A particular area that we like to highlight on Supply Chain Matters is where supply chain management teams are making a recognized contribution to customer and business goal fulfillment, especially during these very challenging times brought about by the global COVID-19 virus outbreaks.
Maryland based Spice and condiments producer McCormick & Co. reported May ending second-quarter financial performance this week and the headlines were that of exceeding market expectations in sales and profitability areas. This was achieved in the midst of a market shift in channel product demand which the company’s supply chain had to manage and respond to.
Financial performance highlights included a net sales increase of nearly 8 percent to $1.4 billion while adjusted operating income was reported as growing 23 percent. That is significant performance given the overall challenges presented by this pandemic.
What actually occurred in the quarter was a reported shifting of product demand. With many consumers confined to home because of the virus, cooking at home became a new skill to be renewed . This was reflected in a reported sales increase of 26 percent in the company’s consumer segment. Correspondingly, with the many country and regional lockdowns caused by the virus spread, sales to restaurants and food service companies, long a core channel for McCormick, declined by 18 percent.
Chairman and CEO Lawrence Kurzius indicated to investors: “Our ability to meet increased consumer demand and execute during a volatile quarter highlights our agility and strong foundation.”
During the quarterly performance investor briefing, Kurzius specifically praised the performance of the company’s supply chain management teams:
“Our global supply chain has been critical to our success during this period of volatility. It is an area of strength for us, and one of the reasons we will come through this crisis strong.”
Speaking to the challenges that had to addressed and overcome:
“Our global sourcing organization has been a real differentiator, quickly executing contingency plans of placing critical materials where needed since our early involvement in China and ahead of any demand surge. While we, of course, have experienced some raw material constraints, these have had minimal impact on our ability to meet demand.”
Responding to questioning from analysts, the CEO indicated that the surge in consumer demand was not so much that of pantry, but that consumption-based demand. So much so that planned promotions of certain products had to be cancelled in order to dedicate production to in-demand products. In its reporting on McCormick’s performance, The Wall Street Journal indicated that a big chunk of the surge in consumer-focused sales in the May quarter came from single-use categories such as marinades and dry recipe mixes. Challenges in increasing and adjusting manufacturing output had to be overcome along with instituting new safety measures for manufacturing workers.
Regarding the need to re-ignite restaurant and food-service condiment needs, executives indicated they are working with some institutional customers to shift sales from full-bottle condiments to portable packets for takeaway meals.
Like many other companies and industry settings, supply chain professionals have had to rise to extraordinary challenges that have tested readiness, business continuity and supply chain risk mitigation plans.
Supply Chain Matters would like to extend out “Tip of the Hat” recognition to McCormick’s supply chain management teams for their ongoing contributions to successful business outcomes.
Your efforts have been recognized.
And to all of those stay at home cooks, keep up with those yummy recipes.
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