Andrew Lazar (Barclays) asked how the U.S. spices-and-seasonings response differs from several years ago, and what portion of the tariff refund funds reinvestment versus covering inflation.
Brendan Foley said the strategic playbook is broadly the same but the pressure is now in specific segments amid even higher consumer inflation, with faster, more digitally targeted execution already showing early results; Marcos Gabriel said the majority of the $31 million refund offsets higher inflation (tracking toward ~6% on the Middle East conflict), while underlying gross margin still expanded ~130 bps, leaving room to reinvest.
Peter Galbo (Bank of America) asked how investors can gain confidence the Americas Consumer actions are sustainable amid 'macro Whac-A-Mole,' and for guardrails on the Q3 EPS decline.
Foley pointed to the sustained improvement achieved over the prior two years in similar conditions, ongoing gross-margin strength, rising A&P, and stronger innovation as evidence of durable resilience; Gabriel said Q3 operating income (high single to low double digits) is driven by SG&A timing (ERP, incentive comp, brand marketing), with the main EPS headwind being tax normalization from ~16% to ~24% (a ~700-800 bps drag).
Tom Palmer (JPMorgan) asked whether the Q3 operating-profit softness was modeling versus incremental costs, and about Flavor Solutions lumpiness and faster reformulation.
Gabriel said SG&A phasing (more brand marketing and ERP costs shifting into Q3) is in line with internal expectations, with more inflation offset by the tariff refund while gross margin still expands; Foley said Flavor Solutions strength was broad-based with reformulation (especially large CPG) commercializing faster than expected, amplified by a health-and-wellness innovation wave and away-from-home beverage innovation, with McCormick gaining share.
Steve Powers (Deutsche Bank) asked how durable the favorable Flavor Solutions spread versus end-market consumption is, and for more detail on the Unilever Foods integration work.
Foley said the activity is aligned with durable consumer trends (the food industry innovating to meet consumers), suggesting durability; on integration, he cited strong collaboration and 'esprit de corps' across disciplined, parallel work streams hitting their timelines, leaving him even more excited about the combination after the first three months.
Robert Moskow (TD Cowen) asked whether there is enough time to execute the volume-led Americas recovery given it took longer last time, and about seasonings brands (Grill Mates, Lawry's) losing share.
Foley acknowledged it took longer before but said today's faster customer dialogue, greater speed/agility, a stronger digital toolkit, and more gross-margin flexibility enable quicker correction; he confirmed price gaps are part of the issue in specific segments as attractive categories draw more private-label and branded competition, and said McCormick knows what it needs to do.
Alexia Howard (Bernstein) questioned the combined McCormick-Unilever 21%-25% operating-margin outlook (implying low non-marketing SG&A) and asked which food-service channels are recovering and whether a struggling large snacking/beverage customer headwind has eased.
Foley and Gabriel said the margin profile is driven by gross-margin expansion (not belt-tightening) with A&P investment rising, and SG&A is not unusually low; growth is concentrated in QSR (Americas), fast-casual, and non-commercial channels, and while all Flavor Solutions customer types are now growing, they framed it more as McCormick share gains than a specific customer's turnaround.
Max Gumport (BNP Paribas) pressed on whether Q3 guidance is a step-down versus prior signaling and asked about the working-capital drivers of stronger cash flow.
Gabriel clarified the original guide was annual (15%-19% CC, not quarterly), with brand-marketing phasing heavier in Q3 (and a tough Q4 2025 marketing comp); he highlighted strong first-half cash flow and delevering to 2.9x even after $750 million of McCormick de Mexico debt, with working-capital gains led by inventory days and payables.