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 a set of slides at ir.mccormick.com.Currently, all participants are in listen-only mode. Following our remarks, we will begin a question-and-answer session. [Operator Instructions] 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 rate and adjusted earnings per share that exclude the impact of special charges. Reconciliations 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 for complete information. In addition, as a reminder, today’s presentation contains projections and other forward-looking statements, as 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. It is important to note, these statements include expectations and assumptions which will be shared related to the impact of the COVID-19 pandemic. As seen on slide two, our forward-looking statement also provides information on risk factors including the impact of COVID-19 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. To start, I’d like to comment on the extraordinary and continually evolving global impact of COVID-19. On behalf of everyone at McCormick, I’d like to first express our deepest sympathies to all those who are affected by COVID-19 and thank those working to keep people safe through this crisis.McCormick is committed to maintaining critical food supply across all our markets and supporting our communities. We are working through the challenges of today, while keeping our focus on the long-term goals, strategies and values that have made us so successful.We have three priorities while navigating through this period of volatility and uncertainty. First, to ensure the health and safety of our employees and the quality and integrity of our product.Second, to keep our brands and our customers brands and supply and maintain the financial strength of our business. Our third priority is to ensure McCormick emerges strong from this event. It will come to an end. We will come out a better company by driving our long-term strategies responding to changing consumer behavior and capitalizing on opportunities from our relative strength.We’re taking steps to safely operate our business and supply our customers. We continue to operate our supply chain without significant disruption. We have implemented contingency planning with most employees working remotely where possible.We have global and regional crisis teams in place, continually monitoring the rapidly evolving situation and recommending risk mitigation actions. And we’ve implemented travel restrictions, visitor protocols and social distancing practices, as you would expect.We’ve also recently announced incentives to further recognize and support employees who work on-site in locations critical to keeping our operations running globally. We will increase hourly wages, further extend sick leave to support family members and maintain salaries if operations are suspended. It’s…

Thanks, Lawrence. And good morning, everyone. I’ll begin now by providing some additional comments on our first quarter performance and then discuss some of our expectations for the balance of the year.Starting on slide 14, during the first quarter sales declined 1% in constant currency, driven primarily by the COVID-19 impact in China, which had a negative 3% constant currency effect on the total company.Excluding the impact of China, favorable volume and product mix from base business and new products, as well as pricing drove sales growth. The consumer segment sales declined 6% in constant currency, primarily driven by the Asia, Pacific region.On slide 15, consumer segment sales in the Americas declined 2% in constant currency versus the first quarter of 2019. As Lawrence described earlier, the decline was driven by trade inventory reductions, with a partial offset from pricing actions which were taking late during the first quarter.In EMEA, constant currency consumer sales were up 1% from a year ago, driven by pricing, primarily related to the timing of trade promotional activities. Consumer sales in Asia Pacific declined 28% in constant currency, driven by the China disruption. Growth was strong across the rest of the region.Turning to our Flavor Solutions segment on slide 18, we grew first quarter constant currency sales 5% due to strong growth in the Americas and EMEA regions. In the Americas, flavor solutions constant currency sales increased 5%, driven by new products and base business volume growth, with particular strength of snack seasonings and branded food service. Additionally, pricing also contributed to growth across the portfolio.In EMEA, we grew flavor solutions sales 9% in constant currency. Sales increased to both quick service restaurants and packaged food companies, driven by new products and volume growth on the base business, as well as pricing. In the Asia,…

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 29. We delivered solid first quarter results, excluding the COVID-19 impact on China and recognize the balance of the year will be impacted by a broader challenging environment. We’re effectively executing our strategies and are confident in our underlying foundation.We are responding to COVID-19 developments with agility and working through the challenges of today, while keeping our focus on the long-term goals, strategies and values that have made us so successful.We have a consistent history of growth and very positive fundamentals in place to manage through this short term period of volatility and continue on our long-term growth trajectory. Our commitment to our long-term financial objectives has not changed. We are sustainably positioned for growth and will continue to deliver differentiated results.Now, let’s turn to your questions.

Thank you. We’ll now be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question comes from the line of Ken Goldman with JPMorgan.

Hi. Good morning, everyone. And, obviously, I hope everyone and your families are safe and sound in crazy times.

Right. Thank you, Ken. You too, Ken.

I wanted to just quickly ask, one, can you give us a little more clarity on maybe the quarter-to-date performance in both of your segments, even if just on a rough basis? And two, obviously, you do secure some of your products from areas of the world that are experiencing some challenges right now.Can you just walk us through a little bit, maybe, what you’re doing to sort of secure your inputs? Maybe secure your supply chain a little bit beyond what you’ve told us so far, that would be helpful. Thank you.

Sure, Ken. Great. Well, first of all, we’re seeing all phases of the coronavirus crisis as a company, from the early phases of recovery in China through the new epicenters that we’re all experiencing in the EMEA and in the US.We’ve got - we are seeing the early stages of recovery in China, as we said in the prepared remarks. We can pretty well quantify that and we see a path forward there, and we’ve given some outlook on that.In the Americas and EMEA, we’re seeing very strong sales of retail products, as our others, especially in the Americas, it cuts across all channels on the - of the - our retail and consumer-oriented product, especially strong in e-commerce.We just actually got in a fresh scanner data this morning, ourselves. I mentioned a moment ago that we were up about 65% as a total company through the scanner for the most recent week that we had data for. We just got last week’s information, and it’s even stronger than that. It’s nearly 90%, I’d say.So it’s a little over 89% for total company, through the U.S. - sorry, total company in the US, total consumer there. So really strong performance on that side, driven by the consumer pantry stocking behavior. And I think that you all probably got Nielsen data that covers the same time frame. That would be roughly consistent with that.And typically, our unmeasured channels are stronger than the measured channels, and I would expect that to be - you can - should expect that to be the same again.In our flavor solutions portion of our business, the portion of the business that’s a little over 50% - that’s over 50% that services the other CPG manufacturers is seeing an equally strong surge in demand. As those customers…

Very comprehensive. Thank you very much.

Our next question is from the line of Andrew Lazar with Barclays. Please proceed with your question.

Good morning, everybody.

Good morning, Andrew.

Hi, there. Just two quick ones for me, if I could. In listening, Laurence, to your comments around the various portions of the business thus far, sort of through the quarter. Is it simply that it’s still a bit too fluid and dynamic to sort of take those three big buckets, if you will the consumer piece, the part of flavor solutions that goes to packaged food manufacturers and then the pure food service side?I guess is it too early thinking through the quarter thus far to even suggest maybe how those things might balance out. I realize for the full year, that’s probably a much tougher exercise.But even in thinking through the second quarter, just given some of the magnitude of some of the numbers on both ends of the spectrum. Even sort of directionally, is there a way to say that the two positives sort of outweigh the negative? Or do we still just really not have that level of clarity? And then, I just got a follow-up.

Yeah, for the year, of course, we - there’s so much uncertainty on how this is going to unfold. I know others have given some guidance. Those have tended to be companies that are in their fourth quarter already. So they are basically giving you guidance for the next six weeks. We’ve got a whole year ahead of us. This is just the end of our first quarter.We’re one month into Q2. And the changes and shifts have been so dramatic over just the last couple of weeks that I think that we’re not comfortable even - we don’t normally give quarterly guidance, and we’d be even less comfortable doing so right now.We really don’t know the duration and the extent of the impact on the restaurant industry in particular. There are areas of the world that are still open for business. There are areas that are closed that could reopen. And we think that there’s too much uncertainty for us to give you credible meaningful guidance right now on that.I will say that - I would expect that the restaurant industry impact will be pretty heavy in the second quarter. Again, the complete closure of restaurants in some areas, even though it’s the minority of our business is going to be a drag that I think it’s hard to see the consumer side overcoming in this particular quarter.

Yeah, understood. Thank you for that. And then just quickly on just the ERP spend, I think you said about the same amount of incremental spend this year, as last year. So I think initially, it was going to be - if I’m not mistaken, an incremental $60 million of ERP spend this year and I think there was $20 million last year. So basically, we’re saying there’s now an incremental $20 million this year instead of $60 million? Thank you very much.

Hey, Andrew. It’s Mike. You’re correct. We spent around $20 million last year in 2019, and we’re going to spend around $20 million this year in 2020. So it’s not incremental. It’s at the same as comparable between the fiscal years.

I just want to elaborate on it. We are pausing the ERP program, but we are committed to our long-term success. And as a company, we take a long-term view of our program. So we’re investing behind our employees right now. We’re continuing to invest in brand marketing and it’s our intent to continue the ERP program.So we do have a team that will continue to work on it through the year and we would expect to - that the go-lives that we were planning are going to slide out 12 months or so and be back.And right now, there are two drivers for a decision to postpone it. One is, just the executional reality. Our pilots for - one of our pilots was in Italy, for example, and it has become as an executional matter impossible to do that pilot and the other pilot is also in an area where because of travel restrictions, it just wasn’t possible to do the training and work that it takes to actually bring the system up. And with no pilots there, no go-lives. And so from an executional standpoint, sheer practicality required us to push the program out.And then secondly, as we have prioritized keeping our brands and our customers brands in supply and maintaining business continuity the resources that we’re going into the program were better spent right now on the urgent needs and adapting to the rapidly changing supply requirements.

Thank you. Stay well, everybody.

Thanks, Andrew.

The next question is from the line of Faiza Alwy with Deutsche Bank. Please proceed with your question.

Yes, hi. Good morning. So I wanted to talk a little bit about your commercial initiatives in the consumer segment. You had talked about how there have been some changes. I know we were talking about shelf resets at CAGNY. So just wanted to get more color around how those are changing, just given what’s happening because of COVID, especially in the US?

You bet. So Faiza, we’ve changed - well, first of all, we’ve continued to deliver the brand marketing that we had planned to, but some of the messaging and the vehicles that we’re using have shifted. This is part of the advantage of having our in-house marketing excellence organization, we’re able to change - produce new content and change the content very rapidly. And so we made the message a bit more relevant. I gave some examples in our prepared remarks. And I think that has had a good impact.We’ve resourced up an area where consumers can write in and get real-time answers to their questions. That’s a somewhat people-intensive thing, but it’s been very much appreciated by consumers.The new products that we talked about at CAGNY were already largely being launched. And so while retailers have focused more on core items as they have scrambled to keep their shelf stock. We had a lot of placement on those items and a lot of acceptance on those items already.And although we didn’t talk about our second half new items at CAGNY, our R&D teams have continued to work on it. Our commercial teams - commercialization teams have continued to work on those. And I would expect - you should expect to see a reasonable pipeline of new products in the second half of the year as well.The shelf reset that we talked about also was already underway. And so the picture, for example, that I used at CAGNY was in an actual store. It was not some kind of a retail lab, but it was an actual store installation. We have a number of them up.Right now those installations have stop, because of the immediate demand at retail and everybody trying to minimize extra people in the store. But as all these shelter-in-place rules and so on get lifted and things hopefully return to normal in the second half of the year, we would expect that to remain.We didn’t quantify how many stores. We said we would have. I think I said at CAGNY that we would have thousands of them though. We still expect to have thousands, but fewer than we would have thought at CAGNY.

Great. Thank you.

The next question is from the line of Alexia Howard with Bernstein. Please proceed with your question.

Good morning, everyone.

Hi, Alexia. Good morning.

Hi. Can I ask about the behavioral changes that you’re seeing? You talked about people cooking from scratch more. Do you have any channel data to show how many more meals people are cooking at home versus eating out or what have you?And then similarly on the behavioral change on e-commerce side, some obviously very impressive growth there. Do you have any data on how many of those - how much of that lift is driven by new sign-ups, people trying it for the first time versus existing consumers? And how profitable is that channel these days for you? And then I have a quick follow-up.

Okay. I’m not sure I get the answers to the exact questions that you’re asking, but I do know that we - that the consumer behavioral changes that we’re seeing are significant. And rather than thinking of panel data, we actually have - we’re actually doing our own real-time consumer tracking. And so we have our own data that shows how behaviors are unfolding. There is definitely an interest in cooking at home more kind of around comfort foods, a little bit around the same trends that - some of the trends that we have talked about previously or actually - are just magnified or accelerated, so shopping online, some more adventurous cooking. Mike, do you want to add.

Yeah, I think - and we’re doing a lot of our research, even with our employees. One of the questions - one of the comments we had back from employees are snacking a lot more at home because they’re home working and the snacks are right there.So pushing a huge lift in both cooking activities and everything food is people being adventures them, too. They’re trying to use what’s in their pantry, jazz it up a bit, and we’ve seen very strong sales of a lot of exotic spices and flavoring.

And then as a quick follow-up. On the flexibility of your manufacturing, in the food service production be re-tooled to make more on the consumer side of the business? Or is it going to be quite challenging to maybe have a sustained period where the restaurant channel is down, the retail sales are up?Are you worried that sustaining this kind of level of growth or not - maybe not this kind of level of growth, but after the pantry loading finishes, having that, sort of, switch? Is that a challenge for you or is that fairly easy to manage? Thank you. I’ll pass it on.

Yeah, Alexia, it’s a great question. Most of our facilities make products for both segments of our business. And so we can move resources within those facilities. Some of the foodservice items are being repurposed to the club store channel right now as well. And so we’re able to do that. And even beyond the manufacturing facilities, we were able to move our people to focus in on the right area. So we have a lot of flexibility on that.There are a couple of exceptions. We do have one manufacturing facility in Europe that is heavily dedicated to sauces for the QSR and food service industry. And demand is very, very slow there, and it’s difficult to repurpose that. But generally speaking, we’ve got 118 facilities around the world. We have 49 production plants. They are all able to operate, and we’re able to shift volume around to meet the current demand.

Great. Thank you very much, and stay safe everyone. Great to work with you.

Thank you, Alexia.

The next question is from the line of Steve Strycula with UBS. Please proceed with your question.

Hi, good morning. And it’s great to hear that McCormick has taken the long view here, not surprising and taking care of its employees and stakeholders during these volatile times, so much appreciated.So question - two part question. First one would be a consumer behavioral question. Lawrence, you’re keen to point out that right now we’re going through phase one, maybe where consumers are pantry loading, but ultimately, well people are behaviorally at home more, they should be cooking more.So can you walk us through what you would expect oversimplified model as to how we maybe migrate through on the consumer piece over the next few months? Some investors are asking, do we go through a big pantry load period that’s followed by subsequent de-load or just be the spike and then it moderates to a better baseline growth level? If you could just help us understand that curve?

Actually, we lean towards the latter few. This pantry stocking behavior, obviously, is a one-time surge that isn’t sustainable. But there is real incremental consumption that’s happening. The kids are staying - are in from school. People are trying to stay close to home, either voluntarily or by government order.And people, as a result are getting used to the idea of cooking at home and are learning new cooking behaviors. We’re - our demand for recipes and how to videos on our digital properties is absolutely through the roof. The kind of questions we’re getting for our real-time response is all about cooking tips and how to prepare and what to prepare. And we think that there is going to be a sustained shift for a period of time to more at home cooking, which in the past has been a net benefit to us.The other thing I don’t want to miss is that kind of the after - however, the COVID-19 situation plays out, it’s likely we’re going to be followed by a recessionary period as well. Historically, we’ve performed well during the recessionary period. Consumers tend to do cook more at home. And they’re cutting back in other areas, they tend to reward themselves a little bit with the foods that they consume at home.And our historical track record, just looking back at the 2001 and the 2008, ‘09 time period, we’ve had strong growth in our consumer business. That’s been a positive for us overall as a company.

I appreciate that. And as of Marylander, I’m rewarding myself with some Old Bay Hot Sauce, which is very…

Great, it’s awesome.

One quick question for Mike, and then I’ll pass it along. To follow-up with Andrew Lazar’s question on the ERP spend, I appreciate given the servicing rates to the customers right now as a priority and that might postpone the SAP implementation upgrade.But should we think about that $60 million of incrementality, therefore kind of shifting into fiscal ‘21 and what was earmarked for fiscal 2021 kind of shifts into fiscal 2022. So basically, the whole Wave series goes over by a year.I know it’s difficult to comment on right now, but any high level would be commentary would be appreciated. Thank you.

No, Steve, just like we’re not giving second quarter guidance or 2020 guidance, we’re not going to give 2021 or ‘22. I mean, there will be some type of shift. We just - it’s really too early. We need to re-plan this project, work around our manufacturing busy seasons and things like that. So yeah, I hesitate, but I can’t give you really any guidance there.

And there’s some expense and work has been done this year, which contributes to it also. So the shape of it will likely be different.

Understood. Thank you.

Thanks.

Next question is from the line of Robert Moskow with Credit Suisse. Please proceed with your questions.

Hi, thanks for the question. A lot of people are trying to think through the cost to execute all of these increases in manufacturing capacity, the higher labor costs. I mean, if you’d ask me though, you know, what’s the net benefit here of producing SKUs that are really popular and long production runs, I would argue that, that would offset higher cost for labor. Is there any way you can walk us through the pros and - the nets and negatives of that or positives and negatives of that?And then secondly, promotional price discounts. I mean, does McCormick still need to have promotional price points at retail in this environment?

Yeah. Part of that is hard to answer and goes to the uncertainty that makes us not want to give guidance at this time. And that there are puts and takes and they’re changing so fast that I don’t know that we can give - we’re not 100% - we’re not sure enough on how those balance out.Your point is well taken. By a longer run, more core items that that’s a very efficient way to run our manufacturing facilities. There are also a lot of extra costs related to expediting at over time - over time, definitely. We just announced that we are paying premium wages to the people who come to work. We haven’t talked about it, but we’re doing, I think, temperature scans at all the entrances to facilities, which has a cost. And so we’re - I’d say that right now, there’s some uncertainty about how those are going to balance out that we will sort through.If we were maybe two more weeks into it, we have a better handle on it, but these are things that are literally changing day-by-day. So, things like transportation, fuel rates are down, you see that at the gas pump. But some shipping rates are up too. So we’re just too early at this point.

Okay. Ask a follow-up, Easter, you typically have a lot of seasonals that go into market for Easter. Is that still going to happen? Or are retailers shifting merchandising away from Easter?

You asked about promotions, and so this kind of goes to that. So we are running fewer promotions. I think we might have had that in our prepared - my prepared comments and that’s really in collaboration with our customers who, frankly, are having a hard time executing against those.That’s probably going to add some impact on Easter, but I think that whatever impact there is on Easter, it’s going to be lost in the shuffle because of the tremendous surge right now. We are seeing the right seasonal items doing strongly in vanilla for baking a big item right now.Easter is a less important holiday for McCormick. We often talk about Easter because you’ve got to get the Easter displays down to get the grilling displays up. And the grilling season starts after Easter, and I’d say that’s the bigger factor for us is getting the grilling items out there. And honestly, with people staying at home more, we actually expect our grilling season to be really good.

Great. All right. Thank you.

Thanks.

Our next question is from the line of Rob Dickerson with Jeffries. Please proceed with your question.

Great. Thank you so much. Hope everyone’s well. So look, I know you said kind of that week ending March 15th, vanilla was up. I think you said there was 50% plus. Obviously, people at home cooking more, eat vanilla. How do you think - your first question is just about destock potential, right? There’s a lot of questions around is this a consumption shift or is there really a pantry load, just in general?And then secondly, just on the margin, I know there’s no guidance, but with respect to Q1, the flavor solutions segment actually had decent op margin. And then I think kind of going forward, you hopefully would get some volume leverage lift.But maybe given kind of that shift in flavor solutions on the foodservice side, is there an offset? Or just kind of like some structural framework how we can think about that, that, yeah, maybe there could be some benefits on the consumer side, but we’re not sure and kind of the same goes for flavor solutions? Thanks.

Yeah. On the pantry stock, I think that there’s real incremental consumption and it’s not going to be something that’s going to have to be de-loaded. We’re talking about spices used to - spices, seasoning, condiments used to – if you look to recipe mixes used to cook meals at home, and there is more food consumption happening at home.Consumers really are eating this up. It’s not like toilet paper where at some time, there’s going to - there’d be such a glut on the market that it’s going to freeze up. There’s real incremental usage here that we think is not going to require any kind of consumer pantry unloading, at least as near as we can measure at this time. And I’d say that that would probably play into the uncertainty about it, but we have a point of view on it.

I think on the - your question about kind of the structural margin, you are right, we had a really great first quarter from a margin perspective at the gross margin line flavor solutions. We continue the portfolio migration. Our CCI teams have done a great job, and we’ll continue to do a great job during this crisis.We have a lot of volume favorabilities. The problem is going forward, Rob, if some of the volume drops off, some of those go away from an overhead absorption perspective, so you can’t really count on those to continue. But obviously, we’ll give you more guidance as we can.

Okay. Sure. And then just a quick follow-up, I think I heard you say earlier that maybe the pressure so far from your perspective, you see coming through March and that 20% of the business in food service restaurants and flavor solutions could be maybe a little bit more pronounced than consumer might be able to offset. So I just want to clarify that comment, just given that piece is 20% and the other piece of the business…

Rob, I also want to - so I want to remind you that, China was largely on lockdown through most of the month of March. And so there’s going to be a pretty - there’s going to be a significant impact from China. They are in recovery now. But Hubei province actually just reopening now, and so - for example, so there is going to be an impact from that as well.

Okay. So it sounds like that 1% to 2% expected pressure on China for the year is really, at this point more of a Q2 event?

I’d say, mostly a first half of it.

Yeah. Okay. Cool. All right. Thank you so much. Stay safe.

Thanks, Rob.

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

Thank you. Appreciate you guys squeezing me in today. First, coming back, it’s an earlier question from a different line. Just thinking about trade marketing in the current - in the current period, I know, Lawrence, you talked about promotions generally, but just trade spend generally.I mean, how does that evolve when it seems almost indiscriminate what the consumer is taking? And as long as - if you have it on the shelf in the center of the store, it seems like people are buying it. Just how does that become part of the margin kind of earnings equation over the balance of the year?

Right. I wish it was that easy. But I think a lot of what - I mean, right now, I mean, trade marketing is really about customer support and working with our customers collaboratively to keep them in supply with the items that are selling the fastest.And so the reason that there’s a reduction in promotion activity is frankly, the customers can’t keep up with it, and so you stop. So there’s - so we shouldn’t have stopped. So we have curtailed some promotions.It’s hard to see how that is kind of to play out as we go through the year, I think that we’re just going through an extraordinary period right now that will reach a new equilibrium, and we’ll be able to continue with the promotional activity that’s meaningful with our customer.

And as more consumers really go online to digital – and we’ve been migrating our trade spend to digital for the last couple of years. So you’ll see more of that there.

Okay. That’s helpful. And then a second question, just on the pantry stock that’s been happening, I mean, your portfolio, I maintenance, a pretty complex kind of assortment of SKUs that have kind of different kind of consumption patterns and kind of normal sales velocity.And just from the data you’ve seen, have you been surprised that the sales velocity of things that normally wouldn’t turn fast? Or just, I guess, some of your things I would think can stay in the pantry for some time. Are you seeing bigger uplift in those items where it could take longer to get that restock again in several months or the faster turning SKUs returning even faster?

I think that the extent of the consumer pantry stocking and the suddenness with which it hit is a surprise to everyone. But in terms of you know, when you piece it apart and you look at orders of magnitude, the items with the highest velocities are not a surprise. They’re recipe mix. It’s our condiments.Frank’s RedHot Sauce, frankly, these items are not items that are stockpiled, but that tend to be consumed pretty quickly. And that are the ones that are seeing some of the biggest increases.

Okay. I appreciate the color.

Thank you. Our next question is from the line of Chris Growe with Stifel. Please proceed with your question.

Hi. Good morning.

Good morning.

I’m glad you all are doing well and safe. So just two questions, if I could. The first would be, I want to understand, as we think about the restaurant business overall, the area that’s being pressured the most, is that a higher margin business overall?In particular, I’m curious in China, there was a larger profit effect from that the softness in that business. I just want to get my head around the size of profitability there, even in general terms.And then I had a second question just on the US, I know you had a bit of an increase in inventory in the first quarter last year, obviously, that compares to this year. Where do inventory stand now building in this environment. I just want to understand how that could play out going forward and how to expect that to influence your business? Thank you.

Hey, Chris. This is Mike. If you remember the flavor wheel, we show the flavor solutions breakout, where we have about 45% of our flavor solutions businesses in flavors. That’s generally the higher margin business, and we talked about portfolio migration more to that.Custom condiments, coatings, ingredients, generally lower margin business. We have talked to some really good margin in there, so I don’t want to characterize the whole group. But it’s generally lower than the flavor side of the business.Specifically talking about China, I mean, China is a very developed market for us. We have scale there. We have large manufacturing facilities, lots of people. So the margins there are generally good across consumer and flavor solutions. So that’s why you’re seeing a pretty significant impact in Q1 from a profit perspective.

And going forward, the wheel that Mike was talking about, the branded foodservice component has margins that are comparable to our consumer business. So there’s a mix of margin structures within that. There’s the branded food service with consumer-like margins and there’s a quick service restaurant piece, which is part of the business that we generally characterize as low margin.

There was a second part of your question. Chris, what was it?

Yes, it was just on the inventory changes, and we are going either down or up in the first quarter last year, therefore, a tough comp, but how to think about those going forward? That seems like they should grow from here would seem?

Yeah, you would think - I mean, I think customers are trying to grow their inventories right now. I don’t know that they’re being successful. I mean, if you walk into any store you’re going to see, they don’t have stock on their shelves in a lot of areas.It’s hard to - I don’t know where that is going to stabilize. I’d say right now, I don’t think anyone in the - a retail or customer side is thinking about inventory reduction. I think right now they’re scrambling to stay in stock.

And to that point then, Lawrence, are you shipping ahead of consumption then? Just from a broad - I’m not trying to get an exact number, but understand the degree to which you’re able to ship now. Can you ship ahead of consumption then?

Yeah, I can’t really - I would really be speculating on that. We are - I would say we are keeping up with the demand. It is challenging right now to keep up with that demand.And I would say that if we had not been as well prepared as we were on the supply chain side and also, frankly, building some inventory in preparation for our ERP shift that - which might echoes down all the way through our supply chain, we would really - we’d be even more stressed than we are right now.

Our next question comes from the line of David Driscoll with DD Research. Please proceed with your question.

Great. Really appreciate you guys getting me in, and I understand the time here. So just some follow ups, and I hope these are enhancive. The first question, I don’t think you said what the magnitude of the decline in the foodservice business, the 20% of the company in March, but can you?I appreciate the positive numbers on the consumer side, but just trying to get a sense of this 20% of foodservice business. Do you have a sense of what the magnitude of the decline is in March?

Well, exactly, definitely not said what it was and you know we’re not going to say more than it’s significant. It is a fast changing situation. Restaurant openings and closures are being announced almost daily. And I think that it’s - I think that we’re really not in a position to give you or your colleague’s meaningful credible guidance in this area right now.

What we can say, it’s different in different regions with the world, like we said before, EMEA has seen a significant downturn because of the government actions without shutting down everything.

Okay. And then just two other quick follow-ups. Mike, can you just talk about the CCI program in an environment like this? Does it even unfold over the rest of the year as you originally thought it would?I mean, can you execute these programs? Or given the demand that you have going on, do you just re-task your people to making sure that you got product going out the door? I don’t really understand how to think through this. So any thoughts you give right there are of big help.And then last question I had for you guys was just new products versus the big SKUs You’ve kind of talked around this a little bit. But just directly, are you reducing your focus on some of the new products and increasing your focus on your big SKUs in terms of your manufacturing runs? That’s it for me. Thanks, guys.

Hey, Dave. This is Mike. CCI, good question. CCI has been a long-term program for us since 2009. We have a really strong pipeline of projects coming into this year and it’s ingrained in our culture. We have teams still working on CCI programs.You’re right though, it puts a lot of stress on the organization competing priorities. But that is not any - that’s not a factor in any withdrawal of our guidance. We still feel confident about our CCI program.Again, in the second quarter, and we always say this too shall pass to some degree. And hopefully, things get back to the new normal, but we still feel real confident in our CCI program and achieving those results.

And likewise on NPD, I’ve already commented on the first quarter, so I won’t repeat the - sorry, first half, and I won’t repeat that. But again, as we take a long-term perspective on our business, our R&D teams and our marketing teams and commercialization teams are continuing to work on NPD. And we have a good pipeline. Again this will pass and there’ll be - there’s going to be an important place for new products just as always has been.

Thank you.

Thanks.

Thank you. Our final question today comes from the line of Peter Galbo with Bank of America. Please proceed with your question.

Hey, guys. Good morning and thank you for fitting me in. Lawrence, I just wanted to ask about kind of squaring some of the math around China. Obviously, a 3% hit kind of in the first quarter and then 1.5% or 1% to 2% kind of hit for the full year, would sort of imply a similar $35 million to $40 million hit in the second quarter? I just want to make sure I’m thinking about that right.And I know you’ve also just given some early commentary, but anything you’re hearing from your foodservice customers in China on the ground, maybe outside of the Hubei province would be helpful.

Sure. So I think that your math is right. I wouldn’t say that it’s all second quarter, but we do see a ramping up of the business, but a strong impact in the second quarter. And that you’re in the right order of magnitude there in terms of the impact that we expect.Regarding the food service industry in China, most of our customers have gone - have publicly stated that their restaurants are open and they are. And consumer traffic is slowly building. That opening has occurred over a period of weeks, but our teams would confirm that the restaurants are open.And they are depending on the region, some of the areas where recovery is furthest along like in Shanghai. And they’re seeing 30% or as much as 50%. Normal traffic in places like Hubei, you know, the openings are only - they are only like a few days or weeks into them and consumers are still not confident enough or have the freedom of movement to get into those restaurants.Hope that gives you some good color. We’ve got almost 3,000 people in China, including 1,000 in Wuhan. So, we have a pretty good pulse of what’s actually happening on the ground there.

Got it. No, that’s very helpful. You also gave some helpful commentary just around McCormick’s broader performance during recessionary periods. I think one of the questions that we’ve been getting is just in general what kind of happens with private label in a recessionary period.So just anything you could speak to that, what you saw kind of in 2001 and maybe in 2009 in some of your categories with competition from private label?

Our experience is that we’ve done well during those recessionary times. I don’t want you to forget that we’re a supplier of private label. And both - private label does well, so do our brands, and we’ve had good growth.We, again, look back at the last two recessionary periods, and our consumer business growth was strong. I think we mentioned those numbers in the prepared remarks. I’d say that our US consumer business was actually slightly stronger than the numbers that we quoted for total company.

Great. Thanks very much, guys.

Thank you.

Thank you. I’ll turn the call back to Lawrence Kurzius for closing remarks.

Great. Thanks, everyone for your questions and for participating on today’s call. And thank you for your patience for staying over. We did want to take all of the questions. And so, we’ve run a little bit long. McCormick is a leader in flavor, and we’re differentiated with a broad and advantaged portfolio, which continues to drive growth. We have growing and profitable business and operate in an environment that is changing at an ever faster pace. We deliver flavor to all markets and channels, while responding readily to changes in the industry and the world with new ideas, innovation and purpose.One of the most significant risks to any company is being unprepared to respond with agility to a significant unexpected disruption. We are all experiencing that disruption now, and McCormick is well prepared, not only to manage through it, but to emerge stronger.With a relentless focus on growth, performance and people, we are confident our strategies will enable us to become even better positioned to drive future growth and build long-term value for our shareholders.

Thank you, Lawrence, and thanks to everyone for joining today’s call. If you have any further questions regarding today’s information, please reach out to me. This concludes the call this morning. Have a good day and hope everyone stays healthy and safe.