strong underlying base business performance and recent acquisitions to drive significant sales growth, as well as strong operating income growth, even considering extraordinary COVID-19 costs and business transformation investments highlighting our focus on profit realization.

During the first quarter, we delivered double-digit sales, adjusted operating income and earnings growth. We expect growth to vary by quarter in 2021, given 2020 level of demand volatility and the pace of COVID-19 recovery.

But importantly, we have started the year with outstanding first quarter performance giving us confidence in an even stronger outlook for 2021. As seen on slide five, we have a broad and advantaged global flavor portfolio with compelling offerings for every retail and customer strategy across all channels.

The breadth and reach of our portfolio across segments, geographies, channels, customers and product offerings creates a balanced and diversified portfolio to drive consistency in our performance as evidenced again by our first quarter results.

The sustained shift in consumer behavior to cooking and eating more at-home continued to drive substantial increases in our Consumer segment demand in all regions, as well as increases in our packaged food company customer in our Flavor Solutions segment..

Thanks, Lawrence, and good morning, everyone. I will now provide some additional comments on our first quarter performance and an update on our 2021 outlook. As Lawrence mentioned, our first quarter results were outstanding.

Starting with our topline growth, as seen on slide 18, we grew sales 20% in constant currency during the first quarter, our volume and product mix, acquisitions and pricing each contributed to the increase.

Our organic sales growth was 16%, driven by our Consumer segment and incremental sales from our Cholula and FONA acquisitions contributed 4% across both segments. The Consumer segment sales grew 32% in constant currency with double-digit growth in all three regions.

The sustained shift in consumer consumption continues to drive increased demand for our Consumer products, fueled by our brand marketing, new products and category management initiatives, and resulted in higher volume and mix in each region.

On slide 19, Consumer segment sales in the Americas increased to 30% in constant currency versus the first quarter of 2020, with 5% of the increase from the acquisition of Cholula.

The remaining increase from higher volume and product mix was broad-based across the majority of categories and brands, as well as private label products, with particular strength in the McCormick, Frank’s RedHot, French’s, Zatarain’s, Lawry’s, Simply Asia and Gourmet Garden brands.

In EMEA, constant currency consumer sales growth -- grew 26% from a year ago, with double-digit growth in all countries and categories across the region.

The most significant volume and mixed growth drivers were Schwartz and Ducros branded spices and seasonings, Vahiné homemade dessert products, packaging products and our Kamis branded products in Poland.

Consumer sales in the Asia-Pacific region increased 55% in constant currency, driven primarily by the recovery from the disruption in China consumption last year, as Lawrence mentioned.

Excluding that recovery impact, the region had double-digit growth due to strong China consumer and branded foodservice demand, partially driven by the timing of Chinese New Year and related holiday promotions, as well as continued strength in Australia.

Turning to our Flavor Solutions segment in slide 22, we grew first quarter constant currency sales 3%. In the Americas, Flavor Solutions constant currency sales grew 2%, driven by the FONA and Cholula acquisitions, a 7% increase, as well as pricing to offset of increase.

Volume and product mix declined due to a reduction in demand from branded foodservice and other restaurant customers, partially offset by higher demand from packaged food company, with particular strength in snacks seasonings and savory flavors. In EMEA, constant currency sales were comparable to last year, as pricing actions offset cost increases.

Volume and product mix declined due to lower sales to branded foodservice and other restaurant customers, partially offset by sales growth with packaged food companies with strengthened snacks seasonings.

In the Asia-Pacific region, Flavor Solutions sales rose 18% at constant currency, driven by higher sales to QSRs in China and Australia, partially due to our customers limited time offers and promotional activities, as well as the China recovery impact from last year’s COVID-19 related lockdown.

As seen on slide 26, adjusted operating income, which excludes transaction and integration costs related to the Cholula and FONA acquisitions, as well as special charges increased 35% or international currency 32% in the first quarter versus the year ago period.

The Consumer segment adjusted operating income grew 59% to $190 million, a 54% constant currency growth from higher sales, favorable mix and CCI-led cost savings more than offset COVID-19 related costs and a 17% increase in brand marketing.

In the Flavor Solutions segment, adjusted operating income declined 4% to $73 million with minimal impact from currency. Higher sales and CCI-led cost savings were more than offset by unfavorable manufacturing costs.

As seen on slide 27, adjusted gross profit margin expanded 60 basis points in the first quarter versus the year ago period due to favorable mix, both within the Consumer segment and due to the sales shift between segments. In addition, CCI-led cost savings were partially offset by COVID-19 related costs.

Our selling, general and administrative expense, as a percentage of net sales, was down year-on-year by 100 basis points from the first quarter of last year. Leverage from sales growth drove the declined, partially offset by the increase in brand marketing, I mentioned a moment ago.

With the growth -- gross margin expansion and SG&A leverage, adjusted operating margin expanded 160 basis points for the first quarter of 2020. Turning to income taxes on slide 28, our first quarter adjusted effective tax rate was 22.7%, compared to 18.4% in the year ago period.

The first quarter adjusted tax rate in 2020 was significantly impacted by a favorable discrete item related to a refinement of our entity structure. Income from unconsolidated operations increased 28% in the first quarter of 2021, due to strong underlying performance of our joint venture in Mexico.

At the bottomline, as shown on slide 30, first quarter 2021 adjusted earnings per share was $0.72, as compared to $0.54 for the year ago period. The increase was due to our higher adjusted operating income performance, partially offset by a higher adjusted income tax rate. On slide 31, we summarize highlights for cash flow and the balance sheet.

Our cash flow from operations was an outflow of $32 million for the first quarter of 2021, compared to an inflow of $45 million in the first quarter of 2020.

This change was primarily due to a lower level of cash generated from working capital associated with increased sales, higher incentive compensation payments and the payment of transaction and integration costs related to our recent trans -- acquisitions.

In February, we raised $1 billion through the issuance of five-year 0.9% notes and 10-year 1.85% notes. We took the opportunity in a low interest rate environment to optimize our long-term financing following our Cholula and FONA acquisitions.

We also return to $91 million of cash to our shareholders through dividends and use $49 million for capital expenditures this quarter.

We expect 2021 to be another year of strong cash flow, driven by profit and working capital initiatives and our priority is to continue to have a balanced use of the cash, funding investments to fuel growth, returning a significant portion to our shareholders through dividends and paying down debt.

Now, I would like to discuss our 2021 financial outlook on slide 32 and 33. With our broad and advantage flavor portfolio, a robust operating momentum and effective growth strategies, we are well-positioned for another year of differentiated growth and performance.

In our 2021 outlook, we are projecting topline and earnings growth from our strong base business and acquisition contribution, with earnings growth partially offset by incremental COVID-19 costs and ERP investment, as well as our higher projected adjusted effective tax rate.

We also expect there will be an estimated 2-percentage-point favorable impact of currency rates on sales, adjusted operating income and adjusted earnings per share.

At the topline, due to our first quarter results and robust operating momentum, we are increasing our expected constant currency sales growth to 6% to 8%, compared to 5% to 7% previously, which continues to include the incremental impact of the Cholula and FONA acquisitions at the projected range of 3.5% to 4%.

We anticipate our organic growth will be primarily led by higher volume and product mix driven by our category management, brand marketing, new products and customer engagement growth lines.

As Lawrence mentioned earlier, we expect sales growth vary by region and quarter in 2021, given 2020’s level of demand volatility and the pace of the COVID-19 recovery. But importantly, we continue to expect we will drive overall organic sales growth for the full year in both of our segments.

We are now projecting our 2021 adjusted gross profit margin to be comparable to 2020 due to increasing inflationary pressure, mainly due to transportation costs, but our inflation expectation for the full year remains a low single-digit increase.

Our adjusted gross margin projections reflect margin accretion from the Cholula and FONA acquisitions, as well as unfavorable sales mix from segments and COVID-19 costs. Our estimate for COVID-19 costs remains unchanged at $60 million in 2021, as compared to $50 million in 2020 and weighted to the first half of the year.

As a reminder, fiscal 2021 COVID-19 costs are largely from the third-party manufacturing costs. Reflecting the increase in our sales outlook, we are also increasing our expected constant currency adjusted operating income growth.

Our adjusted operating income growth rate reflects expected strong underlying performance from our base business and acquisitions projected to be 11% to 13% constant currency growth, compared to 10% to 12% previously.

This is partially offset by a 1% impact from increased COVID-19 costs compared to 2020 and a 3% impact of the estimated incremental ERP investment. This results in total projected adjusted operating income growth rate of 7% to 9% in constant currency, increased from 6% to 8% previously.

This projection reflects the inflationary pressure I just mentioned, as well as our CCI-led cost savings target of approximately $110 million. We also continue to expect a low single-digit increase in brand marketing investments, which will be heavier in the first half of the year.

We also reaffirm our 2021 adjusted effective income tax rate projected to be approximately 23%. This outlook versus our 2020 adjusted effective tax rate is expected to be a headwind to our 2021 adjusted earnings per share growth of approximately 4%.

We are increasing our 2021 adjusted earnings per share expectations to growth of 5% to 7%, which includes a favorable impact from currency. This increase reflects our higher adjusted operating profit outlook and the impact from optimizing our long-term financing, which I mentioned earlier.

Our guidance range for the adjusted earnings per share in 2021 is now $2.97 to $3.02, compared to $2.91 to $2.96 previously. This compares to $2.83 of adjusted earnings per share in 2020.

This growth reflects strong base business and acquisition performance growth of 11% to 13% in constant currency, partially offset by the impacts I just mentioned related to COVID-19, our incremental ERP investment and the tax headwinds.

Based on the expected timing of some expense items such as COVID-19 cost and brand marketing investments, as well as a low tax rate in the first half of last year, we expect our earnings growth to be weighted to the second half of the year. Our first quarter performance was a strong start to the year and we are optimistic for the balance of the year.

But we recognize we are lapping a very strong earnings performance in the second quarter of 2020, we are also making investments to drive growth in 2021. In summary, we are projecting strong underlying base business performance and growth from acquisitions in our 2021 outlook.

With earnings growth partially offset by incremental COVID-19 costs and ERP investment, as well as a higher projected effective tax rate. 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 details, I’d like to recap the key takeaways as seen on slide 34. Our first quarter results with double-digit sales, adjusted operating income and earnings growth were an outstanding start to the year and bolstered our confidence in a stronger 2021 outlook.

We have a strong foundation and a balanced portfolio, which drives consistency in our performance. We are confident the sustainability of higher at-home consumption will persist beyond the pandemic and we are well-positioned to capitalize on accelerating consumer trends, as well as prepared for away-from-home consumption recovery.

Cholula and FONA have both started the year with strong momentum and results, our enthusiasm for these acquisitions and our confidence that we will deliver on our plans has only strengthened over the last few months. Our fundamentals, momentum and growth outlook are stronger than ever.

Our 2021 outlook reflects another year of differentiated growth and performance, while also making investments for the future. We are confident we will continue on our growth trajectory in 2021 and beyond. Now, let’s turn to your questions..

Thank you. Thank you. And our first question comes from the line of Andrew Lazar with Barclays. Please proceed with your question..

Hi. Good morning, everybody..

Good morning, Andrew..

Good morning..

Hi. I guess, first off, sounds like you are making as expected good progress on getting many of those suspended items in SKUs back on the shelf as your capacity comes on stream. It sounds like there’s still some more to go as you move through the year, I guess, particularly in 2Q.

Is there any way you can maybe dimensionalize that a bit and how significant that refill might be in 2Q, even if it’s like versus the magnitude of what you saw in 1Q, just to try and put some context around it? And have you had any challenges in getting some of those suspended items back on the shelf at all, because I know that in Europe you mentioned you would actually benefited from incremental shelf placement at the expense of some competitors that had some capacity issues.

I didn’t know if the reverse had been an issue for you here? And then I am just going to follow-up..

Sure, Andrew, Well, as we have gone through the COVID crisis in 2020 and we want to ship consumption every quarter because we were not able to keep up with the extended elevated levels of demand overall.

And in order to keep our best selling items, our core items and in particular as we got to the fall protect the holiday items, we did suspend a substantial number of items and as that capacity we have been steadily restoring them as we have gone through this first quarter of this year.

And I’d say that right now we probably are around the halfway point in terms of getting items back on the shelf.

But any -- you or anyone on this call and certainly my friends and family who hector me about this endlessly, can walk into any store and find that there are a lot of holes on the shelf and a lot of our products that are not yet in full distribution and even within a given account, the store-by-store situation it might be different.

There’s a supply chain aspect to it. There’s a retail work aspect to getting on the shelf. And I think that this is going to be a steady rebuild as we go through the rest of the year. We have made a good start on it in Q1, but we have quite a long way to go. And it’s hard -- I would hesitate to get overly precise about it.

I would expect to see the shelf getting restored as we go through the year. I think one of the big variables for us, Andrew, is just the strength of the consumer demand..

Yeah..

Consumer demand has been higher than we originally planned and so we are actually not as far along in our restoration plans as we would have hoped. That’s because as fast as we supply the market, consumers are pulling the product through. But as you think that, it’s hard -- I’d say it’s hard for us to dimensionalize. I will emphasize….

Yeah..

… it’s an America’s problem. Most of the world, we are shipping to consumption, our supply chain is well caught up or our service levels are solid. It’s in the Americas where we have got some catching up to do. And in most categories here in the Americas we are also shipping consumption as well.

It’s primarily herbs and spices, and our recipe mixes particularly..

Yeah..

I think you are going to see a big change in the TDPs as we go through the coming weeks and I think I am sure we hit bottom on that and already turn the quarter just because of the restoration efforts daily..

Yeah..

I think just to add to that too, we are going to be a little bit more optimistic but prudent. I mean the second quarter of last year as you remember we grew total consumer sales 28%, 36% in the Americans. So it’s a tough comp as we look forward but we are optimistic..

Yeah. Understood. And thank you for the TDP comment that leads into just a quick follow-up, which is, where do you -- what’s your best guess at where TDPs might end up like once we get to a steady state, let’s say, versus 2019.

I am assuming they will be down a bit just as you have come through this and maybe in a more efficient shelf going forward even though I know they probably reached obviously more depth during the actual pandemic and manage to recover. But we do expect TDPs to be down maybe a couple of percent going forward….

Yeah. That is….

… that sort of a steady state?.

…very good observation. As we have gone through this we have not only suspended SKUs but we have also rationalized SKUs. We have eliminated a couple of hundred SKUs that were slow moving or what the items that we have now are much higher velocity on an average. We are also continuing the aisle reinvention program and setting store shelves.

We -- in spite of that I think the COVID situation last year and all of the restrictions around working the shelf we were able to reset over 5,000 stores. We expect at least that many this year and a reduction we are getting a lift from that and at the same time it does reduce the SKU count. So it’s a….

Thanks..

.

Right. Thank you very much everybody..

Our next question is from the line of Ken Goldman with JPMorgan. Please proceed with your question..

Hi. Thank you. You have a unique perspective because you see broadly across so many retail and foodservice categories. I am curious in the U.S.

restaurant sales, we are doing better right? Americans are traveling much more? But at the same time, we are seeing overall food at-home take away really remaining strong and I think probably better than what some may have expected? Obviously down on a weekly basis, but still better on a two year? So I am just curious, are you surprised and how do you reconcile the improved foodservice sales that we are seeing across the entire industry, with what I would consider still impressive at-home trends? I never want to bet against the simplest explanation, which is that Americans are just eating more, but I think the total implied increase in food numbers.

It’s still -- it is notable.

I am just curious for your thoughts there?.

Right. Hey, Ken. Thanks. And by the way you won the award for the best headline on your screen that was awesome..

All the short-term are mad at me for overstating it. So it works both ways..

Okay. Well, I would say, first of all, the food at-home consumption really is strong. I mean we are seeing that ourselves and in our business of course and also in our Flavor Solutions business where the other CPG companies are our customers. And so we see growth -- we are seeing a lot of strength there. I think on restaurant it’s actually a mixed bag.

The QSR, the quick service restaurants are doing well. I think during the first quarter, there were a lot of -- because everyone thinks about the state we are in today, but think about December and January, there were a lot of new lockdowns that were put in place, the restrictions that were -- have been lifted or reinstated.

I would say that the branded foodservice side, the restaurant customers might be off to a little bit slower start to the year and everyone maybe thinking.

I do think there’s a lot of optimism among restaurant operators as we go into the second quarter and as the vaccination rates go up and many of these restrictions are lift and I think that that group will come back stronger. But certainly for the beginning of the year they are off to a little bit slower start..

Okay. Thank you.

I know we are running a little long but I wanted to sneak one more in which is it’s always dangerous to ask about math on earnings calls, but back of the envelope it seems you are implying now that for the last nine months of the year, right, 2Q to 4Q organic sales growth is actually going to be a little bit less than what you have anticipated a few months ago and I am just basing this on some of your guidance items? So is it fair to say that the first quarter over shipment was so strong that it may be pulled forward some of your expected shipments ahead or am I really parsing that info too finally and you are not really making any implied changes to guidance?.

Yeah. So our intent was to reflect the sales growth over delivery that we got in the first quarter, but -- which was high. But we really did not change our outlook for the rest of the year….

Yeah. Year ago for the total constant organic as we call it is basically the same. It’s plus or minus 1% for the year. So we call our base of the range is 2.5% to 4%, up 1%. But you are right, year ago it basically what we said before, we haven’t called it down..

Okay..

But I know and as you and others the two year CAGRs or what’s really an impressive part as we start measuring this and looking at lapping things. Those are actually above our organic growth guidance long-term that we are seeing now..

And it is just the….

Got it..

… first quarter, so we are trying to be both optimism -- express our optimism, because I mean the business is very strong, but also a bit prudent. I mean we are lapping a big second....

We are lapping….

We are lapping to second quarter there..

Understood. Thank you..

Our next question is from the line of Robert Moskow with Credit Suisse. Please proceed with your question..

All right. Thank you..

Hi, Rob..

Hi. Good morning. I don’t think you are in the practice of giving us your COVID costs, but I was wondering if they now did need to be higher this year than expected, because you need to rely on third parties more than you thought and if you can maybe compare that to 2020? I am also wondering if I look at second quarter a different way.

I know the year-over-year is difficult to look at. But sequentially, you typically have higher sales in 2Q than you have in 1Q and higher first -- and higher profit. But I think consensus is assuming that that won’t happen.

So I know you have given us first half, second half guidance, but wondering for a little more clarity on how 2Q compares to 1Q maybe sequentially? Thanks..

Yeah. This is Mike. On the COVID cost, we said previously and we haven’t changed from that, we spent about $50 million last year and we are going to ever spend about $60 million this year. So that’s about spend..

Okay..

Now the timing of that is a little different. It’s going to be first half heavily weighted in 2021, a lot of that’s cumin cost we talked about before.

Kind of leading in your second question, like, Colmin was coming in the first quarter wasn’t a full impact of the Colmin cost as we ramp things up, so really the second quarter is where kind of these every month will have the full Colmin cost, so that’s a little bit of the headwind in the second quarter.

We talked about the first quarter our consumer A&P was up around 17%, we are going to have another investment of A&P in the second quarter to drive sales as we said again as towards the first half, second half story. So I think Q2 has a bit of a headwind from an expense perspective and then COVID and A&P cost perspective.

And also the tax rates, they are going down to the EPS line..

Okay. I will leave it there. Thank you..

I say maybe we summarize this, we talked about the year being a first half, second half story, within the first half, there’s a first quarter and the second story -- the second quarter story, think of it that way..

Yeah. And again first half EPS still up versus year ago..

Yeah..

Okay. Great. Thanks a lot..

Next question is from the line of Alexia Howard with Bernstein. Please share your question..

Good morning, everyone..

Good morning, Alexia..

Hi, there. So you mentioned e-commerce briefly in the prepared remarks.

Could you give us a little bit more color region-by-region? You talked about strong double-digit growth and I am just wondering how that varied in the various parts of the world? And are you seeing a slowdown in some of those areas at this point as reopening happened? And then I have a follow up..

Sure. Well, first of all, e-commerce is strong everywhere. We talked last year about triple-digit and at the end of the year, we said, e-commerce total was around, I think, it was 136% increase year-on-year. It’s not quite triple-digit, but it’s a very strong double-digit increase in the first quarter again on top of the strong performance last year.

So, I mean, I’d say, that that’s still pretty explosive growth and we have no disappointment about that. I’d say, the omnichannel, particularly is very strong and I don’t -- I think that the -- while the numbers may be slightly different region-to-region, but they trend in the same direction globally..

Great. Thank you very much..

I think consumers have had a good experience shopping online..

Well, I think that the habits that they are going to continue using to what we are seeing..

Right..

Some of our consumer research..

Okay. That’s very helpful. And then, in terms of new product, it sounds as though you have obviously got an impressive lineup to 2021. Is your percentage of sales from new products trending upwards, I imagine it was slower last year because of the pandemic.

I don’t know what you can quantify exactly what percentage of sales from new products you are anticipating this year and how that compares to maybe where you were a year ago?.

I will let Mike speak to the numbers of....

I think it is more -- I think that as a more normal year. In a normal year, we are talking about 7% or 8% of our products introduced in the last three years make up our sales pace.

It would have been less last year because of the pandemic, but it was kind of a strong ramp of new products in the 2021, as you have seen that we get back to more normal longer term numbers..

Great..

Yeah. A number of the items that we launched last year, we got less placement on it because of the focus on core items, not just by us but by the retailers. On the other hand, where we -- they did get into distribution. They have got an extraordinary amount of trial.

So some of the items that we did launch last year are no longer best performing at new items and new aisles and we are really treating 2021 as a continuation of the launch here for NPD we introduced last year. So it gives us quite a pipeline for this year..

Great. Thank you very much. I will pass it on..

Our next question is from the line of Adam Samuelson with Goldman Sachs. Please proceed with your question..

Yes. Thanks. Good morning, everyone..

Hi, Adam..

Good morning, Adam..

Hi. So I just want to clarify -- two clarification questions.

First, the relative to the earnings call in January the expectations on raw materials and cost inflation were unchanged? And just to be clear just in terms of what you are seeing in terms of freight, packaging, varieties of raw material, ingredients, is that something where you have had enough contracted and not exposed to the spot market to insulate you for fiscal 2021 or is it just your aggregate commodity basket really hasn’t moved that much because….

I mean it….

…more broadly seems....

Yeah. This is Mike. I mean we haven’t changed our guidance for the year still low-single digits, obviously, a lot of commodities and packaging to your point is already contracted.

In freight variable that we have talked about and one of the reasons we said while we have had growing great growth in mix and things like that in the long-term debt optimization.

We didn’t drop it off through to the bottomline because some pressure from increased inflation from transportation just like every other company has been seeing recently and those we have recognized that in our forecasts and our guidance but we are still low single digits generally..

Okay. That’s really helpful. And then the second clarification just you talked about over shipping Americas consumption growth of 15%. I am just trying to make sure in the slides the Americas volume price mix, our product mix is up 25%, 24.5%.

Is that apples to apples versus the 15% or what the -- just trying to understand the magnitude of how much you were actually over shipping in the period?.

In a year ago -- this is Lawrence. In a year ago in the first quarter of last year it seems like a long -- life time ago in the Americas are actually under shift consumption in the first quarter a year ago and so at the time we said was about a 4% impact on the Americas.

So I think you should factor that out and so the over shipment versus consumption might be a little bit less than it seems. Again, we….

Okay..

… are hopeful actually to build to rebuild stocks in the trade more than we did and the consumption is very strong..

All right. That’s all really helpful. I will pass it on. Thank you..

Great. Thanks, Adam..

Thank you. We are nearing the end of our question-and-answer session for today and have time for one additional question which is coming from line of Chris Growe with Stifel. Please proceed with your questions..

Hi. Good morning..

Good morning Chris..

Hi. I just I will make a quick here. I know we are at the end of this, just real quickly.

Just to understand as we think about those third-party co-manufacturing costs and a bit of weight on the gross margin, do those continue all through the year? Just understand like are you using third parties just to rebuild inventory and then you can shut that down or is this something that will be ongoing in terms of your supply of product in the future?.

Hey, Chris. It’s Mike. One, we are always using food manufacturers. That’s a part of our supply chain. As we talked about though here we really stretch some of those strategic co-factors to help us out shorter term really focused on the first six months of the year, very volume dependent.

So, the way we are thinking now is again the second quarter will be the heaviest spend there will be some probably roles into third quarter or so but. And we will see what volume is too, what consumption continues as something we would assess as we always do.

And as our supply chain continues to recover that’s another variable that could speed it up or slow it down. So those are all considered in our guidance stuff..

Okay. Thank you. And just a quick one on as I think about what’s happening in China, you saw double-digit consumption in consumer sales and I think that even excludes the branded foodservice you sell -- the products you sell, as well as a really strong recovery in foodservice.

I guess I just want to understand, make sure that those numbers are accurate and then to the degree to which that is somewhat of a predictor of what can happen in the U.S.

as we saw the lap the tougher comps on the consumer side with the easy comps on the foodservice side, are you learning anything from what’s happened in China as an indicator for the U.S.?.

Well, I think, the interesting thing in China is that, even though they are well past the COVID impact and are very far along in recovery, consumption of food at-home remains strong even as foodservice has recovered.

The -- I think it’s interesting to look around that region also because what we are talking about the Asia-Pacific region, it is not just China that’s the biggest market there.

But markets like Australia which is also pretty far along in recovery, even though foodservices has rebounded, it’s not back to the same level that it once was and consumption of food at-home has continued to be very strong..

Okay. Thank you..

I think it goes to the point that we have -- the making which is that, this has been a long-term trend anyway for consumers where they cook more at-home and more from scratch at home when they do and the COVID situation reinforced that behavior that helped whole new generation of cooks learn how to cook their family recipes that maybe they relied on mom or grandma, all new eating occasions as well as new….

Lunch….

All new eating occasions like lunch as people work remotely. I think there are lot of reasons to believe that consumption at-home is going to continue to be elevated..

Okay. Thank you..

Thank you. I will now turn the floor back to Lawrence Kurzius for closing remarks..

I’d like to thank everyone for your questions and for participating in today’s call. I apologize to those that we didn’t get to in the queue. We did have a very long script today. We had a lot of information to get out. McCormick is differentiated by the breadth and reach of our balanced portfolio which is sustainably positioned us for growth.

We are very pleased with our outstanding first quarter operating performance, which proves the strength of our business model, the value of our products and our capabilities as a company.

We expect to drive even further growth as we continue to execute on a long-term growth performance and people strategies actively respond to changing consumer behavior and capitalize on new opportunities.

Our investments provide a new foundation for growth, while enhancing our agility and our relevance with consumers and customers, which positions us well for continued success and long-term shareholder value creation..

Thank you, Lawrence, and thanks everybody for joining today’s call. And again, we apologize to those that did not get. And I would be happy to follow up with you after the call. If there are any further questions from anybody regarding today’s information, please feel free to contact me. This concludes this morning’s conference call.

Thank you very much..