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Dive Brief:
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McCormick said Thursday the Trump administration’s tariff policy could cost the company up to $90 million a year as the flavoring giant contends with higher prices for spices that cannot be commercially grown in the U.S.
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The spice maker is planning to selectively raise prices in the fourth quarter after seeing the “cost of certain commodities coming in higher than we had planned,” Executive Vice President and CFO Marcos Gabriel said on an earnings call.
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McCormick is also using advanced analytics to identify alternative sourcing locations where possible, which is expected to offset a significant portion of tariff costs, according to Gabriel.
Dive Insight:
While McCormick is exploring alternative sourcing options for imported agricultural products, CEO Brendan Foley acknowledged that some raw materials cannot be substituted because they are “not commercially available in the United States.” The company's portfolio includes about 17,000 ingredients across 90 markets.
McCormick is minimizing its reliance on any one country, especially as rapid trade negotiations lead to a different set of duties depending on the geography. The company is “pulling all the levers that we can to mitigate the impact,” Gabriel said.
Consumers have increasingly demanded global and exotic flavors such as yuzu or lychee, especially as more culinary enthusiasts look to recreate the restaurant experience at home due to persistent inflation. Tariffs could raise prices for many of these trendy ingredients, which are native to growing regions outside the U.S.
Even McCormick’s flavor of the year, which the company unveils annually to highlight culinary trends, isn’t spared from tariffs. This year’s flavor, the Aji Amarillo pepper, is from Peru, which is currently subject to 10% baseline tariffs.
After a 90-day pause from the Trump administration, sweeping tariffs are set to go into effect July 9 on countries without trade agreements in place. The move is expected to raise prices of spices including table salt, black pepper, vanilla, cinnamon and nutmeg, according to the American Spice Trade Association.
“The vast majority of spices cannot be grown in America in quantities sufficient for commercial use,” the association wrote in a March letter to the Trump administration, adding that higher costs will either be passed down to consumers or absorbed by food manufacturers.
Story ContinuesMcCormick”s second quarter earnings beat analyst expectations, with sales rising 1% on higher volumes. The spice maker is seeing accelerated interest from food companies interested in making their portfolios healthier or reformulating their products to remove artificial dyes.
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