Mccormick & Co Inc (MKC) Q1 2024 Earnings Call Transcript

Good morning. This is Faten Freiha, VP of Investor Relations. Thank you for joining today's First Quarter Earnings Call. To accompany this call, we posted a set of slides on our IR website, ir.mccormick.com. With me this morning are Brendan Foley, President and CEO; and Mike Smith, Executive Vice President and CFO. During this call, we will refer to certain non-GAAP financial measures. The nature of those non-GAAP financial measures and the related 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. Today's presentation contains projections and other forward-looking statements. Actual 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. Please refer to our forward-looking statements on slide two for more information. I will now turn the discussion over to Brendan.

Good morning, everyone, and thank you for joining us. As many of you have probably seen on the news this morning, the Francis Scott Key Bridge collapsed in Baltimore. Our thoughts go out to everyone impacted by this terrible tragedy. We have activated a team and are monitoring the situation. We are pleased to start the year with a strong first quarter. Our performance reflects the early success of our prioritized investments to improve volume trends and drive profitable growth. I will begin my remarks this morning with an overview of our first quarter results, focusing on top-line drivers. Next, I will provide perspective on industry trends, highlight some early signposts of success, as well as areas we continue to work on and review our growth plans. Mike will then go into more depth on the first quarter financial results and review our 2024 outlook, and finally, before your questions, I will have some closing comments. Turning now to our results on slide four. In the first quarter, sales grew 2% in constant currency, reflecting a 3% contribution from pricing, partially offset by a 1% decline in volume and product mix, primarily driven by the pruning of low-margin business and our canning business divestiture. Underlying volume was flat compared to the prior year. Sequentially from the fourth quarter, volume trends improved in both Consumer and Flavor Solutions. We believe this improvement is an indication of continued progress as we remain focused on driving quality top-line growth throughout our portfolio. In Consumer, volumes improved substantially from the fourth quarter in the Americas. In EMEA, we drove positive volume growth while continuing to benefit from pricing actions. In Asia Pacific, volume performance was impacted by the macro environment in China, as we expected. We continue to expect full year 2024 China Consumer sales to be comparable to 2023. Outside of China, we delivered strong sales growth driven by both price and volume. In Flavor Solutions, our results were solid and growth was driven by price and underlying volume growth, partially offset by the impact of our canning divestiture. We are pleased with our performance recognizing many of our customers, including Consumer Product Companies or CPGs and Quick Service Restaurants or QSRs, continue to experience volume softness in their businesses. We are continuing to collaborate with our customers to navigate this challenging environment and we remain optimistic about our growth for the year. It's worth noting that volume trends and Flavor Solutions typically fluctuate from quarter-to-quarter, largely attributable to customer activity, including new product launches, limited time offers, and their other promotional activities. As we said at the CAGNY conference, McCormick is a growth company, and 2024 is an important investment year to return to our long-term objectives. Our results demonstrate the early impact of investments we have made to fuel our top-line and further capitalize on the underlying growth of our categories.

Thanks, Brendan, and good morning, everyone. Starting on slide eight. Our top-line constant currency sales grew 2% compared to the first quarter of last year, reflecting 3% of pricing benefit, offset by a 1% volume and mix decline. As expected, volumes were impacted by our strategic decision to exit DSD, Direct Store Delivery, of our bagged Hispanic spices in the Americas. The exit of a private label product line, and the divestiture of a small canning business in EMEA. Underlying volume and mix performance was flat for the quarter, reflecting a sequential improvement from the fourth quarter where total underlying volume growth was down approximately 3%. In our consumer segment, constant currency sales growth of 1% reflects a 3% increase in pricing actions, offset by a 2% volume decline, which is due to a 1% impact from the DSD business exit I just mentioned, lower volume and product mix in the Americas, specifically in Prepared Food Categories, including Frozen and Asian, consistent with our expectations, and the impact of the macro environment in China. On slide nine, consumer sales in the Americas were comparable to last year. Contribution from price was offset by a volume and mix decline of 3%. This decline was fully attributable to the DSD exit and lower volume and product mix in the Prepared Food Categories I just mentioned. In EMEA, constant currency consumer sales increased 8%, with a 5% increase in pricing actions and 3% volume growth. Sales growth was broad-based across product categories in our major markets. We are pleased with the volume growth we delivered in EMEA and expect the momentum to continue through 2024.

Thank you. Our first question comes from Andrew Lazar with Barclays. Please go ahead with your question.

Great, thanks. Good morning, Brendan and Mike.

Good morning, Andrew.

Maybe to start off, your first quarter organic sales obviously came in better than I think the Street had forecast and sounds like maybe better than you might have initially expected, but of course, it's a seasonally smaller quarter for McCormick as well. And while you did confirm the full year sales growth range, obviously it was notable in your comments about having increased confidence and achieving the mid-to-high end of your constant currency sales growth range for the full year. So I was hoping maybe you could give us a sense of some of the specifics of what gives you that greater confidence now than when you first gave guidance last quarter?

Well, thanks Andrew for the question. Maybe just to open up with, a couple of remarks that I think drive at the heart of your question. We did have a strong quarter. We drove a little bit more on sales, which does give us confidence to be in that mid to upper half of our range. And I think importantly, we accomplished the things that we said we would do, and we made a lot of good progress. We drove sequential improvement, volume improvement in our core categories, especially on spices and seasonings. We said this would be a year of investment, and we were able to quickly execute the programs that we intended to get out in the market. That was an example of increased brand marketing, new product launches performing well from 2023, and that targeted price gap management execution, and at the same time, we did expand margins. So we are pleased with the results, yet it is the start of the year, and it's our smallest quarter as you called out, and so we're keeping it in perspective. But this is strong progress, and so I think that gives us some of that confidence going into the rest of the year. As we noted on the call or probably as you expect, our pricing assumptions haven't changed. So this doesn't imply that volumes are improving as we go through the year. We have targeted investments, and we continue to expect to improve those volume trends as the year progresses and to drive volume growth during the second half of the year. We're focused on what we can control, and we're confident in those initiatives that we've called out, and hopefully you've heard the proof points that we've cited.

Great. Then, I know volumes, specifically in Consumer Americas, I think were down about 6% in the fourth quarter last year, and as you noted, down a much more modest, sort of less than 3% in the first quarter. Would you expect Consumer Americas volume to sort of continue to improve sequentially from here? And again, in that segment, that it could inflect a positive during the second half of the year? Or are some of the headwinds you pointed out that still exist in Consumer Americas still more of a challenge to that?

Let me give more context around Q1, and then that might also help provide a sort of foundation for how to think about the year to go. The volume decline of 2.6% in the Americas for Q1, it was really coming through two key factors. One is that DSD exit that we've spoken about quite a bit over the last four quarters. So that definitely was one of the drivers of that 2.6%, and then that decline in the prepared food categories as we noted on the call. So, if you exclude those two factors, volume growth in Consumer Americas would have been flat to slightly positive. So I think that's kind of a, helps to sort of set a foundation for how we think about the year to go. Also, in our key categories in Q1, growth in spices and seasonings and recipe mixes was pretty healthy. It was offset by declines in mustard and hot sauce. So, that's other context I think we would provide against Q1. As we look forward to the year, we expect volumes to continue to sequentially improve and drive volume growth as we get into the second half. So, that would probably be the best perspective I could provide on that.

I think – to think about too, this is not just about Americas Consumer. I mean, we're building volume globally in the consumer side, and a lot of the same brand building activities, such as increased A&P, we talked about this in the call, is in all regions. So we continue to support those brands globally in each of our regions, not just Americas.

Thank you so much.

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

Hey, guys. Good morning. Thanks for taking the question.

Sure.

Mike, maybe just to follow up on Andrew's question, I think if you strip out DSD, the exit in the first quarter, you still kind of had a ship ahead or consumption ahead of what the scanner data would have said in North American Consumers. So maybe, I know you probably don't want to give like basis point level detail, but if you could kind of rank between untracked, some of that co-manufacturing you do, some of the upside drivers relative, I guess to the scanner data that drove kind of the positive variant in the quarter.

Peter, thanks for your question on that. On an apples-to-apples basis, our consumption is roughly in line with our sales and we are shipping to consumption. What's probably driving the U.S. consumption, lagging on Americas consumer sales is we had good growth in Latin America and Canada and that contributed to our total growth. But we also delivered growth in unmeasured, excluding that DSD business exit that we talked about. So we do expect and continue the alignment between consumption and shipments moving forward. We don't really believe that there's any sort of inventory movement that we can call out at this point in time. But it's also important to call out that in that unmeasured growth was primarily driven by e-commerce. It represents this globally for us, about 10% of our total consumer sales, and so that's pretty healthy and positive. But we've seen double digit growth in all of 2023 in e-commerce and did again in Q1. So we continue to believe that e-commerce is a growth channel, and we do continue to put resources up against it. But coming back to sort of the top of your question on the influences on measured channels, I would probably think about that as one thing to consider and think about. But largely, we really believe that our shipments and consumption are broadly in line with.

Got it. No, that's helpful. And then maybe guys, just I wanted to clarify on China, because the slide seemed to say maybe two things. I think in the China Consumer business, which I know is kind of more branded food service, there was some weakness. But then on China Flavor Solutions, you talk about strength in QSRs in China. So just wanted to maybe unpack a bit more on those because it seemed to be saying two different things and get a better read kind of between those two sub-segments. Thanks very much.

Sure. I'll make a couple of comments here, and Mike might have some things to add. We are not thinking about China any differently than what we said last quarter. It largely met our expectations for the first quarter, both from a consumer segment perspective and a flavor solution segment perspective. And we continue to expect that for total 2024, China Consumer sales to be comparable to 2023. Broadly our outlook for the Chinese consumer does remain cautious. I mean, there are several reasons to continue to think that way, persisting unemployment with young adults, reduced consumer confidence. Consumers are still somewhat reluctant to spend. In our business, and that falls into our consumer segment, is sales to smaller independent restaurants and they are losing some traffic to the larger QSR chains. That might be where you're hearing us say two different things. So off of that is some perspective around that. Yet, like we do with other regions, we have plans in flight to address how we're looking at China and the changing trends of Chinese consumers. We do expect our Flavor Solutions business to be stronger in 2024, just based on the trends that we're seeing. So, that's I think, some of the perspective. Mike, do you want to add anything?

Yeah, I think we were in China about two months ago and saw a lot of these trends with QSRs, big established QSRs were starting to gain share and drive some traffic into their stores versus that kind of smaller mom and pop type stores. I mean, I would just give you context to this kind of talk as we talk about our whole Flavor Solutions business. The QSR business in some parts of the world, like China, is really doing well. Other parts, it's a bit challenged. So as you think about our guidance, those are things that you can talk about the Flavor Solutions business is lumpy in part due to the fact that, our CPG customers and QSR customers control new product launches and there's foot traffic and things like that. But China has started off strong on the QSR side, which is great.

Great. Thanks, guys.

Thank you. Our next question comes from the line of Max Gumport with BNP Paribas. Please proceed with your question.

Hey, thanks for the question.

Good morning.

The last quarter you talked about making good progress on restoring distribution that was lost to past supply issues. And it sounded like you're reiterating that commentary and that you still have line of sight to making some good progress on getting that distribution back following customer resets in the middle of this year. I was just curious if you could give us a bit more color on some of the updated insights you've gotten over the past couple of months since we last heard from you on what you are seeing, what you are hearing with regard to customer wins in U.S. spices and seasoning. Thanks.

Thanks for the question, Max. Yeah, as a reminder, the proactive discontinuations over the course of the last two years make up roughly 50% of the TDP losses that we experienced. So just a reminder, as background on that and then of the TDP that we lost really due to supply, we've recovered really quite a bit of it, not entirely all of it, but a lot of it. I think the context, I would add on top of that in terms of what we're seeing right now, across our core categories, we're really making pretty good progress. So, for example, just on recipe mix, our total distribution points were up again in Q1 and at this point, we probably have the highest TDPs that we've seen in that category, probably compared to the last three or four years, and our share of TDPs is really quite healthy and strong. On hot sauce, again our TDPs were up in Q1, and we have the highest total TDP points on that business too, in the last three years. Mustard, similar situation, TDPs were up again in Q1, and we have the highest total TDPs and on that one, the share of TDPs in the last three years. So, a number of those categories, we feel like we're doing quite well and progressing quite nicely, up against this. In spices and seasonings, we're also making pretty good progress. In about five of our top six segments, we're seeing TDP growth. Broadly right now, TDP shares is flat for us, but we expect that to improve as we go through the year. A lot of these resets, when you think about any category or mostly that tend to happen in the middle of the year. We think towards the end of Q2, those will start to reflect on shelf. So I wouldn't say for all of Q2, but definitely as we go into the back half of the year, we think there'll be more full reflection of the gains that we think we've won.

Great. And then one more on Flavor Solutions. So, it's nice to see the positive volume growth to start the year. It was a bit earlier than we all expected, at least from RC. I know you called out that this segment can have fluctuations, whether it's due to limited time offerings or promotional timing, new product launches, what have you. With that comment, are there any things you know about right now that would make you think we could see some step back in Q2? Or is it more just trying to let us know that this is a segment that is more volatile and there's potentially reason to think that we could see a dip back to flatter performance in Q2? I'll leave it there. Thanks.

Yeah, this is Mike. I think you're right. We're really happy with the first quarter performance there, the sequential improvement. But, some of our regions, the QSR business is pretty material, such as the EMEA. It's very public, some of the customers coming out talking about the food traffic. So, I think as Brendan said in the call, the second quarter, there is a bit of headwind there on the Flavor Solutions side, so I wouldn't be surprised by that. But, as Brendan said, too, the second half, both for Consumer and Flavor Solutions volume, we're expecting strength. I think about our performance, too, in halves versus quarters, because quarters can get very weak. That makes a difference sometimes. So, within the first half, we're still calling for kind of flattish volume, second half volume growth across the business. So, think about it in those terms, too.

Thanks very much.

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

Yes, thank you. Good morning, everyone.

Good morning, Adam.

So I guess, I wanted to dig in a little more on the Americas Consumer business and just maybe provide a little more context, Brendan, Mike, on the point on spices and seasonings and the unit share kind of improvement. Just is that was that coming through faster than you expected? Is that tracking as you thought and just retail sales broadly in January in particular accelerated for the whole industry? A little bit of weather and some of that channel shift that you alluded to seems like it’s gone back to the same similar trend through February. Was that – do you think you've held that unit share through existing the quarter through February or was there some bigger uplift towards the end of the quarter there?

Yeah, Adam I'm happy to provide more context on spices and seasonings. Just maybe speaking first to broadly what we saw in the industry, I think through the first quarter. As our prepared remarks noted, if you think about what appeared to be a very sort of challenging, difficult Q4, we started to see more center of store improvement compared to Q4 broadly, and maybe that came at the expense of food-away-from home to some degree. Certainly a cold winter always benefits McCormick. We like to see people make a lot of chili, and so that always is great for part of our recipe mixed business. But, what we're speaking specifically to spices and seasonings here. So, we tend to think about this from a different perspective. What's really driving I think our performance right now is, I would point out maybe a couple of things that are benefiting our business. Our new packaging continues to increase velocity on shelf and we're rolling out more of that. It's just pulling through and more of it will be complete by the end of the second quarter. So we're at 75% at the end of Q4. We believe that we're obviously somewhere between 75% and 100% at this point in time, and so that's driving improvement. We are recapturing distribution points too, and we think that sequential improvement led to some positive. That plus our increase in advertising and the velocity of our new – coming from our new packaging led to unit share gains at the end of the quarter. That increase in advertising, I think certainly was one of the things that we think led a lot of our positive trends in our business in spices and seasonings. So, these are some of the things that we've spoken to I think from not only the fourth quarter call but also at CAGNY and I would just reiterate them here. The collection or the integration of all of that together we believe is driving the right level of performance on the business overall.

Okay, that's helpful. And then maybe just to follow up from Mike, just the comments on the second quarter and the gross margin that will be up modestly year-over-year. I guess I'm just trying to make sense of from a – should we be thinking about SG&A percent of sales similar to the first quarter? It doesn't seem like your top line, maybe a little bit of setback in Flavor Solutions sequentially in terms of the top line. But it doesn't seem like you're talking about a big setback probably in terms of the overall company sales. I know last year was a tougher comp on price cost, but I guess I'm trying to just make sure I understand why it would seem like the profit growth, if not the profit dollars themselves are decelerating.

I think, Adam, maybe think about it this way. I mean, second quarter is kind of an inflection point for us. The pricing which for the first quarter was about 2.7% and think about it for the year is going to be at 1%. So, second, third, and fourth quarters is coming down. While volume is turning positive and we're getting sequentially improvements, in that second quarter you don't have as much cover for pricing and your volume while it's improving isn't to the level it is in the second half. So that is – in second quarter, as I said in the remarks, we're activating some of our price cap management activities more than in the first quarter. So that puts a little pressure on the sales line and the profit line. But we're confident those investments, including increased A&P, which we had in the first quarter but also in the second quarter too, will contribute to driving sequential volume improvement in both Q2 but in the second half. So, I think what you're getting a little bit is a bit of a – like I said, it's an inflection point before the volume growth, which we'll talk about in the second half. So, it puts a little pressure on margins. We're still having positive margin improvement versus last year, but if you think about last year, that was like the sweet spot of when our pricings were really going in, overcoming the cost impacts. We talked about that last second quarter. So that was – at that point our margins were up 300 basis points from the prior year, I think it was. But we still see, again back to the first half, second half really good margin improvement in the second half for the first half. The first half is about investments. We benefited in the first quarter also, the wrap GOE programs, things like that too, which did help the first quarter, but a lot of moving parts in the second. That's why we tried to give you a little bit of summary in the script.

The color is appreciated. I'll pass it on. Thank you.

Thank you. Our next question comes from the line of Robert Moskow with TD Cowen. Please proceed with your question.

Hi. Just a couple of follow-ups. Thanks. Can you remind us again what percent of the portfolio in the U.S. are you executing this price gap strategy? I think you said it's 50%? And maybe a little more color on what segments you're working on right now and what you're learning from that. Secondarily, I think you mentioned some dollar trial sizes in hot sauces. I haven't seen that. Can you explain a little bit why you think that's incremental to the category? Is your competition doing it? And if so, are they gaining any share as a result, or is it really just helping everybody? Thanks.

Thanks, Rob. So, let me address – I just want to make sure I don't forget your second question as I address yours. With regard to price gap management, I mean I think I just would go back to confirming what we've said also at CAGNY, is that that program and those efforts, which is quite targeted on a skew-by-skew basis, represents less than 15% of our Americas...

15%, not 50.

And it's really being applied to targeted parts of our spices and seasonings category and recipe mixes. So, we're also taking price gap management efforts selectively across other regions. I would say EMEA is an example of that. But this is just part of, I think, good tactical blocking and tackling on the parts of our portfolio where we think maybe a price point just simply isn't at a place where it could be successful. So, that's the color I would add to that. Now, specifically on your question on hot sauce, the background I would first provide, hey, this is an attractive category. There's always, particularly more so than most categories, a lot of new competition always entering in the category. So, this is something that we live and operate with all the time. We do have underlying strength in our base business on hot sauce and really healthy consumer loyalty. Our plans remain pretty consistent. We're fueling a lot of growth through increasing both Cholula and Frank's brand marketing. In fact, Frank's is going to be activated all 12 months of the year in terms of being on air, and that's the first time we're doing that. And to really tap into the growth that we've seen in this segment, and we are also expanding distribution. But our underlying trends are pretty good. Now, more recently, particularly in like the end of the fourth quarter, the beginning of the first quarter, we've seen retailers push the concept of trial sizes, like at $1 price point. And it's created, obviously, a lot of consumer value when you have just a really low opening price point of $1 for something that's like an ounce or less of product. But it's resulted in significant unit growth. It's been driving down sort of the category of volume and dollar growth that maybe we had been seeing, going into this time period. So that is pressuring our share performance, particularly on units, if you might imagine. A lot of this is driven by gifting during the holidays, and so you could see sort of the big spike, and then it's kind of decelerating since then. But, we still believe it's something that's contributing positively to the category because it's adding new users to the category. We've evaluated, how much of it's coming from new households versus existing households, and the majority of its coming from new households into the category. So that's always a positive. We're taking some of these learnings and looking at, our own efforts at having a trial size and competing in this kind of promotional area. Because we think it's obviously anything that drives trial and awareness in the category we think is healthy. And importantly, it's also building upon actions that we already have in place behind hot sauce, which is a lot of innovation coming out this year. I would say, particularly a lot on Frank's, but also Cholula. We're increasing the A&P support on all the brands. Where we have traditional promotional periods for these categories, we're just making sure they're at the right times during the year and on key use of education. Obviously, the summer certainly lends itself to that. Like think of the Mayo too, so that's the context on hot sauce.

Okay, I got it. And just to follow up on the 15%, as you make it through the year, just optically we see market share data that still doesn't look like it's where you want it to be from $1 basis in spices and seasonings. Is it possible that the other 85% of the portfolio might also need to be addressed in terms of price gaps? Or are you comfortable that you don't need to take any action there?

I think we're comfortable that we don't need to take any action. And we are, pretty precise, if I might say that in terms of how we apply this and where it best needs to be applied. But I also have to say, we're constantly evaluating this. So every month we're looking at data and results and deciding whether or not, something's in the right place. But, I think we have a lot of confidence that we're focusing on the right, percentage of the business. But, to speak more specifically, I think to just share perspective around that. While we don't guide to market share of a specificity, I think the trends in our business right now are going in the right direction, and in many ways delivering against what we would expect to see, which is, that focus on share improvement for us as we're looking at our business plans, first begins with improving unit growth. And then we expect dollar, to sort of follow on top of that. But, like in U.S. spices and seasonings we're seeing that type of performance right now. So just also appreciate, this is a big integrated effort with a lot of other activities, too, including increased brand marketing, innovation, price spec architecture, other category management efforts that we're putting forth. So, I wouldn't single out any one of those levers, but actually they all work together, and that's sort of the perspective I would add on top of your question.

Got it. Okay. Thank you.

Thank you. Our next question comes from the line of Matt Smith with Stifel. Please proceed with your question.

Hi. Good morning. I wanted to ask a follow-up question on that targeted price gap management in the U.S. consumer spices and seasonings business, particularly in terms of phasing as you've built up or are you targeting 15% of the portfolio, meaning was it more targeted in the fourth quarter? You made some progress against the 15% that you're targeting in the first quarter, and there's still some more to go in these categories where you see the opportunity to use your price gap management tools to improve share. Should we expect that to continue to build into the second quarter?

Hey, Matt. Let me start here, and then Mike can chime in. Regarding the 15%, I want to emphasize that it's 15, not 50, and that represents the total view for the year. I would say our Q1 is not quite at that level yet, but we anticipate reaching that percentage as the year progresses. I just wanted to provide a bit of context for your question, Mike. No, and Matt, good question. And just as I said in the script, the second quarter is a bit of pressure because it does more activation in the second quarter. So, you're right, a little bit in the fourth, more in the first. Second quarter is when it's really almost fully activated quite nicely so. But, again, these are investments that drive that volume growth building throughout the year, which we – the early results of the fourth and first quarter investments have been very positive, combined with the A&P and things like Brendan just mentioned, so that holistic program.

Thank you for that. And you talked about some particular portions of the portfolio in the U.S. that are challenged, particularly mustard or your frozen prepared foods. Can you talk about some of the – your outlook for the improvement in those categories? Do you have plans in place to address some of the lower price points in mustard, and is it really just the consumer recovery that's going to drive the improvement in your frozen prepared foods?

So, I'll speak first to mustard. We just, again, readdressed sort of the context and the background on this. We definitely are seeing sort of a lot of low price points in private label, fairly low, which impacted our consumption, and it's driving down the category dollars, but importantly, it's impacting, our trajectory on consumption. So, we do plan to improve those trends in 2024. Largely, I think we're going to look at increasing promotional programs. We have a big grilling season, quite excited, actually, about the grilling season coming up. Mustards a big part of that as are a number of items within our portfolio. That plus, just making sure we are at the right price points, I think, across that business. We're also strengthening distribution, too, which will strengthen trends on top of that. So, that's a perspective on mustard. It will continue to get better, but as we were talking about in the fourth quarter, I don't know that we saw – what we saw in the first quarter was, contrary to what we were expecting as we start to implement those plans, particularly as we get to the grilling season. On the prepared foods category that we spoke to, we're riding the trends right now in the marketplace, and I think that's what you would expect to see us – how we would see us perform. It's a smaller part of our portfolio. We would not kind of call it this part of that core, and so we are really, I think, just watching the trends, making sure we follow what's going on in the category, and we're treating it much like in that manner.

Yeah, I think about it, too. You think about – we've talked about our portfolio management and this is part of that. We're making sure that items we have in our portfolio, just whether on the consumer or Flavor Solution side, we can improve business that doesn't meet our target, so you'll see some of that probably in this area too, but we won't be calling it out as a separate item.

Thank you for that. I can pass it on.

Thank you. Our next question comes from the line of Tom Palmer with Citi. Please proceed with your question.

Good morning, and thanks for the question. I wanted to ask on just the shelf resets coming later in the second quarter. Is this incremental from a shelf space standpoint? I mean, is there going to be, depending on how the timing goes, the potential for some favorable shipment timing as we think about the second quarter? I would assume that's not factored into your outlook. I just want to understand kind of the moving parts there, and also kind of if that's the key driver of this expanded shelf set. Thanks.

Well, we do believe that when we gain in TDPs or distribution, we do that as incremental to our presence in the market at that time. I think speaking to its impact on the second quarter, we feel like we've got that called in our outlook for the rest of the year. So I don't know if there's anything specific I want to identify for the second quarter behind this, and when exactly all that stuff ships, etc. I think that's a level of detail we just probably wouldn't be getting into at this point.

I think, Thomas, maybe as your saying, I think you are kind of focusing on the shelf renovation with the new bottles. That's been rolling out from the end of last year into this year, and that's really not a big shipment, that's what we're replacing. It's kind of going – it's not a big reset. It's the same size bottle basically. It fits on a roll bin, so we're just kind of filling the pipeline with that. So you're not going to see a big spike. Now, you will see better velocity and things like that, which is why we did it, and that will build throughout the year. Some of the resets we talked about with winning new business on other categories, those shelf sets happen sometime in the second quarter and will benefit us in the second half. So there's kind of two different thoughts there as you think about it. And welcome to the call. It's your first call with us, Thomas.

Thank you. I'll leave it at that. Thank you.

Thank you. Our final question this morning comes from the line of Rob Dickerson with Jefferies. Please proceed with your question.

Great. Thanks. Just one up-front question, two mechanical ones. So I just want to go back, I guess, for the last time, the last question, just to kind of the delta we're seeing in the track channel data, which clearly all of us look at, and then what you did in overall consumer in Americas was better. And I think I heard you say like Latin America was doing well. I know e-comm sounds like it's growing double digit. But I'm still trying to get a little bit more color, because I feel like if e-comm had been growing double digit or Latin America kind of had already been doing well, like there's got to be some delta in there that's driving the difference between what we're seeing in that track channel data, relative to what you report, because it clearly was much better in Q1 versus, let's say, the prior three years. So then as we're all looking at that data going forward, like should we I guess think that you will be tracking nicely ahead of that data given the same drivers or maybe not, because you are also saying you shift to consumption, but it's not what we see, and it's not what we've seen for the past like 11 quarters. So just there was something in there, and that's why we're all asking, but I just didn't really get it.

Well, Rob, I think there's possibly two different questions there. I'll make an attempt at what I think you are getting at, which is what we're seeing in our business, and we read our business through Circana, and that's a much broader, more refined view of our categories, and so we are reflecting that kind of data in our performance as we talk about it. Compared to what Nielsen might be reporting, I think traditionally over time we've seen differences in that reporting. We don't really reconcile that on the call or do anything of that nature, but there have been at times a difference in what Nielsen might be reporting in terms of how they are capturing the category versus the more refined, higher level, broader view as we look at spices and seasonings in our category. So that might address part of your question. Now, the other half of that could be, it's about unmeasured channels, etc., and I would go back to the comments that I made earlier that we largely see everything pretty much being in line between shipments and consumption. We are getting a lot of strong growth in e-commerce, as I called out earlier in the call. So that certainly is something that could create a difference in the numbers and the metrics, and obviously good performance in Canada and Latin America. I'm going to pause to see if maybe we thoughtfully addressed, I think.

Yeah, no, I think that's fair. That's fair. That's fair. Totally get it. I just thought I'd ask one last time. And then just quickly on the Mexico business, the JV, I know guidance is for mid-teens. I think its mid-teens growth for the year. You put up like 50% in Q1. So maybe just kind of, if you could just discuss kind of what actually did occur to drive that growth in Q1. And then given what we saw in Q1 should – like why do you think you'd still grow mid-teens if you are already so ahead?

No, our McMex’s joint venture had a great first quarter. I mean it's comping against a weaker first quarter too, so there's some of that in there. It's a little bit too early to call it the year. Just like here, there's the economy in Mexico. There's a lot of price volume things that are going through also as they've managed the year. So again, strong underlying business and we’re really happy with it, but yes, we're hoping the rest of the year is just as strong as the first quarter, but it's a little bit too early to call on that one.

Okay. Alright, alright, fair enough. And then just quickly, Mike.

I'm glad you asked that question, because we don't get a lot. I mean, it's such a large part of our portfolio. It gets ignored because it's below operating profit, but very profitable business. We have dominant – well, not dominant, but we have real strong brand positions down there across a couple of categories. And we export into the U.S., too, mayonnaise and other things too. So it's really, really good business for us.

Yeah, and it was actually a core driver of net income. Anyway, and then I guess just Mike, quickly. I don't think I heard you speak to interest expense guidance, but you do frequently provide that. So I don't know if you have that, and that's all I have.

The fact that we didn't provide it means it's not really that material. We only – I think last year was the first year we provided it, but it was roughly equal for the first quarter, so I wouldn't expect a whole lot of change for the year.

Cool. Thank you so much. Perfect.

Thank you. That concludes our question-and-answer session. I'll turn the floor back to Ms. Freiha for any final comments.

Thank you, and thanks to all for joining today's call. If you have any further questions regarding today's information, please feel free to contact me. This concludes our conference call.