According to Supply Chain Dive, McCormick & Co. has raised its fiscal 2026 inflation forecast from a mid-single-digit year-over-year increase to 7%, citing higher freight, logistics, packaging, and input costs — a revision announced by CFO Marcos Gabriel during the company’s Oct. 1 earnings call.
Cost pressures and offsetting initiatives
Higher logistics expenses, driven in part by the Iran war and tighter U.S. over-the-road trucking capacity due to stricter federal regulations, have intensified cost pressure. However, these were partially offset by savings from McCormick’s long-running Comprehensive Continuous Improvement (CCI) program. As CFO Marcos Gabriel explained, productivity gains helped balance rising external costs despite ongoing supply chain volatility.
The company expects freight and commodity costs to compress margins in the current quarter ending Nov. 30, with inflation projected to persist into fiscal 2027, which begins Dec. 1. Tighter carrier capacity has extended bulk lead times from 24–72 hours to 7–10 days, according to industry data cited in the source.
Financial performance and strategic offsets
In the third quarter ended Aug. 31, McCormick expanded its adjusted profit margin by 180 basis points year over year to 39.3%, while adjusted operating income rose 22.1% to $358.5 million. These gains occurred despite elevated freight and commodity costs, supported by pricing actions, CCI-driven efficiencies, and benefits from acquiring a controlling stake in McCormick de Mexico.
Separately, McCormick received a $28M tariff refund in July 2026, as reported in a related Supply Chain Dive article. The company also anticipates procurement cost reductions following its pending $44.8 billion merger with Unilever — a deal expected to close in mid-2027.
Broader industry context
McCormick joins peers like Conagra Brands, which recently projected full-year inflation near 6%, and Lamb Weston, where CFO James Gray noted substantial increases in freight, edible oils, packaging, and ingredient costs for the quarter ending Aug. 30. Lamb Weston’s remarks came during its Oct. 6 earnings call. These trends reflect systemic pressures: Conagra attributed accelerated logistics cost growth to a truck driver shortage and higher oil prices, while Lamb Weston highlighted persistent inflation across multiple input categories.
The $600 million in recurring annual expense reductions expected from the Unilever merger includes procurement savings that will account for 40% of that total. These synergies are central to McCormick’s longer-term cost management strategy amid sustained macroeconomic headwinds.
Source: Supply Chain Dive
Compiled from international media by the SCI.AI editorial team.
