Prepared remarks
Good morning. This is Faten Freiha, VP of Investor Relations. Thank you for joining today's Fourth 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, Chairman, President and CEO; and Marcos Gabriel, 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 statement on Slide 2 for more information. Lastly, I'd like to call out that we made changes to our release and slides to streamline and enhance our communication. And these changes are in alignment with investor and analyst feedback. In terms of metrics, to simplify, we are adopting the organic sales measure, which is defined as the impact of volume and mix plus price and excludes the impact of FX and any divestitures or acquisitions. As a reminder, the reconciliation of our sales measures can be found in the appendix of our slides and in our press release. I will now turn the discussion over to Brendan.
Good morning, everyone, and thank you for joining us. I'm pleased to report on our strong performance for the fourth quarter and fiscal year 2024, an important year for McCormick in which we built momentum and strengthened our leadership and differentiation, returning to quality, volume-led growth. We invested in our core categories, drove improved unit and volume share trends, while also expanding our margins and delivering strong earnings growth. Our results demonstrate the success of our prioritized investments in the areas that we believe will drive the most value and set us up to continue to drive momentum for 2025 and beyond. McCormick remains a growth company. We have robust plans that leverage the demand for flavor and the strength of our brands. Our strategies have proven to be effective in driving growth and compounding that growth over the years. And I remain confident that we have the right leadership team in place and engaged employees globally to deliver on our near-term and long-term objectives with industry-leading performance.
This morning, I will begin my remarks with an overview of our fourth quarter focusing primarily on top line drivers. Next, I will highlight some areas of success and the areas that we continue to work on. Then I will briefly reflect on our full year performance and share our plans at a high level to continue to drive momentum in 2025. Next, I will review how McCormick is positioned relative to an evolving consumer landscape. Marcos will then go into more depth in the fourth quarter as well as 2024 fiscal year financial results and review our 2025 outlook. And finally, before your questions, I will have some closing comments. Turning now to our results on Slide 4. In the fourth quarter, total organic sales increased by 2%, reflecting volume and product mix growth of more than 2%, partially offset by pricing. Total volume improved sequentially for the fourth consecutive quarter despite a challenging environment.
And this improvement in the fourth quarter was driven by our Consumer segment, where volume and product mix increased approximately 4% compared to the prior year. In Americas Consumer, we delivered meaningful sequential volume improvement leading to more than 5% volume growth year-over-year. This growth reflects continued focus on our core categories, investing in brand marketing, accelerating innovation and alignment with consumer trends, expanding distribution and price gap management plans. In EMEA, we continue to drive positive volume growth across our major markets and core categories. We realized benefits from new product innovation as well as expanded distribution. In Asia Pacific, our results were impacted by China as the environment in this market remains challenged. Looking forward, we expect a slight and gradual recovery in 2025 relative to the prior year. Marcos will discuss this when he covers our outlook for 2025.
Moving to Flavor Solutions, volumes were flat for the Global segment. Volume performance was primarily impacted by volume softness in our CPG and QSR customers' volumes. Sequentially, relative to third quarter volume growth, our results were impacted by the timing of customer activities. Let me now touch on some areas where we are seeing some pressure. As I mentioned earlier, in our Asia Pacific consumer business, the environment in China remains challenging. Consumer sentiment remains low and October-November distributor inventory buildup was below prior years due to the expected softer consumption. In Flavor Solutions, in both Americas and EMEA, some of our CPG customers experienced continued softness in volumes within their own businesses. And in EMEA, some of these customers were impacted by geopolitical boycotts in the region related to the Middle East conflict. This geopolitical impact may continue into 2025.
In addition, QSR traffic remains soft in EMEA and in the Americas. We have seen this pressure impact our results for several quarters. It's difficult to predict QSR traffic. However, we are collaborating with our customers as they focus on improving their volumes through innovation and value aligned with consumer trends. Now, I would like to reflect on our performance for the fiscal year on Slide 6. We successfully delivered on the goals we set and shared with you for 2024. We demonstrated our dedication to improving volumes. We refined our plans and prioritized our investments to drive impactful results and returned to differentiated and sustainable volume-led growth, the kind of growth that investors expect from McCormick. I am very proud of what we achieved and you should expect continued momentum in 2025. Our team remains focused on returning to our long-term growth algorithm, strengthening our profitability, continuing our strong cash flow, paying down our debt and reducing our leverage ratio, all have put McCormick in a position of strength to invest further with a sustained focus on growth. A few highlights for the year.
Thank you, Brendan, and good morning, everyone. I'm pleased to be reporting on strong results for both the quarter and the year. Starting on Slide 9, our total organic sales grew 2% for the quarter. This increase was volume-led with more than 2% volume and product mix growth partially offset by pricing. We drove strong sequential volume improvement as you can see on the slide. Moving to our Consumer segment on slide 10. Organic sales increased 3% as volume growth of 4% was partially offset by 1% impact of price investments. Consumer organic sales in the Americas increased by 4%. This increase reflects 5% volume growth, partially offset by price investments of 1%. Volume growth was focused in our core categories and was driven by our investments in brand marketing, innovation and expanded distribution. Our investments are yielding positive results as seen in our improved consumption and we expect the momentum to continue into 2025.
In EMEA, we grew consumer organic sales 3%, driven by a 5% increase from volume, partially offset by promotional pricing of 2%. The volume growth was broad based across product categories in our major markets. We're pleased with the strong sustained volume-led growth momentum in EMEA in 2024. Consumer organic sales in the APAC region declined 10%, driven by an 11% decrease in volume, partially offset by 1% contribution from price. This volume decline was primarily attributable to the macro environment in China. Turning to our Flavor Solutions segment on Slide 11. Fourth quarter organic sales increased 1%, driven by pricing. In the Americas, Flavor Solutions organic sales increased 1%, reflecting a 2% contribution from price, partially offset by a 1% decrease in volume, driven by softness in our CPG and QSR customers' volumes. This was partially offset by volume growth in flavors with high growth innovator customers as well as growth in the Branded Foodservice business.
In EMEA, organic sales decreased by 4%, including a 2% decline from price and a 2% impact of lower volume and product mix, reflecting the impact of soft CPG and QSR customers' volumes. In the APAC region, Flavor Solutions organic sales increased 6% with volume growth of 7% driven by QSR customer promotions, limited time offers as well as new products, partially offset by pricing of 1%. As seen on Slide 12, gross profit margin expanded by 20 basis points in the fourth quarter versus the year-ago period, driven primarily by the benefit from our comprehensive Continuous Improvement Program or CCI. For the year, gross margin expanded 90 basis points with incremental benefit from product mix and pricing. Selling, general and administrative expenses or SG&A increased relative to the fourth quarter of last year, driven primarily by increased technology costs that shifted from the third quarter as we expected. As a percentage of net sales, SG&A increased 80 basis points. For the fiscal year, SG&A increased 40 basis points relative to 2023, primarily due to increased brand marketing as planned.
Questions and answers
Thank you. We will now start the question-and-answer session. Our first question comes from Andrew Lazar with Barclays. Please go ahead with your questions.
Great. Thanks so much. Good morning, everybody.
Good morning.
Good morning, Andrew.
I guess to start off, Brendan, consumer organic sales came in almost 2.5% well ahead of what the Street was anticipating. And within that, volume growth of 4% was obviously quite strong even despite the weakness in China, particularly in the context, I guess, of the broader packaged food environment. So I guess to what do you attribute this strength and I guess more importantly, how do you see this momentum continuing into fiscal '25?
Thank you, Andrew. Well, just to kind of lead off, we believe we're really well positioned to win in an evolving environment. And I think you saw, obviously, some of that come through in our performance in the fourth quarter, even leading up through up to the fourth quarter, I think, year-to-date. So we've been delivering on our plans and our guidance for the year and essentially accomplishing what we said we would do. So specifically from a consumer perspective, just looking at it, we're really pleased with the performance of the portfolio in the fourth quarter. The performance was pretty strong. Global volume growth was around 4%. But importantly, like in the Americas, we saw about 5% volume mix growth and a strong acceleration from the third quarter to the fourth quarter and we saw very consistent strong performance in EMEA at about 5%. So we're seeing volume growth in our core categories.
I think a way to think about it is leading up to the fourth quarter, there are a lot of very healthy things in place, which were increased investments across our business, increase in brand marketing, we've had increased innovation, a lot of the new products that we're launching are meaningful to our performance, expanded distribution, and then we also implemented price gap management, too. So all those were things kind of in the phase kind of leading up to the fourth quarter, which were all quite positive in providing and supporting already what was emerging as a really strong healthy volume growth. I believe that what made the fourth quarter stand out and contribute to our strong performance was our excellent execution during the holiday season. It was one of the best executions I have witnessed, and we are very pleased with how it turned out. We also had a very successful limited-time offer on our finishing sugars, achieving around a 90% sell-through rate.
It really sold well. Additionally, we launched a new marketing campaign that supports the overall McCormick brand, especially during the holidays, and we think this campaign refresh has been performing quite effectively. Furthermore, we are experiencing faster growth in unmeasured channels like e-commerce, showcasing great execution outside of grocery and mass channels. Overall, we saw a 5% increase in volume, which correlates to a 5% growth in consumption, aligning with our shipments. We regard this as a very healthy quarter. Looking ahead into 2025, as mentioned during Investor Day, we will keep increasing our brand marketing investments, which yield great returns and performance. We plan to continue enhancing our brand management investments and increasing innovation. As we look forward, we anticipate strong performance from the products we are launching in 2024, with even more launches planned for 2025. We will also maintain our focus on product renovation.
Thanks for that. And then just briefly, Marcos, no surprise that fiscal '25 is another reinvestment year as you all highlighted at your Analyst Day last fall. I was hoping you could talk a bit more about where this investment is targeted and then how this all plays into your broader guidance for the year? Thanks so much.
Yes. So, Andrew, so we are expecting that we'll continue to make investments on technology. We talked about technology being one of the levers that shifted from Q3 into Q4 and you saw that SG&A was impacted in Q4 by that. But if you look at SG&A for the full year was up 40 basis points and that was primarily driven by brand marketing and a little bit of technology. But that technology in Q4 will continue to be a line item in 2025. We're stepping up investments there. We continue to drive our ERP implementation program plus also the new generation of capabilities, I would say, AI, things like that and machine learning capabilities. We are building a new data analytics hub across the organization. So we are stepping up the investments in technology. And I believe that over time, we'll continue to drive CCI and productivity savings for the company.
Hey, guys. Good morning. Thanks for the question.
Good morning.
Good morning.
If I could just follow-up actually on Andrew's question around kind of organic sales and the acceleration that you saw in the fourth quarter and was expected for '25. Maybe just two things, Brendan. One, I think when we talked at Investor Day, we were looking more for like a 2% to 3% on organic sales for '25 as an initial. And now the range has moved slightly below that. So just curious kind of what transpired or what's changed from an organic sales standpoint? And the second is, obviously, that range would also imply a deceleration versus the fourth quarter. So just it seems like you have great momentum coming out of 4Q and the comps aren't incredibly difficult. So just curious kind of where the maybe there's some conservatism in there, but just where the range has moved would be helpful. Thanks.
Yes, Peter, we have to provide some perspective around the guidance specifically on net sales. We're exiting 2024 with a strong performance and good momentum like you called out. And it does set us up for even stronger performance in 2025. I think from a top line perspective, this guide reflects the volume-driven plan around our business. And it's really on algorithm, if you will, from a volume perspective. It's somewhat like we called out at Investor Day. So it does call for meaningful volume improvement year-over-year, and there's very little, if any, price in the aggregate. We are building off a stronger base of performance, let's say, compared to '23. And there's balanced growth between, let's say, both the Consumer business and the Flavor Solutions business. We believe this guidance considers the changing marketplace. I want to highlight two points. The lower end of our range is influenced by the weak consumer confidence in China, where we anticipate a slight to gradual recovery.
Additionally, there is weakness in the Flavor Solutions sector, particularly in the QSR channels in EMEA. On the other hand, the high end of our range is supported by strong consumer volumes in the Americas and EMEA. Overall, our outlook is improving compared to what we projected in 2024, reflecting a cautious approach to the evolving market. This aligns with what we discussed at Investor Day, and our perspective has remained consistent since then as we consider our plans for 2025.
That's helpful. Thanks for framing that, Brendan. And maybe just to follow-up, the less talked about outside of Americas consumer. Just your perspective, US Foodservice, it seems like maybe we're setting up for a bit better year in '25. EMEA as well, you talked about the weakness on QSR, but just the EMEA consumer business has been delivering strong as well. So just how you're thinking about Europe in '25? Thanks very much.
Yes. I think, well, we're certainly, we saw a lot of strength in 2024 out of EMEA from our consumer business. It certainly offset what was weakness in Flavor Solutions. I think our view is we still see continued strength in our Consumer segment there in the market. The plans are strong. Similar points to what I said in just sort of the fourth quarter, those continue as we go into '25. On the Flavor Solution side of the business, we see a sort of a gradual strengthening of where we are there. But we have to kind of call out right now. It is certainly volumes. So that's where we're seeing life today. But I think as we look towards the year, improvement overall in our performance in that part of the world from a Flavor Solutions perspective. From a, let's say, CPG customer to a QSR customer, we think the strength will come in certainly from a CPG, it will start to build. There is one a couple of still issues geopolitically happening within that part of the marketplace. So we're seeing that come through and some of not only the perspective that we're getting from our customers, but that is playing out a little bit. The Middle East conflict is starting to affect not just the QSR side of the business, but CPG. However, we still see improved performance versus '24 on the Flavor Solutions side.
Good morning, everyone.
Good morning.
Good morning, Alexia.
So first of all, can I ask about the pivot that you're doing in the Flavor Solutions segment into these new faster growth innovative customers? I know you started that maybe a year or two ago. How quickly is that happening? Are you able to share what proportion of sales those new customers represent and how that might develop over time? And then I have a follow-up.
Sure. Happy to provide some perspective around that. We're not going to necessarily speak to sort of how the whole portfolio breaks down. But despite what we're seeing in terms of just sort of overall flattish volumes that you saw in the fourth quarter, broadly, we do see just faster performance. And to give you some context, just these tend to be as we describe them as sort of higher growth innovator sort of customers. But it's happening in categories like bars and granola, crackers, soups and broth, beverage, whether it's with alcohol, without alcohol, or even just sort of performance nutrition. We continue to see strength in a number of these sort of end categories, if you will, up against those taste competencies that we called out at Investor Day. So these are customers that we continue to seek and acquire and we believe that as we go into '25, we continue to really drive growth across this business, not only as volumes improve but also as we gain share in the marketplace overall. So if I were to think about like what that added context might be, given the spirit of your question, that's probably, I think, the context of this, think about it from an end market category perspective, we're just seeing a little bit faster growth in these areas.
Perfect. And as a follow-up and this is another broader-based question. If we see a number of food additives like Red No. 3 or some of the others eliminated from the generally recognized as safe designation and we see a round of reformulation across the broader industry. How do you position yourself to best tap into that on the Flavor Solutions side to be part of that cycle if it plays out? Thank you and I'll pass it on.
Sure. We see ourselves as actively in that going on right now today. The way we sort of have an opportunity to sort of play into those changes that may or may not occur, as you talked about changes in food regulation or just sort of a push towards healthier eating. We actively play a part right now with the customer base that we have today in terms of working on reformulations and product improvements. I believe that this is where innovation really drives the industry. It has for decades and will continue to moving forward. And so we believe reports pretty well to be able to work with our customers on making any product formulation changes that they would like to make. This could be the removal of artificial colors, sodium reduction, just increasing in clean ingredients. These are areas that we have been working on well up and prior to 2025. So we're quite confident that we'll participate in that.
Hi. Thanks for the question. Actually, I have a couple. I want to know if I could hone in a little bit more on the guidance range of 1% to 3%. You mentioned that the low end factors in weakness in China. And I wanted to know, could you be more specific about your expectations in China? With the low end of the range, the 1% entailed China getting worse or are you not that specific on what the 1% means? And then I had a quick follow-up.
I think our characterization in terms of what starts to sort of provide context around where that loan might be is thinking about at times China has not met expectations, right? We certainly saw that in '23 and then we saw it again in '24. And so I think what we're doing is we're kind of factoring that into our thinking, Bob. And as China, we do expect it to get sort of that slight and gradual improvement. And in fact, Marcos and I were there, actually just in the first week of January, spending time with our leaders in that business looking over just the changes in the marketplace as well as what are the growth plans for the year and what expectations should we have? So I think we're seeing a level of prudence from us just in terms of how to think about China. And I think that's kind of the context I would say that sort of provides that low end context. Obviously juxtaposed against what I framed is sort of what's driving the high end.
Yes, Rob, this is a dynamic environment. We wanted to be balanced in our call right now, not only in terms of top line, but also in terms of from an OP perspective and EPS as you saw in the guide. So we wanted to really be, I mean, I think it is a positive guide, but also it's balanced given the environment that we are in.
In the fourth quarter, the flow-through to operating income wasn’t as strong as expected. You mentioned some strong volumes in consumer, which looked impressive. My understanding is that consumer generally has a higher gross margin compared to Flavor Solutions. Can you clarify whether your operating income in the fourth quarter met your expectations, or was there more incremental spending on distribution or tax expenditures than anticipated? Thank you.
No, Rob. I mean it was pretty much in line with our expectations. I mean, how we came in, in Q4. I mean, we talked about in the last call that we were going to be shifting some of the expenses primarily related to technology and R&D from Q3 into Q4. So that's what you've seen in the P&L for this quarter, an impact from SG&A primarily and that is what is kind of taking us down to a negative OP, slightly negative OP. But as you think about it from the SG&A perspective, on a full year basis, it's in line as well with our expectations, 40 basis points incremental year-on-year on the back of A&P, continued technology investments, as I mentioned before. And the step-up in technology will continue into 2025.
Great. Thanks so much. I guess just in terms of pricing and the commentary that you gave maybe around Q1 as you continue to look to manage price gaps. I guess my question is kind of like how much more, I guess, do you think you need to actually manage price gaps? Like when you talked about investment, where you're talking about technology investment, kind of brand building in general, a lot of different investments. If we focus just on price, do you feel like there's actually that much more price investment that needs to come through in Q1? And then maybe any perspective on kind of how that flows through for the year? And I just ask given especially Consumer Americas volumes were fairly strong in Q4. And I'm not sure if that's Q4 specific because of some of the holiday products you had in the marketplace or if volumes continue like kind of why do you need to continue to invest in price gaps? Thanks.
Yes. Rob, on price, I think there's really kind of two points maybe there to address in your question. As we think about price and we called out, we're still going to be overlapping the beginning of those investments in Q1. That's consistent. That level of investment is consistent with what we were doing previously like Q2, Q3 sort of year-to-date. So as we go into Q1, we're not seeing a step-up in that. We're seeing sort of a maintenance of it, if you will, as we go into Q1. And the way I would ask you to think about it over the balance of the year is maintaining that investment in our baseline, if you will, of how we think about supporting our brands and supporting the volume growth that we've been driving. Price gap management for 2025 will continue the approach we've used in 2024. Throughout the year, we consistently review the performance of our pricing strategies rather than setting figures and ignoring them.
We carefully analyze the returns and effectiveness of our initiatives. From a broader perspective, consider this as an extension of our 2024 efforts. Regarding the strong performance in the fourth quarter, it is important to note that this quarter is typically our largest in terms of consumption. We experienced robust execution and an uptick in consumer behavior, particularly with more home cooking during the holiday season. Although the holiday season was slightly shorter, it did not negatively impact our results, which were generally strong. There are additional contextual factors to consider as you assess our performance profile.
Okay. Great. And then maybe just kind of more broadly speaking, as we think of your portfolio, at least on the consumer side, it does seem as if, let's say, at least through the back half of last year, right, that kind of more meal-related items seem to be doing a little bit better, right, like perimeter to the store, whether it's chicken pasta, etc., versus maybe some more incremental pressure or ongoing pressure and some more discretionary items. Kind of my guess is there is still some benefit, right, from those meal-related items, that's something you've been talking about for years, right? Consumers trading from scratch and at home and heard all through COVID. And I'm just kind of curious kind of what the updated perspective is on some momentum, let's say, on the perimeter and some of these new related items and then clearly how that would benefit, again, your Consumer Americas business. That's all I have. Thank you.
Rob, I think there was a little bit there where you may have cut out, but I think I got your question and that was more of, so what's that our outlook on sort of the Consumer in 2025. I would say our outlook on the consumer environment hasn't changed significantly, but that doesn't mean it's boring. There's a lot going on right there. And I think a lot of it does really position us well to win in this evolving environment. The demand for flavor is pretty strong. As we've said before, others compete with the calories, we flavor them. And we are seeing continuation of cooking at home and a focus on healthier eating. And we believe that, obviously, this positions our portfolio well to perform well in an environment like this. We believe that value is going to remain important for consumers. As you saw in some of my prepared remarks, it's still that lower income consumer. It still remains quite challenged overall.
And they're looking for value and affordability and not just in the United States. They're looking for it in Europe, they're looking for it in Asia. And so these are things that we believe are kind of globally consistent themes that we're seeing and influence our plans and the way we think about our portfolio overall. So that's our context with the consumer. Going into 2025, I would say, remaining focused on driving towards healthy eating, when we see people go to the perimeter to buy more product, to buy more protein, we think they're doing it for two reasons. They're doing it because they're looking to obviously save money, stretch their budgets. But also there's a bias towards easing healthier.
Hi. Thank you. I was hoping for a little bit of color on your outlook for margin expansion growth between the two segments. This past year, 2024, consumer was flattish. Obviously, Flavor Solutions had a great performance in terms of margin growth. Are you expecting maybe not the same magnitude, but sort of directional similarity, just given some of the pressure that consumer might feel from higher ad spending, maybe a little bit more promotion? Just wanted to get a sense for how you would like us to kind of think about that progression from here.
Yes, sure, Ken. So first of all, I mean, we're very pleased with the gross margin expansion we had in 2024. I mean it was 90 basis points at the high end of our guidance range. And we have really good reasons to believe that this will continue into 2025. So our call is for 50 to 100 basis points into 2025 as well. A couple of items there. I would say that is driving these expectations for us. Obviously, CCI and our productivity savings that we have in place right now is working very well for us. I mentioned technology before. Technology will also help drive more savings in the future years. The usage of Global Business Services Organization will continue to tap on that simplifying process is standardizing the way that we do work, all of those things will help us drive more savings going into the future years. And then mix, portfolio mix is a big lever, particularly within Flavor Solutions.
As we continue to shift our portfolio to high-margin categories, such as Flavors, Branded Food service, those categories drive higher margins. So if you think about it between the two segments, I would expect more gross margin coming from the Flavor Solutions segment versus the Consumer segment. That is also in line with our strategy of continuing to drive profitability at the bottom line for Flavor Solutions. As you saw, we've improved our operating margin by 140 basis points in 2024. And we have a commitment to get back to 14.5% by 2028. So that was a very important progress that we made now two years in a row on Flavor Solutions. So that is the whole idea about our guide in terms of gross margin as well as operating margin.
Thanks for the question. In the US specifically, your consumer segment is posting strong volumes, but you called out that your CPG Customers and Flavor Solutions have soft volumes, which we can clearly see in Nielsen data as well. So I'm just curious for your color on what's driving that dichotomy? Thanks very much.
Well, as you know, Max, we compete within segments that are sort of very focused around herbs, spices and seasonings, and condiments and sauces. And I think when we think about our portfolio compared to the rest of food and beverage within the United States, I think we first have to start there. And these categories have healthy growth. And so we benefit from that. But also I believe that we jumped on execution quite early in 2024. If you think about maybe my remarks back at the beginning, at this time last year, I said that it was our goal to move fast and really meet the consumer with where they were or where they are today. And that was a real intentional focus on our part from standpoint of being competitive and executing quickly in the marketplace. So I think we've also benefited from that.
The cash flow continues to be a very positive outcome for us this year, continues to drive a lot of cash this company, $922 million in 2024. We made some and this is business as usual for us. We make decisions about for buying some of the commodities for us at times. So oftentimes we make those decisions to bring inventory to protect service and to drive supply chain be available for supply chain, but also to lock in some favorable cost. And so we do take those decisions oftentimes. Difficult to predict what's going to happen in 2025, but this is part of our playbook in terms of how we manage all the input costs and the components across the globe within our procurement organization.
Great. Hey, thanks. Just one question for me, but maybe you both want to weigh in on it. Maybe the part for Marcos is just on your brand marketing plans for the year. It sounded like the rates of increase year-over-year was going to be pretty even throughout the year. Just wanted to play that back and validate. And if that's not correct, if you could give us a little sense of the cadence of increase.
Sure. So, Steve, the first part of the question is, yes. I mean the answer is yes. I mean, we're going to be spending similarly to 2024 levels on A&P, high single-digits, and it's going to be across all quarters. So pretty much even across all quarters, leading to the high single-digit, which is the same as we saw in 2024.
Steve, from a perspective of how we're spending that money, where we see obviously driving strong returns. I think it serves two perspectives on that. If you think about the vehicles that we go into and you think about the presentation that we shared at Investor Day, those are the vehicles in which we're going into. So it's not that we see a dramatic change in exactly sort of how we're spending it, but you see that we're getting even greater penetration and reach as we add more dollars to support the investment behind our brands. I would also say, we also look strategically across the portfolio and decide to increase spend levels on one brand versus another. If you think about this idea of driving resources and focus where we get the strongest return, that also drives our thinking about that allocation of A&P.
Good morning and thanks for squeezing me in. I wanted to, I guess, first ask on just the cadence of earnings relative to the annual growth ranges for organic sales growth and operating profit growth. Should we be thinking about starting off the year within these annual guidance ranges and sustaining it or is there some builds to be thinking about? Thanks.
In terms of revenue, we expect to maintain momentum from 2024 into 2025, with volume growth anticipated across both segments in the first quarter, continuing through the fourth quarter. Regarding profit, I mentioned earlier a slight shift between the first and second quarters. You will see a modest decline in operating profit in the first quarter due to the pricing we experienced last year and a shift in compensation from the second quarter to the first under our new policy. However, this will be more than compensated by an increase in operating profit in the second quarter.
Yes, I mean, the business is still growing. The business is very robust down in Mexico. Brendan and I are part of the Board of the JV, and we monitor the performance on a very close and then on a quarterly basis. And I mean the business is a very good business. It drives a lot of volume. It drives a lot of profitability as well. What's impacting is really the FX. The FX, the strengthening of the dollar up against the Mexican peso. And I mentioned it, it's about 20% devaluation of the Mexican peso year-on-year from 17 to 20 Mexican peso to the dollar. That is really what's impacting is on the translation of those results back into us. But the underlying performance of the business is really, really strong right now.
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 call this morning.
Thank you. This does conclude today's teleconference. You may disconnect at this time.