McCormick & Co, Inc. (MKC) Q3 2021 Earnings Call Transcript

McCormick & Co, Inc. (NYSE: MKC) Q3 2021 earnings call dated Sep. 30, 2021

Corporate Participants:

Kasey Jenkins — Vice President, Investor Relations

Lawrence E. Kurzius — Chairman, President and Chief Executive Officer

Mike Smith — Executive Vice President and Chief Financial Officer

Analysts:

Andrew Lazar — Barclays — Analyst

Ken Goldman — J.P. Morgan — Analyst

Robert Moskow — Credit Suisse — Analyst

Adam Samuelson — Goldman Sachs — Analyst

Chris Growe — Stifel Nicolaus — Analyst

Steve Powers — Deutsche Bank — Analyst

Rob Dickerson — Jefferies — Analyst

Presentation:

Kasey Jenkins — Vice President, Investor Relations

Good morning, this is Kasey Jenkins, Vice President of McCormick Investor Relations. Thank you for joining today’s Third Quarter Earnings Call. To accompany this call, we’ve posted a set of slides at ir.mcvcormick.com. We will begin with remarks from Lawrence Kurzius, Chairman, President and CEO; and Mike Smith, Executive Vice President and CFO, and we’ll close with a question-and-answer session.

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. In addition, as a reminder, 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 statement on Slide 2 for more information.

I will now turn the discussion over to Lawrence.

Lawrence E. Kurzius — Chairman, President and Chief Executive Officer

Thank you, Kasey. Good morning, everyone. Thanks for joining us. Our third quarter performance demonstrates again that the combination of our balanced portfolio with the effective execution of our strategies to capitalize on accelerating consumer trends and strong engagement with our employees have positioned us well to drive differentiated growth. Remarkably, we delivered an 8% sales increase versus last year and 17% versus 2019.

Our third quarter results reflect a robust and sustained growth momentum, as we delivered organic sales growth on top of our exceptional third quarter performance last year. Our third quarter results also included strong contributions from our Cholula and FONA. Sales growth in our Flavor Solutions segment was broad-based, with the at-home products in our portfolio, flavors and seasonings growing at approximately the same rate as our away from home products, which was primarily driven by a robust recovery from last year’s lower demand from our restaurant and other foodservice customers attributable to COVID-19 restrictions and consumers’ reluctance to dine out.

Our Consumer segment results reflect the lapping of the year-ago elevated demand in the lockdown phase of the pandemic, from consumers eating and cooking more at home, as well as the sustained shift to consumer at-home consumption higher than pre-pandemic levels. Taken together, these results continue to demonstrate the strength and diversity of our offering, the breadth and reach of our portfolio with compelling offerings for every retail and customer strategy across all channels creates a balanced and diversified portfolio that enables us to drive consistency in our performance even in a volatile environment.

Turning to slide 5. Total third quarter sales grew 8% from the year-ago period or 5% in constant currency. Substantial constant currency sales growth in our Flavor Solution segment more than offset a slight constant currency sales decline in our Consumer segment, driven by the factors I just mentioned. Adjusted operating income was comparable to the third quarter of last year, including a 3% favorable impact from currency. The benefit of higher sales was more than offset by higher cost inflation and industry logistics challenges as well as by a shift in sales between segments. On the bottom line, our third quarter adjusted earnings per share was $0.80 compared to $0.76 in the year-ago period, driven by higher sales and a lower tax rate, partially offset by cost pressures.

As we have stated previously, we expect growth to vary by quarter in 2021. Importantly, we have delivered outstanding year-to-date performance. Sales and adjusted operating income are up 13% and 9% year-over-year respectively, both of which include a 3% favorable impact from currency and we’ve grown adjusted earnings per share of 8%. Year-to-date versus 2019, we’ve driven sales, adjusted operating income and adjusted earnings per share growth of nearly 20% across all three metrics.

I’d like to say a few words about the current cost environments impact on our third quarter results as well as our outlook, which Mike will cover in more detail. We stated in our July earnings call we are operating in a dynamic cost environment and like the rest of the industry experiencing cost pressures, we’re seeing broad-based inflation across our raw and packaging materials as well as transportation costs to partially offset rising costs, we have raised prices where appropriate, but as usual, there is a timeline associated with pricing, particularly with how quickly costs are escalating and therefore the phasing of most of our actions has taken place during the fourth quarter. Those pricing actions are on track and we appreciate our customers working with us to navigate this environment.

In the last few months, inflation has continued to ratchet up, mainly with packaging and transportation cost. We are experiencing the highest inflationary period of the last decade or even two. We, along with our peers and customer are also facing additional pressure on our supply chain due to strained transportation capacity and labor shortages and distribution. These pressures not only impact costs but also negatively impact sales as the addition of further supply chain complexity makes it harder to get order shipped and received by customers. And this pressure is amplified by continued elevated demand. Overall, we have a demonstrated history of managing through inflationary period with a combination of pricing and cost savings and we expect to manage through this period as we have in the past.

Now let’s turn to our third quarter segment business performance, which includes comparisons to 2019 pre-pandemic levels as we believe these will be more meaningful than the comparison for 2020 given the dramatic shift in consumer consumption between at-home and away from home experienced in the year-ago period.

Starting on Slide 7, Consumer segment sales grew 1%, including a 2% favorable impact from currency and incremental sales from our Cholula acquisition compared to the highly elevated demand levels of the year-ago period. Our Consumer segment organic sales momentum on a two-year basis was up double digits, highlighting how the sustained shift in consumer consumption continues to drive increased demand for our products and outpaces pre-pandemic level.

Our Americas constant currency sales declined 1% in the first quarter, with incremental sales from our Cholula acquisition contributing 3% growth. Our total McCormick U.S. branded portfolio consumption as indicated in our IRI consumption data and combined with unmeasured channels declined 10% following a 31% consumption increase in the third quarter of 2020, which results in a 19% increase on a two-year basis. And that has remained high and we are realizing the benefit of our U.S. manufacturing capacity expansion, although some products remain stressed by sustained high demand. Shelf conditions are improving and we’re seeing sequential improvement in our share performance. That said, as I mentioned a moment ago, the current issues related to logistics pressures continue to make it challenging for market leaders like McCormick to keep high demand products and stock, which has prevented us from making further progress in replenishing both retailer and consumer inventories in the third quarter. Importantly though, we are better positioned than we were last year entering the holiday season and are confident in our holiday merchandising plans.

Focusing further on our U.S. branded portfolio, our 19% consumption growth versus the third quarter of 2019 was led by double-digit growth in spices and seasonings, hot sauces, both Cholula and Frank’s RedHot, and barbecue sauce, as well as our Asian frozen product. In pure play e-commerce, we delivered triple-digit growth compared to 2019, with McCormick branded consumption outpacing all major categories. This is the sixth consecutive quarter our U.S. branded portfolio consumption grew double digits versus the same period two years ago, which reflects continuation of consumers cooking and using flavor more at home and the strength of our brands.

Our key categories continued to outpace the center of store growth rates versus the same period of two years ago, favorably impacting not only the McCormick brand but our smaller brands as well. Household penetration and repeat rates have also grown versus 2019. And when our consumers shop, they’re buying more of our products than they were pre-pandemic. McCormick continues to win in hot sauce. Across our brands, McCormick grows to be the number one hot sauce manufacturer globally earlier this year. In the third quarter, Frank’s RedHot, the number one brand in the U.S., was joined at the top of the category by Cholula, which we have driven to the number two ranking.

Now turning to EMEA, which has continued its outstanding momentum. We had strong market share performance in the third quarter versus last year, maintaining or gaining share across the region and key categories following our strong gains in the third quarter last year. Compared to the third quarter of 2019, our total EMEA region we drove double-digit consumption growth in herbs, spices and seasonings. And turning up the heat, Frank’s RedHot has grown consumption 75% and had gained a significant share versus the two year-ago period. Across the region, our household penetration and repeat rates have also grown versus the two year-ago period. Our year-to-date higher brand marketing investments in EMEA are proving to be effective as evidenced by the metrics I just discussed, as well as our achieving above benchmark rates, the reach, engagement and click-through for instance in our digital marketing.

In the Asia-Pacific region, third quarter sales were strong, reflecting our continued recovery from China’s lower branded foodservice sales last year. Our consumer product demand in the region declined due to lapping significant growth last year. The region is also experienced supply chain challenges with ocean freight capacity constraints impacting the quarter’s growth. In Australia, we continue to see strong consumption growth versus 2019, with key brands recently turning back towards 2020 levels, with Frank’s RedHot already higher than the last year’s elevated consumption.

Across all regions in our Consumer segment, we are continuing to fuel our growth with our strong brand marketing, new product launches and our category management initiatives. We’re making brand marketing investments across our portfolio to connect with our consumers, particularly online. Early in the third quarter in the Americas, we began our search for the first Director of Taco Relations. This was a dream opportunity for the over 5,000 applicants to showcase their Taco expertise and enthusiasm for our product and their video application. To date, we have garnered over 1 billion earned impressions related to our search, and these will continue to grow upon the announcement of our new Director of Taco Relations next week, on October 4th, in celebration of National Taco Day.

We are not only creating buzz through our digital marketing, but also with our e-commerce direct to consumer new product launches. In the Americas, we drove new passionate users to our brands and digital properties with the launch of Sunshine All Purpose Seasoning, a new product developed in partnership with social media influencer Tabitha Brown, inspired by her joyful personality and health and wellness focused recipes, the salt-free and gluten-free Caribbean inspired blend sold out in just 39 minutes, generating record sales from e-commerce driven innovation and over 700 million earned impressions.

Our new product launches differentiate our brands and strengthens our relevance with consumers. And with our global leadership position in our sauce, we are in the perfect position to capitalize on consumers’ rising demand for hot and spicy flavors through a global heat platform. Our recent launches of Frank’s RedHot frozen appetizers and Cholula Wing sauces in the Americas, as well as Frank’s RedHot craft flavors in EMEA have made strong contributions to growth in the third quarter. Just in time for Halloween, EMEA is introducing dead hot gift sets for e-commerce, featuring Frank’s RedHot. And in China, our recently launched ready to eat chili paste as the highest 30-day repeat rate of all McCormick direct to consumer products on Tmall.

Turning to category management. Our initiatives are designed to strengthen our category leadership by driving growth for both McCormick and retailers. These initiatives include simply changing shelf placement. For instance, increasing Cholula velocity over 30% or changing the tile [Phonetic] placement at a large retailer, to reinventing the spice and seasoning of shopping experience. In the U.S., we are anticipating a cumulative implementation of our spice aisle [Phonetic] program, so it began in 2020 at 10,000 stores by year-end versus 2019 to remove year over year noise, sales in the beginning of August show retailers that have adopted the spice aisle changes are growing the category faster than those who have not, and McCormick branded spices and seasoning portfolio is growing solid mid-single digits faster in implemented stores versus stores which have not the adopted the changes.

And in Eastern Europe, the rollout of our first choice bottle, which has perceived this premium and what was predominantly sachet only market is elevating the spices and seasoning category and driving increased share in our Eastern European market. Moving forward, we are confident that we will continue the momentum of our Consumer segment. We have more consumers than pre-pandemic. They have come into our brands, are having a good experience and our buying our products again. We are excited about our growth trajectory and expect long lasting growth from the sustained shift to consumers cooking more at home, fueled by our brand marketing, new products and category management initiatives.

Turning to Slide 9, our Flavor Solutions segment grew 21% or 17% in constant currency, reflecting both strong base business growth and contributions from our FONA and Cholula acquisition. Our third quarter results includes the robust recovery from last year’s lower demand from our restaurant and other foodservice customers, many of which are lapping the curtailment approach of away from home dining, as well as strong continued momentum with our packaged food and beverage customers. Notably, growth was driven equally from both the at-home and the away from home products in our portfolio. On a two-year basis, our sales also increased double digits, with strong growth in all three regions.

In the Americas, our FONA and Cholula acquisitions made a strong contribution to our significant third quarter growth, and we’re executing on our strategy to shift our portfolio to more value-added and technically insulated products. We continue to see outstanding growth momentum with our consumer packaged food customers to new products and base business constrain. Consumers’ rising global demand for hot and spicy flavors is driving growth for both our customer and for our seasonings that flavor them. Compared to last year’s third quarter, snack seasonings grew high single digits with strong growth in core iconic product as well as new products, and the innovation pipeline continues to be robust.

Our confidence will accelerate our global flavors platform continues to be reinforced by their excellent performance with double-digit sales growth compared to last year. Beverages are driving significant growth with particular strength in the fast growing Performance Nutrition category. And finally in the Americas, branded foodservice contributed significant growth for the quarter and our [Indecipherable] channel has continued to strengthen as more dining options reopen.

In EMEA, we had strong growth versus both last year and 2019 across all markets and channels. Quick service restaurants or QSRs are driving growth through increased promotional activities and limited time offers. Our branded foodservice sales with easing restrictions in the hospitality industry increased at a double-digit rate versus the third quarter of last year and as packaged food and beverage companies our performance was strong on top of last year’s strong growth, but the hot and spicy trends fueling growth in snack seasonings particularly through new product innovation.

Our sales growth in the Asia Pacific region was partially impacted by the timing of our QSR customers strong limited time offers and the promotional activities in the third quarter of last year, which increased restaurant traffic as COVID-19 restrictions lifted. As we’ve said in the past, limited time offers and promotional activities and cause some sales volatility from quarter to quarter.

We recognize a part of our third quarter Flavor Solutions results were due to the comparison to low away from home demand last year. Notably, our growth also includes strong contributions from FONA and Cholula, robust growth with packaged food and beverage customers both in the base business and the new product wins, driven by our differentiated customer engagement and continuing momentum with QSR. Year-to-date versus 2019, we delivered 13% constant currency growth, including FONA and Cholula and 6% constant currency organic growth. These results combined with our effective growth strategies bolster our confidence and a continuation of our robust growth trajectory in our Flavor Solutions segment.

Now on Slide 10, I’m excited to share some important purpose-led performances. Just a few days ago, we were named as a global compact lead company by the United Nations for our ongoing commitment to the UN Global Compact and its 10 principles for responsible business. We are honored by this recognition for our commitment to sustainability and to be one of only 37 companies in the world and the only U.S.-based food producer to be included on this prestigious list. Sustainable sourcing is the top priority and we’ve been actively working on initiatives such as our sustainability-linked financing partnership with IFC and Citi, which provides our urban spice suppliers in Indonesia and Vietnam with financial incentives linked to improvements in measures of social and environmental sustainability, as well as our partnership with Heifer International on the launch of the Cardaforestry project, which aims to increase smallholder farmer resilience and improve the quality of cardamom and all spice in Guatemala. In addition, Latina Style, Inc. recently named us as one of the top 50 best companies for Latinos to work in the U.S. We are thrilled to be recognized for our continued efforts for our diversity and inclusive.

We are committed to the long-term vitality of the people, communities and the planet we share and are proud of our impact in these areas. We look forward to sharing more about these accomplishments as well as many others with you through our purpose-led performance report, which will be issued early next year. Before turning it over to Mike, I’d like to make some qualitative comments regarding 2022. To be clear, we are not providing 2022 guidance at this time. We are a growth company and we expect to grow in both of our segments next year. At the foundation of our sales growth is the rising consumer demand for flavor, fueled by younger generations. We’ve intentionally focused on great categories that are growing and generating a long-term tailwind. We are capitalizing on the long-term consumer trends that accelerated during the pandemic and for successfully executing on our strategies and initiatives.

In this dynamic and fast-paced environment, we are ensuring that we remain focused on long-term sustainable growth. Recently, cost pressures have rapidly accelerated and we are preparing for that to remain in 2022. We plan to mitigate these costs, which we expect to fully offset over time through a combination of CCI-led cost savings, revenue management initiatives and pricing actions as needed. In addition, we’re taking prudent steps to reduce discretionary spend where possible. We also expect the impact of COVID-19 to persist into 2022, which will create continued broad-based supply chain challenges. We successfully demonstrated in the past our ability to manage through inflationary environment and cost pressures. Importantly, our strong growth trajectory supports our confidence that our long-term financial algorithm to drive continuous value creation to top line growth and margin expansion. We have a strong foundation and remain focused on the long-term goals, strategies and values that have made us so successful. Around the world, McCormick employees drive our momentum and success and I thank them for their hard work, engagement and dedication, particularly in such a volatile environment.

And now, I’ll turn it over to Mike.

Mike Smith — Executive Vice President and Chief Financial Officer

Thanks, and good morning, everyone. For the reasons Lawrence mentioned, my comments will also include comparisons to 2019. Starting on Slide 13. Our top line growth continues to be strong. We grew constant currency sales 5% during the third quarter compared to last year with incremental sales from our Cholula and FONA acquisitions contributing 4% across both segments. Higher volume and mix drove our organic sales increase with Flavor Solutions growth offset any decline in the consumer segment. Versus the third quarter of 2019, we grew sales 15% in constant currency with both segments growing double-digits.

During the third quarter, our Consumer segment continued to lap last year’s exceptionally high demand. Versus 2020, our third quarter Consumer segment sales declined 1% in constant currency, which includes a 3% increase from the Cholula acquisition. Compared to the third quarter of 2019, Consumer segment sales grew 14% in constant currency.

On Slide 14, Consumer segment sales in the Americas declined 1% in constant currency, lapping the elevated lockdown demand in the year-ago period, as well as the logistics challenges Lawrence mentioned earlier. Incremental sales from the Cholula acquisition contributed 3% growth. Compared to the third quarter of 2019, sales increased 17% in constant currency, led by significant growth in the McCormick, Lawry’s, Grill Mates, Old Bay, Frank’s RedHot, Cholula, Zatarain’s, Gourmet Garden, Simply Asia, Stubb’s and [Indecipherable] branded products, that’s a lot of brands, partially offset by a decline in private label.

In EMEA, constant currency consumer sales declined 11% from a year-ago, also due to lapping the high demand across the region last year. Notably, this decline includes strong growth in our Eastern European market, on top of their significant volume growth last year, which was more than offset by declines in the region’s other markets. On a two-year basis, sales increased 10% in constant currency, driven by strong growth in our Kamis, Schwartz, and Frank’s RedHot branded products.

Consumer sales in the Asia Pacific region increased 11% in constant currency due to the recovery of branded foodservice sales with a partial offset from the decline in consumer demand as compared to the elevated levels in the year-ago period. Sales increased 4% compared to the third quarter of 2019, including a sales decline in India, resulting from a slower COVID-19 recovery.

Turning to our Flavor Solutions segment and Slide 17, we grew third quarter constant currency sales 17%, including an 8% increase from our FONA and Cholula acquisitions. The year-over-year increase, led by the Americas and EMEA regions, was due to strong growth with both packaged food and beverage customers and in away from home products. Compared to the third quarter of 2019, Flavor Solutions segment sales grew 16% in constant currency.

In the Americas, Flavor Solutions constant currency sales grew 19% year-over-year with FONA and Cholula contributing 12%. Volume and product mix increased, driven by significantly higher sales to branded foodservice customers together with growth for packaged food and beverage companies, with strength in snack seasonings. On a two-year basis, sales increased 15% in constant currency versus 2019, with higher sales from acquisitions and packaged food and beverage companies, partially offset by the exit of some lower margin business.

In EMEA, constant currency sales grew 19% compared to last year due to increased sales to QSRs and branded foodservice customers, as well as continued growth momentum with packaged food and beverage companies. Constant currency sales increased 23% versus the third quarter of 2019, driven by strong sales growth with packaged food and beverage companies and QSR customers.

In the Asia Pacific region, Flavor Solutions sales rose 1% in constant currency versus last year and increased 8% in constant currency versus the third quarter of 2019, was driven by QSR growth and partially impacted by the timing of our customers limited time offers and promotional activities.

As seen on Slide 21, adjusted operating income, which excludes transaction and integration costs related to the Cholula and FONA acquisitions as well as special charges, was comparable to the third quarter of last year, including a 3% favorable impact from currency. Adjusted operating income in the Consumer segment declined 10% to $180 million or in constant currency 12%, driven by the cost pressures from inflation and logistics challenges, partially offset by CCI-led cost savings. These logistics challenges not only impacted cost, but also negatively impacted sales.

In the Flavor Solutions segment, adjusted operating income rose 32% to $84 million or 27% in constant currency. Higher sales, CCI-led cost savings and favorable product mix as we continue to migrate our portfolio more than offset the cost pressures in this segment. Across both segments, incremental investment spending for our ERP program was offset by lower COVID-19 costs compared to last year.

During the quarter, we invested in brand marketing ahead of last year and notably we have increased our investments 11% on a year-to-date basis.

As seen on Slide 22, adjusted gross profit margin declined 260 basis points, driven primarily by the cost pressures we are experiencing and the lag in pricing. Our selling, general and administrative expense as a percentage of sales declined 110 basis points, driven by leverage from sales growth. These impacts netted to an adjusted operating margin declined 150 basis points. In addition to the factors I mentioned a few moments ago, the sales shift between segments unfavorably impacted both gross and operating margins.

Turning to income taxes. Our third quarter adjusted effective tax rate was 14.1% compared to 19.3% in the year-ago period. Both periods were favorably impacted by discrete tax items, with the larger impact this year due to the favorable impact of a reversal of a tax accrual. Adjusted income from unconsolidated operations declined 5% versus the third quarter of 2020. Based on our year-to-date results, we now expect a mid single-digit increase in our adjusted income from unconsolidated operations for 2021, up from our previous projection, but a low single-digit decrease. This improvement is driven by strong performance from our McCormick de Mexico joint venture.

At the bottom line, as shown on Slide 25, third quarter 2021 adjusted earnings per share was $0.80 compared to $0.76 for the year-ago period. The increase was primarily driven by lower adjusted income tax rate. As compared to the third quarter of 2019, our 10% increase in adjusted earnings per share was primarily driven by sales growth.

On Slide 26, we summarize highlights for cash flow in the quarter end balance sheet. Through the third quarter of 2021, our cash flow from operations was $373 million, which is lower than the same period last year. The decrease was primarily due to the payment of transaction integration costs and higher use of cash associated with working capital. This includes the impact of planned higher inventory levels to support significantly increased demand and to mitigate supply and service issues, as well as buffer against cost volatility. Through the third quarter, we returned $272 million of this cash to our shareholders through dividends and used $190 million for capital expenditures. Our priority is to continue to have a balanced use of cash, funding investments to drive growth, returning a significant portion to our shareholders through dividends and paying down debt.

Now turning to our 2021 financial outlook on Slides 27 and 28. With our broad and advantaged flavor portfolio, our robust operating momentum and effective growth strategies, we are well positioned for another year of differentiated growth and underlying performance, tempered by the higher inflation ahead of pricing and the logistic challenges we previously mentioned. For 2021, we are projecting topline and earnings growth from our strong base business and acquisition contribution with earnings growth partially offset by incremental COVID-19 costs and ERP investment, as well as a higher projected adjusted effective tax rate. We continue to expect an estimated 3 percentage point favorable impact of currency rates on sales. And for the adjusted operating income and adjusted earnings per share, a 2 percentage point favorable impact with currency rates.

At the topline, due to our strong year-to-date results and robust operating momentum, we now expect to grow constant currency sales 9% to 10%, which is the high end of our previous projection of 8% to 10%, and includes a 40% incremental impact from the Cholula and FONA acquisitions. We had initially projected an incremental acquisition impact in the range of 3.5% to 4%. We anticipate our organic growth will be led by higher volume and product mix, driven by our category management, brand marketing and new products, as well as pricing.

We’re now projecting our 2021 adjusted gross profit margin to be 150 basis points to 170 basis points lower than 2020 due to the increase in cost pressures I mentioned earlier. While we continue to expect a mid single-digit increase in inflation for the year, it has moved higher and is now approaching a double-digit increase in the fourth quarter. Overall, our projected adjusted gross margin compression reflects unfavorable impact from sales mix between segments, cost inflation and COVID-19 costs, partially offset by pricing and margin accretion from the Cholula and FONA acquisitions. As a reminder, we price to offset cost increases, we do not margin up. Our estimate for COVID-19 costs remains unchanged at $60 million in 2021 versus $50 million in 2020, and is weighted to the first half of the year.

Reflecting the change in gross profit margin outlook, we are lowering our expected constant currency adjusted operating income growth. Our adjusted operating income growth rate reflects expected strong underlying performance from our base business and acquisitions projected to be 8% to 10% constant currency growth, which includes the higher inflation ahead of pricing and logistics challenges and partially offset by a 1% reduction from increased COVID-19 costs compared to 2020 and a 3% reduction from the estimated incremental ERP investment. This results in a total projected adjusted operating income growth rate of 4% to 6% in constant currency. This projection includes the mid-single digit inflationary pressure as well as our CCI-led cost savings target of approximately $110 million. It also includes an expected low single-digit increase in brand marketing investments.

Considering the year-to-date impact from discrete items, we now project our 2021 adjusted effective income tax rate to be approximately 21% as compared to our previous projection of 23%. This outlook versus our 2020 adjusted effective tax rate is expected to be a headwind to our 2021 adjusted earnings per share growth of approximately 1%. We are lowering our 2021 adjusted earnings per share expectations to 5% to 7% growth, which includes a favorable impact from currency. This reflects our lower adjusted operating profit outlook and lower adjusted income tax rate, as well as the higher adjusted income from unconsolidated operations.

Our guidance range for adjusted earnings per share in 2021 is now $2.97 to $3.02. This compares to $2.83 of adjusted earnings per share in 2020 and represents 8% to 10% growth in constant currency from our strong base business and acquisition performance, partially offset by the impacts related to COVID-19 costs, our incremental ERP investment and the tax headwind.

I’ll now turn it back to Lawrence.

Lawrence E. Kurzius — Chairman, President and Chief Executive Officer

Now that Mike the shared our financial results and outlook in more detail, I would like to recap the key takeaways as seen on Slide 29. Our third quarter results reflect a robust and sustained growth momentum as we drove strong sales growth despite a challenging year-over-year comparison. Year-to-date versus 2019, we have driven significant double-digit growth rates for sales, adjusted operating profit and earnings per share. We have a strong foundation and a balanced portfolio which drives consistency in our performance. We expect higher at-home consumption will persist beyond the pandemic and are continuing the momentum we are gaining in away from home consumption. We’re are confident the growth and momentum of our business is sustainable.

As a reminder, McCormick has grown and compounded that growth successfully over the years regardless of short-term pressures. Our strong growth trajectory supports our confidence in our long-term growth algorithm to drive continuous value creation to topline growth and margin expansion. We’re driving McCormick forward and building value for our shareholders.

Now let’s turn to your questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Andrew Lazar with Barclays. Please proceed with your questions.

Andrew Lazar — Barclays — Analyst

Good morning, everybody.

Lawrence E. Kurzius — Chairman, President and Chief Executive Officer

Hi, Andrew.

Mike Smith — Executive Vice President and Chief Financial Officer

Hi, Andrew.

Andrew Lazar — Barclays — Analyst

Hi. Maybe to start out — at our recent conference and then again this morning you alluded to costs and supply chain disruptions likely continuing into fiscal ’22, others have made very similar sort of comments. Of course, you’ll have more pricing kicking in among other actions to mitigate some of the challenges. I think you also had mentioned that ERP costs could be offset by COVID expenses coming down. So I guess things remain very fluid, of course, and you’re not obviously giving specific ’22 guidance as of yet, but I’m trying to get a sense of whether on algorithm year, particularly on the profit side would be too much to ask in fiscal ’22 at this stage. All things considered, particularly given what I assume will be continued margin pressure at least through the first half of next year?

Lawrence E. Kurzius — Chairman, President and Chief Executive Officer

All right. Well, first of all, Andrew. Thanks for the opportunity to talk about the pretty high level question, right, out of the — out of the gate. In your question you included a couple of my points that I would actually make to answer it. Beginning with this, just to be clear I’m not going to give guidance for next year. There are a lot of moving parts, things are fluid. We are right in the middle of putting together our budgets for next year right now. As we said in the call, our long — we are very confident about our algorithm over the long-term. I’m just not ready to talk about it in 2022 specifically just yet. But in our prepared remarks I did say we expect growth in both segments and so I’ll start there and then I’ll bring it back to profit.

McCormick is unique and that we’ve been differentiated by strong growth. The underlying trends that support our business includes the demographic tailwind from younger consumers that has nothing to do with the pandemic and then many of the consumption trends we believe were reinforced and accelerated by the pandemic. So we believe that going into the pandemic our growth was differentiated already through it. It’s been differentiated and coming out, but it continues to be differentiated. We made investments, including during the time of the pandemic, both organic and through smart acquisitions that put our portfolio more and more into high growth categories like hot sauce and and flavor. And on top of this, we’re going to have the topline benefit of pricing in 2022. So we have good confidence in strong growth going forward.

For operating profit, there are a lot of puts and takes. Over the last few years we’ve had rising ERP investment. Over the last two we’ve had the shock of extraordinary COVID cost and right now as everyone else, not just in our industry, but across business in general are wrestling with decade high inflation and that’s in everywhere, we’re not unique. Now the first two of these, rising European investment versus the COVID cost should largely offset in 2022, and I think that given the magnitude of the cost as we’ve described previously, everyone should have an expectation around those largely offsetting. And first is that cost pricing is going to kick in. Pricing has lagged. We have our pricing in the U.S., largely going into effect in the fourth in particular and so I would expect that we would see — where you should expect to see the benefits from that not just on the topline, but running through the P&L. But remember the math says that margins compress when we take pricing.

Our approach is to take pricing to pass through costs and so that both the numerator and the denominator go up and so the fraction gets a little bit smaller. So while we do expect that pricing to come in, it would be reasonable to expect some level of margin compression. Nonetheless, with the pricing action and other steps will take to offset cost and the topline growth that we expect, I think it’s very reasonable to expect solid operating profit growth next year. I’m not ready yet to say if it’s exactly on algorithm.

Andrew Lazar — Barclays — Analyst

Right. I appreciate that color. That’s helpful. And then one very quick follow-up and it may be tough to parse out in the quarter though, are you able to sort of break out what impact some of the supply constraints may have had on overall sort of company organic growth? I think organic growth was up about 1%. I mean, if some of the supply constraints were significant enough that it would have meaningfully changed what organic growth looked like in the quarter. Thanks so much.

Lawrence E. Kurzius — Chairman, President and Chief Executive Officer

It actually did have an impact on in the fourth quarter. I think we’re in — sorry, let’s say fourth, I misspoke there, but it’s third quarter. And we haven’t quantified that and I’m not prepared to. But it was material. We normally would not have a backlog at all. They had the idea of having a backlog of orders is unprecedented. We have backlog that’s measurable indeed and so it did have a — it definitely had an impact. It would have been our hope to actually continue to rebuild trade inventories as we went through the quarter, which has not yet been fully recovered and we were not able to do. We’ve really wanted and planned to ship more, these logistics challenges are very real. We’ve got from a very — from a very strategic discussion that’s now are very tactical one, but just simply getting the product out there has been a challenge in the face of the, but it is still very high demand at the same time that we are having these logistical challenges. I’d say that the trade channels are still a bit starved for inventory.

Mike Smith — Executive Vice President and Chief Financial Officer

We did narrow our range on sales to the high end of the range, so we had very strong confidence in the fourth quarter.

Andrew Lazar — Barclays — Analyst

Yeah, thanks so much.

Operator

Thank you. Our next question is from the line of Ken Goldman with J.P. Morgan. Please proceed with your questions.

Ken Goldman — J.P. Morgan — Analyst

Hi, thank you. Just on pricing, are there any geographies or categories or brands where maybe getting the pricing you hope for has been a little more challenging than in others? And I guess I’m curious where are you in your, I guess journey, so to speak of taking incremental pricing to offset some of the newer or more severe headwinds you’re facing? I’m trying to figure out if you’re still having conversations with customers, do you feel most of the heavy lifting is done there for maybe some of the second rounds that’d be helpful. Thank you.

Lawrence E. Kurzius — Chairman, President and Chief Executive Officer

You know, first of all I won’t say that there is a particular problem. These actions always have some degree of commercial tension in them and so I don’t want to get too specific there. First, I must say there are ongoing conversations with customers. I think that there are some new conversations that we had. All of our actions on pricing are on a track, particularly for the U.S., the price increases that we talked about earlier in the year have been sold. There is a time lag though, especially with how quickly costs have gone up. Inflation has accelerated since we launched those pricing point and so there is more work to do in that area in 2022. That most of our actions is happening in Q4 and we would expect to see the benefit of that in 2022.

Mike Smith — Executive Vice President and Chief Financial Officer

And I think I’d point that, Ken, to historical perspective here. We had higher inflationary periods in the past in the 2008-2009 timeframe, 2011-2012, where we successfully put in pricing. It’s actually performed to my U.S. consumer during one of those time periods and we’re able to pass through the pricing. We also put a lot of other level levers, whether it’s CCI, discretionary spending to get Andrew’s point about getting back on algorithm from a profit perspective.

Ken Goldman — J.P. Morgan — Analyst

Great, thank you. And I’ll pass it on there.

Operator

Next question comes from the line of Robert Moskow with Credit Suisse. Please proceed with your question.

Robert Moskow — Credit Suisse — Analyst

Thanks. I think this question will sound like Ken’s question, maybe a different tack though. Is the conversation different with retailers on how to take pricing or how to think about pricing in the latest — in relation to the latest acceleration, because I think some retailers out there consider the supply chain disruption to be temporary, the labor challenges will go away and as a result, does that mean if you have to shift more towards, I don’t know more variable actions on promotions or packaging changes rather than a straight up list price increase?

Lawrence E. Kurzius — Chairman, President and Chief Executive Officer

Well, again I’m going to say that I can’t get specific about any one particular customer, certainly the pricing actions that we just took, we had a lot of company going out there. And so I think retailers — what they heard from us was similar to what they heard from from others. I’m not so sure. We have not gotten that kind of feedback that retailers think that these increases are transitory. There’s been some discussion about inflation not continuing to escalate, but there hasn’t been any discussion about this not being a reset of pricing levels. And I think that there is broad recognition of that and I will say that I was on a call with Chairman, Jerome Powell, yesterday, where he was saying very much the same thing. And so I think that the outlook is that these costs are not transient, there are here to stay and they are potentially going to have to find a way through in the form of pricing that gets to the consumer and the belt tightening across the entire supply chain, including us as a supplier to our customer.

Robert Moskow — Credit Suisse — Analyst

Okay, great. So you’re saying is it’s similar types of conversations, there is no different types of push back on the second round compared to the first round, its a similar conversation?

Lawrence E. Kurzius — Chairman, President and Chief Executive Officer

Yeah, I’m not, I’m not — not differentiating between the two right now. I think if I go much further than that I’m getting into specifics that are bit too granular and too perspective.

Robert Moskow — Credit Suisse — Analyst

Okay. Anything else you want to, tell us about what Jerome Powell said or do you want to leave at that?

Lawrence E. Kurzius — Chairman, President and Chief Executive Officer

No, just like — you’ve got to do it in a public forum, so it’s all out there.

Robert Moskow — Credit Suisse — Analyst

Okay, thank you.

Operator

The next question is coming from the line of Adam Samuelson with Goldman Sachs. Please proceed with your question.

Adam Samuelson — Goldman Sachs — Analyst

Yes, thank you. Good morning, everyone.

Lawrence E. Kurzius — Chairman, President and Chief Executive Officer

Good morning.

Mike Smith — Executive Vice President and Chief Financial Officer

Good morning.

Adam Samuelson — Goldman Sachs — Analyst

So I guess on the inflation dynamics you’ve highlighted specifically logistics and packaging and I just want to be clear that — is that more on the ocean freight side, is it domestic trucking, all of the above? And beyond those two discrete buckets is there anything notable in terms of your own wage rates and are you seeing pressures in your own labor force domestically given the rise in — given the broad-based labor pressures you’re seeing?

Mike Smith — Executive Vice President and Chief Financial Officer

Adam, it’s Mike, I’ll take this and Lawrence may add a few comments. I mean, like we said on the call, it is — you’re right, it’s 80% to 90% of this is really logistics, transportation, packaging, things like that. So we have really good line of sight to our commodity costs in the fourth quarter obviously. It’s really both ocean freight, but also domestic freight and you’ve actually seen after Hurricane Ida some of the domestic rates have gone up again. So that’s part of the new news that I think we’re all experiencing in the U.S. in particular. You’ve seen globally in the U.K., natural gas challenges and things like that too and trucking challenges. So it’s both. It’s both getting it here and getting it to customers. And from a wage rate perspective, we’ve taken actions just like other companies have to aggressively attract talent in our manufacturing facilities and DCs with retention bonuses and other actions like that. So I think it’s Lawrence’s point, these labor rates aren’t going to go back down. There have been a reset of cost level that it may not escalate further, that’s to be seen, but it’s not — we’re not going to have deflation on labor rates.

Lawrence E. Kurzius — Chairman, President and Chief Executive Officer

And I’ll tell you, I’ll just add to that, that the cost increase that we’re talking about are not — these are not things that are unique to McCormick at all. The biggest increases have been on packaged materials and on transportation costs followed by raw material and labor, and I’d say that that we’d look a lot like everybody else in that regard.

Adam Samuelson — Goldman Sachs — Analyst

Okay, that’s helpful. And then if I could ask more longer-term margin question and it’s really in the Flavor Solutions business. And I guess I’m thinking to kind of a couple of years pre-COVID in that business and you’ve done through acquisition and internal initiatives have done a lot of heavy lifting to get the margins in that business to the kind of 14%, 15% level from about 10% back in 2015, 2016 and we’re now back in the 13% to 14% range. I’m just trying to think about where that business can go from here once we maybe get through some of these price cost and balances in the near term? Do you think there is a lot more room on mix to really push that business higher, their investments in technology and R&D on the flavor side that you’ve got to accelerate to temper that? I’m just trying to think about that being a driver of earnings growth maybe beyond some of the shorter term inflationary pressures that we’re experiencing right now.

Lawrence E. Kurzius — Chairman, President and Chief Executive Officer

[Indecipherable] I have to bring you in to help write some of our IR materials. We have great confidence in the margin trajectory of our Flavor Solutions business. We’re really changing in the portfolio. The big driver of our margin improvement over time has been the shift in the portfolio to more value-added technically insulated products we would organic investments and that part of the fitness we’ve done acquisitions in that part of the business to accelerate the growth. And as the portfolio continues to shift in that direction, that’s going to drive a structural improvement in margin. Those are just categories that command a better margin and it’s going to mix the business up. And at the same time, we’ve made decision to get out of some of the lower margin stuff, some of which is really low margin and we found graceful ways of exiting some of that without getting on the wrong side of those customer relationships. So I’d say our long-term outlook for continued expansion of our Flavor Solution is one of the things that underpins our confidence in our long-term algorithm.

Mike Smith — Executive Vice President and Chief Financial Officer

I think like the FONA acquisition has even given us more confidence and continuing to migrate that portfolio with really combining their technical expertise with ours.

Lawrence E. Kurzius — Chairman, President and Chief Executive Officer

And I’ll just — there has been a number of the notes we’re going to try and parse it, organic sales from acquisition and so on. Yeah, we’re going to — we’re reporting a 100% of what we sell of FONA as the acquisition related. But we have grown that business tremendously since we bought it and we’re very [Speech Overlap] But your question specifically was about Flavor Solutions and that’s really part of that portfolio migration.

Adam Samuelson — Goldman Sachs — Analyst

Okay, that’s helpful color. I’ll pass it on. Thanks.

Operator

Our next question is coming from the line of Chris Growe with Stifel. Please see with your question.

Chris Growe — Stifel Nicolaus — Analyst

Hi, good morning.

Lawrence E. Kurzius — Chairman, President and Chief Executive Officer

Good morning.

Chris Growe — Stifel Nicolaus — Analyst

Hi, I just had a question for, if I could, in relation to pricing. Just understand, would you expect that your pricing would offset your inflation once all your pricing is in place?

Lawrence E. Kurzius — Chairman, President and Chief Executive Officer

I was going to say that all of the levers that we’re going to pull…

Chris Growe — Stifel Nicolaus — Analyst

Yeah, fair enough.

Lawrence E. Kurzius — Chairman, President and Chief Executive Officer

Part of CCI does is offset inflation to an extent, part of it offset cost increases and part of it we bring into reinvest in the business in other ways and part of it makes its way to the bottom line, that’s need to. So I’m expecting that over time we’ll recover all of the cost, all of the levers. It won’t be 100% through pricing.

Chris Growe — Stifel Nicolaus — Analyst

Okay, I understand, yeah thank you. I understand. The other question I was going to say was just, as you get into — is it expected that you would have a lot of these levers pulled by say first quarter of 22? I know you’ve got some pricing going into place in the fourth quarter. I’m not trying to get to an exact time or guidance for next year. Just to understand the timeframe around pulling all these levers?

Lawrence E. Kurzius — Chairman, President and Chief Executive Officer

I think that — I don’t want to get too deep into talking about 2022. I did want to give guidance for the year and I don’t want to give guidance for any of the quarters. Yeah, but I do think — I think that this is something that’s going to unfold over time. We’ve taken pricing actions. We’ve said that inflation has continued to accelerate, so there’s more to go, and I think that — to think that’s all going to be in place in Q1 is probably not.

Mike Smith — Executive Vice President and Chief Financial Officer

And also you realize that there is lot of focus on the U.S. timing, but this happens around the world at different Indecipherable] local. So we’ll have a lot more to say in the January call.

Chris Growe — Stifel Nicolaus — Analyst

Understood. Okay. And I had just one other question and it’s just more to understand kind of this inventory situation will call it, I guess in rebuilding. We can debate IRI or Nielsen data, but it shows like your U.S. sales down 11% and again we can debate that number. I see your Americas business, again not a perfect representation totally the U.S. being down 4%. Is that gap the sort of inventory build you expected for this quarter year-over-year, knowing that you were shipping below inventory — below consumption a year ago or is there more inventory build to come I guess? So I’m trying to get to.

Lawrence E. Kurzius — Chairman, President and Chief Executive Officer

If you do the math — looking back two years, so it look at the undisturbed 2019. Last year, you’re right, we weren’t shipping to consumption, demand was extraordinarily elevated. And if you strip out the acquisition, you have demand. Consumption is up 19%, our shipments are up 13% So just this right math on that would suggest we under shipped by about 6 percentage points, which is very substantial. We did that same math in Q2 and it was — we were ahead by 4% So, it looks like we’ve unwound some of the — some of the inventory build that we did. But in 2019, we have a holiday terms program in place, which we normally would do, I mean normally in the third quarter. We’re starting to build trade inventories from a heavy fall season. And so that would have been part of the underlying demand. So when you net that all out, we think we’re pretty close to even on shipping versus the true change in consumption. But, so, that includes not being able to build for the trade inventories for the holiday as we would have hoped, and so we do think that we’re a bit — we’re like as the federal, one of the questions earlier the trade channel right now is a bit starved for inventory in the US. We think of that as really sloshing between third and fourth quarter. And that still will end up getting captured within the year. So, it doesn’t much change our outlook for the full year. It makes us anticipate a pretty strong — a pretty strong fourth quarter. But to bring it back to where we are in rebuilding, we’re not as far along as we would have hoped.

Chris Growe — Stifel Nicolaus — Analyst

Okay, that was good color. Thanks for the time.

Operator

Our next question is from the line of Steve Powers with Deutsche Bank. Please proceed with your questions.

Steve Powers — Deutsche Bank — Analyst

Yes. Hey, thanks. And you might have Just — I think you sort of addressed this in response to Chris’s question, but just to play it back. So when we think about your intention to fully offset pressures over time and appreciating that there is a rolling process to this, I think, I don’t know if you were speaking to Chris’s response, specifically on pricing or just all the offsets. But I guess what I’m trying to get a sense for is just on that — on those rolling offset, when do you think you hit run rate — your run rate achievement of those assets? Is that a middle of next next year type of timeline or is it more realistic to think that it progresses all the way through and it’s not until the closer to the end of ’22 where you hit the full offset run rate? Just trying to get a sense or the magnitude pacing of your effort?

Lawrence E. Kurzius — Chairman, President and Chief Executive Officer

Yeah, I mean obviously, I mean a lot depends on the future cost environment to on this. I mean, we put in the pricing in the U.S. to — this is going to partially hit in the fourth quarter, like we said last quarter. The full impact is going to be in 2022. Now if cost continue to accelerate, we’ll have to address that with other actions. But I think it’s speculative at this point to try to call ’22, and the timing by quarters and by halves.

Steve Powers — Deutsche Bank — Analyst

Okay, okay, fair enough. Can I ask just a cleanup on tax and appreciating the three benefits you’ve now realized in ’21 and I’m not asking for ’22. On a normalized basis, how should we think about your the tax run rate for the business going forward? If there is any color on the cash taxes versus versus GAAP taxes that would be great as well?

Lawrence E. Kurzius — Chairman, President and Chief Executive Officer

No, it’s a great question obviously, and we talked about the facts here at our 10-Q disclosures amount. We talk about kind of underlying rate of 24% to 25% based on the country mix, underlying tax rates that we have and our expectations for the year. And generally what happens and what happened this quarter, they are discrete programs our tax team runs. There are acquisitions in the past that we clean up some of the assumptions or estimates or there’s stack due to limitations that drop off where we’ve tended to realize in discrete tax benefits. So that is what happened this quarter. But under the current tax regime with [Indecipherable] all these things, globally it’s 24% to 25%. Obviously, we’re all waiting to see what happens in Washington to see what future rates are. And I’d say our cash taxes are pretty close to that too. We pay our fair share.

Steve Powers — Deutsche Bank — Analyst

Yeah. Thank you very much.

Operator

Our next question is from the line of Rob Dickerson with Jefferies. Please proceed with your question.

Rob Dickerson — Jefferies — Analyst

Great, thank you. Just wanted to touch on private label for a second, given I think you still operate that side of the business a bit as well as brands, obviously there’s been terms ongoing discussion kind of where state of that overall industry and as we trying to get through the pandemic, so I’m just curious that given some of the comments around let’s say trade inventory not exactly where you want it to be going for date and did a pricing forthcoming, I’m just kind of curious what you’ve seen or heard in the retailers as of late around demand for kind of your private label products versus brands and then just kind of how you think about price gaps as you kind of enter this pricing phase? That’s my first, thanks.

Lawrence E. Kurzius — Chairman, President and Chief Executive Officer

Generally across all categories private label has lost share through the pandemic [Technical Issues] as the group have gained and in the recent results that we just announced our brands were strong, private labels were the soft point. When it comes to pricing, that costs are going up for every raw materials, packaging, labor and transportation, and that applies to private label as well. And so the pricing actions that were going forward [Technical Issues] include the private label products that we’ve been factoring. And I would expect that in many cases just because they are priced at a lower price point that they may see a higher percentage inflation rate because the same is our cost flow through. It’s going to be a bigger percentage.

Rob Dickerson — Jefferies — Analyst

Okay, fair enough. And then just quickly. We’ve obviously heard from a lot of food companies that so far U.S., typically measures look great relative to history given some of this elevated demand. I’m just curious, again I know you’re not giving ’22 guidance, but you have to have some thoughts that sort of what you might be baking in on the elasticity side? Kind of what I’m hearing is if there is growth expected in both segments next year and pricing come in, I’m kind of assuming that the answer here is that there could be some incremental distribution gains to offset some elasticity, demand remains elevated. But just kind of any comments around that kind of volume side versus the price side where you think elasticity could shake up? Thanks.

Lawrence E. Kurzius — Chairman, President and Chief Executive Officer

Sure. The demand remains elevated. Our categories that we’re already growing before the pandemic and need to grow through it and there is — we’ve talk endlessly about the underlying demand for Flavor growing, the younger consumers are fueling that and as we gone through the pandemic, we’ve gained household penetration, the usage rates are up and we haven’t talked about it much but we — I think we had a comment about it in the prepared remarks that the purchases per purchase occasion are up a lot and so consumers are buying more of of our products and we expect that to continue to be the case. So let’s say our [Technical Issues] continues to be positive for the strong sales growth and if you look at consensus sales for next year that are out there, they’re pretty anemic. And I guess we’re trying to gently suggest that there is a reason to reconsider that.

Rob Dickerson — Jefferies — Analyst

All right, thank you. It’s very helpful, Lawrence. Appreciate it.

Operator

Thank you. Our final question is a follow-up from the line of Robert Moskow with Credit Suisse. Please proceed with your questions.

Robert Moskow — Credit Suisse — Analyst

Hey, just very quickly. Lawrence, I think you quantified on a two-year basis Americas shipments up 13%, consumption up 19%. And doesn’t that also include your private label business being down in that two-year period, so therefore the gap isn’t really 600 basis points, it might be a little bit less?

Lawrence E. Kurzius — Chairman, President and Chief Executive Officer

It’s a very small number overall compared to our branded portfolio, the change is definitely less than 1% differential.

Robert Moskow — Credit Suisse — Analyst

Less than 1%. Okay, thanks for the math.

Operator

Thank you. At this time, I will turn the floor back to management for closing remarks.

Lawrence E. Kurzius — Chairman, President and Chief Executive Officer

Oh my god, we’re out of questions, great. Thanks everyone for your question and for participating on today’s call. McCormick is differentiated by the breadth and the reach of our balanced portfolio which has sustainably positioned us for growth. So very pleased with our outstanding year-to-date operating performance which proves the strength of our business model, the value of our products and capabilities as a company. Looking ahead, we expect to drive even further growth as we continue to execute on our strategy, actively respond to changing consumer behavior and capitalize on new opportunities. Thank you for your time this morning.

Kasey Jenkins — Vice President, Investor Relations

Thank you, Lawrence, and thanks to everyone for joining today’s call. If you have any further questions regarding today’s information, please feel free to contact me. This concludes this morning’s call. Have a good day everybody.