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Diving overview:
- McCormick & Co. increased its 2025 tariff impact from $90 million to about $140 million, CFO Marcos Gabriel told investors.
- In an Oct. 7 earnings call, Gabriel said costs had increased due to existing and new tariffs as of August, with the latter accounting for about two-thirds of the impact of the levies in the third quarter ending in September.
- “Looking ahead to 2026, we plan to offset as much of the incremental impact as possible through productivity savings across our P&L, alternative sourcing and supply chain initiatives, as well as leveraging our revenue management capabilities, including pricing,” the CFO said.
Dive Insights:
McCormick has been wrestling with tariff relief since April, when President Donald Trump announced he would impose levies on almost every country. Last June, management reported that reducing the levy was difficult because some raw materials were not commercially available in the United States. The company’s portfolio includes 17,000 ingredients across 90 markets.
McCormick offset tariffs this year by raising prices and shifting its sourcing footprint to countries with lower tariffs. The company plans to continue this approach in 2026 with productivity savings.
“Our global manufacturing location strategy, resilient supply chain, global sourcing capabilities and collaborative efforts across the organization continue to maintain a competitive advantage, enabling us to mitigate the impact of tariffs and tariff-related costs and maintain business momentum,” said Brendan Foley, President and CEO.
In addition to tariff increases, McCormick faced rising raw material prices in the first half of 2025, which accelerated in the third quarter, Gabriel said. “The pace has picked up and we’ve seen more inflation this quarter than we expected.”
Tariff uncertainty has forced suppliers to pause and wait to see how the market moves, Foley said.
“I think this blunts the difficult forces of supply and demand,” Foley said. “And that’s certainly been a factor that we’ve seen since the beginning of the second quarter. But more recently, we’ve definitely started to see them passing on the impact of the tariffs.”
Meanwhile, McCormick has increased its overall distribution points for spices and seasonings, recipe mixes, hot sauces and mustards in the Americas, Foley said. The company also continued to expand distribution in high-growth channels such as e-commerce.
Tariff relief has been an ongoing effort among brand manufacturers. WD-40 has launched an initiative to bring sourcing closer to the customer. Colgate-Palmolive relied on its supply chain to cut costs, while Clorox considered sourcing and product mix to reduce tariff exposure.
