Dive Brief:
- McCormick & Co. raised its tariff impact for 2025 from $90 million to approximately $140 million, CFO Marcos Gabriel told investors.
- The higher costs stemmed from existing and new tariffs as of August, with the latter accounting for about two-thirds of the levy impact on the third quarter ending in September, Gabriel said on an Oct. 7 earnings call.
- "As we look ahead to 2026, we plan to offset as much of the incremental impact as we can with productivity savings across the P&L, alternative sourcing, supply chain initiatives and, of course, leverage our revenue management capabilities, including pricing," the CFO said.
Dive Insight:
McCormick has grappled with mitigating tariffs since April, when President Donald Trump announced levies on nearly every country. In June, executives reported that reducing levies was difficult because some raw materials were not commercially available in the U.S. The company's portfolio includes 17,000 ingredients across 90 markets.
McCormick offset tariffs this year by raising prices and shifting its procurement footprint to lower-tariff countries. The company plans to continue that approach in 2026 alongside finding productivity savings.
“Our global manufacturing location strategy, resilient supply chain, global sourcing capabilities and collaborative efforts across the organization continue to be competitive advantages, enabling us to mitigate the impact of tariff and tariff-related costs and maintain business momentum," President and CEO Brendan Foley said.
Besides higher tariffs, McCormick faced rising commodity prices in the first half of 2025 that quickened in the third quarter, Gabriel said. "It accelerated, and we saw more inflation come through this quarter than we expected."
Tariff uncertainty led suppliers to pause and wait to see how the market moves, Foley said.
"I think this slows down difficult forces of supply and demand," Foley said. "And so that's definitely been an element that we've seen even as early as the second quarter. But more recently, we certainly start to see that they're passing along their tariff impact."
Meanwhile, McCormick has increased its total distribution points in the Americas for spices and seasonings, recipe mixes, hot sauce and mustard, Foley said. The company also continued to gain distribution in high-growth channels like e-commerce.
Tariff mitigation has been an ongoing effort among brand manufacturers. WD-40 launched an initiative to bring sourcing closer to customers. Colgate-Palmolive leaned on its supply chain to lower costs, and Clorox considered sourcing and product formulation to reduce its tariff exposure.
