00:00Talk to us first about this deal because it is a massive deal. And I guess you'll what you'll back
00:06into a company that still will have a majority of Unilever shareholders. But you'll stay on running the business and
00:15keep your headquarters. That's right. This is this is a combination really focused on on growth and value creation. So
00:21you have two iconic brand portfolios combining to really create just a preeminent you know food company that's all focused
00:29on flavor.
00:30And so when we look at this it's you know it's going to be very accretive in the first year.
00:34You know sales just operating margin just DPS. And so we really think there's a lot of value creation opportunity
00:40here. But it's also you know an opportunity for you know McCormick just to continue to kind of strategic focus
00:46on flavor at a global level.
00:47It does feel a little bit counter to the overall trend of what's happening with consumer products. Kraft Heinz paused
00:53a split but still is looking at it. Keurig, Dr. Pepper, this is moving in the opposite direction. Are they
00:59getting something wrong? Why do you think that you're growing bigger as others are trying to do spinoffs or shrinking
01:04and focusing in on on various parts of their business?
01:06You know for both Unilever and McCormick this is about focus. And you know we're really bringing together a number
01:13of brands. Again as we said they're all focused on flavor. And that's what McCormick's focus is. And we bring
01:18the focus of a food company now to that brand portfolio that we're combining with with Unilever. But it is
01:24really about focus in both companies.
01:25So I want to focus on the flavor too. I have a million questions about your products. But I want
01:31to ask first about the deal because the structure is interesting. It's a reverse Morris trust. I don't know what
01:37that means.
01:37But tell us about the mechanics of that and why you decided to do it this way. Well as we
01:42as we combine both companies you know you think about the size of Unilever. It's about two thirds the size
01:47of the total combined and McCormick's about one third.
01:49And that's really the combination that we agreed upon in terms of the proportion for both shareholders. But both shareholders
01:55win in this. What they get is a larger food company that's faster growing with stronger margins and an ability
02:01to really kind of really build out globally.
02:03Well and Unilever is a monster business but they must have a lot of faith in you and your management
02:07team because otherwise they would you know obviously replace you.
02:12McCormick is the right home for these brands. And when we talked about it I mean the equity fit of
02:17their focus of their portfolio which is
02:19brands like Hellman's and Knorr and other brands that are also local favorites combined with McCormick. It's a really strong
02:25fit when you think about the grocery store.
02:27It is a big project to take on. What becomes sort of the pain points of an acquisition of a
02:32deal of a reverse Morris trust of this size. What needs to be worked through in the coming months and
02:38years.
02:38Well the important part is how you plan integration. So we have a very detailed integration plan that we have
02:43underway and we have a lot of experience in doing this.
02:46So of course not necessarily at this size and this scale. But when you look at an integration it's important
02:50to define the complexity that you're dealing with.
02:53And in this one you know think about first you have to separate and then you have to integrate.
02:57And right now the separation I think 80 percent of the sales of Unilever's food business is already separated. It's
03:02standalone.
03:03Think about the sales organization manufacturing R&D. Those are things that kind of come together and kind of reduce
03:09execution risk. But also think about market overlap.
03:12Now we're talking about the combining aspect of this. And so we see a lot of overlap opportunities where we're
03:17lifting and shifting great Unilever talent and ways of operating into a combined business.
03:22How does that work with just making sure that the best talent stays on board. Do they need to move
03:27to Baltimore. I mean it's a great city. I love Baltimore.
03:29But maybe you'd have people being like absolutely no way I'm going there.
03:32This is a global business and we need people globally.
03:35I wonder about a couple of trends in the food business that everyone has seen right. The private label business
03:41the white label business has gotten big.
03:43So how do you differentiate McCormick from I don't know bowl and basket or whatever you know private label brand
03:52is sitting right next to it in the spice aisle.
03:55It's the quality in the flavor of our products. So you think about the hot sauce category. Those are flavors
04:00that can't be replicated.
04:01And so people are really loyal to them. Think about Cholula or Frank's Red Hot.
04:05And in fact they probably have many hot sauces in their pantry for different purposes.
04:09But you go over to herbs and spices. I mean if you compare sort of a cumin to a cumin.
04:14We have a very unique sourcing strategy that is really deep. We go all the way to the source and
04:20we have a chain of custody from the farm.
04:22We work with over 54,000 smallholder farmers. And so we know exactly what that product is and it prevents
04:28adulteration and make sure that we have the right spec behind everything that we have.
04:32So it is quality in the jar that is the big differentiator versus everything else because we have a very
04:37unique sourcing strategy.
04:38I think there is this fear that consumers already having dealt with a lot of inflation are dealing with it
04:42even more acutely as gasoline prices go up.
04:45Have you seen any changes to consumer behavior over the past month.
04:48You know I would not say over the past month. It's really been over the last couple of years.
04:52There's a real intersection with the need for value and also health and wellness.
04:56And consumers are going to give up on looking for both of those.
04:58So we put a lot of focus around that in the first couple of years that I've been CEO and
05:03really make sure we have our price points right at shelf.
05:05We're working a lot with our retail partners to make sure that we grow categories and we think about volume
05:10growth.
05:11And that's been a big focus of ours.
05:12If you look at the performance of McCormick and Unilever Foods over the last two to three years, we're one
05:16of the few companies that have been doing that because we think we're hitting that cross-section of value in
05:21health and wellness.
05:22I want to get into mayonnaise a little bit because I grew up in Bexley, Ohio.
05:26My grandmother would make us peanut butter and mayonnaise sandwiches.
05:30Oh, I don't know how I feel about that.
05:31It's delicious.
05:32I don't know.
05:32It's delicious.
05:33But she wouldn't have used anything other than Hellman's.
05:35And as a result, I never will try Mike's Amazing Lemonade or Duke's Mayonnaise or whatever QP is, this Japanese
05:43mayonnaise.
05:44But other people are increasingly starting to branch out.
05:48And there's also like a hyper-local foods trend that's picking up.
05:53How do you look at this category, this all-important category of mayonnaise?
05:56Well, when you look at categories like this where you have big legacy, you know, sort of iconic brand names
06:01like Hellman's or like McCormick, those are important to consumers.
06:05But consumers also like to explore with flavor.
06:08They like to try new things.
06:09We understand this world of flavor a lot.
06:11And, you know, you have to continue to be relevant.
06:14And you have to bring in innovation.
06:15You have to bring in new flavors.
06:17You have to think about, you know, how does heat apply, you know, and think about flavor trends.
06:21We know all about that.
06:22And so I see a world of innovation opportunity, whether it is a small, you know, growing brand.
06:27Like think about Cholula or Frank's Red Hot or My Mustard.
06:32Those are really great high-potential brands around the world that we see a lot of growth.
06:36And so we see a lot more new penetration.
06:37But there's also innovation opportunities behind brands like Hellman's where you're still going to want to be a loyal user,
06:43but it's also a lot of new flavor opportunities there, too.
06:46What's sort of the split between, like, your test kitchen coming up with new stuff versus inorganic acquisitions and finding
06:52little small, like, you know, the kind of small local hyper brands out there?
06:55Do those look attractive to bring in new innovation, or is it kind of all done in-house?
06:58Well, we consider both, actually, as we think about growing the business.
07:02It is about growing the brands organically.
07:03That's really important.
07:04It's also important to grow through volume.
07:06And sometimes there are opportunities where you see brands like we did with Cholula a couple of years ago.
07:10We thought this brand has the ability to take off globally.
07:13That has to be in our portfolio.
07:15What's next?
07:16I mean, would you, you want scale.
07:19You know, you want more skews.
07:21Do you go after a J.M. Smucker?
07:24Because Jif peanut butter goes amazingly well with Hellman's mayonnaise.
07:27You know, we're really focused very exclusively, and that's why I think it's really the most important part of this
07:33combination is we're dedicated to flavor.
07:35And we've been very, very focused on that.
07:38Just very quickly, because we're almost out of time, but one of the things that's been remarkable about this very
07:43tense geopolitical moment that we're living in is that kind of the price of everything is dependent off energy, including
07:48plastics.
07:49What has that done to you, packaging, getting more expensive because of what's happening in the Middle East?
07:53Well, we're certainly watching that closely, and the price of oil obviously affects a lot of that.
07:57We're finding a way to work through that, you know, and every company is trying to find a way to
08:00make sure we work through that.
08:01But this is one where we have to think about value at shelf, making sure we also find other ways
08:05to offset those input costs, and that's the way we're dealing with this current situation.
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