MCCORMICK & CO INC (MKC) Business

ITEM 1. BUSINESS

McCormick is a global leader in flavor. We manufacture, market, and distribute herbs, spices, seasoning mixes, condiments, and other flavorful products to the entire food and beverage industry: retailers, food manufacturers, and foodservice businesses. We also are partners in a number of joint ventures that are involved in the manufacture and sale of flavorful products, the most significant of which is McCormick de Mexico. Our major sales, distribution, and production facilities are located in North America, Europe, and China. Additional facilities are based in Australia, Central America, Thailand, and South Africa.

On January 2, 2026, we completed the purchase of an additional 25% ownership interest in McCormick de Mexico. The purchase price was $750 million, which increased our ownership to a 75% controlling interest. We believe the acquisition creates opportunities for further growth in the Mexican market and provides a strategic platform for further expansion in Latin America. McCormick de Mexico is a prominent food company in Mexico, with a broad portfolio, including mayonnaise, spices, marmalades, mustard, hot sauce, and tea, sold under McCormick brands.

Business Segments

We operate in two business segments: Consumer and Flavor Solutions. Demand for flavor is growing globally, and across both segments, we have the customer base and product breadth to participate in all types of eating occasions. Our products deliver flavor when cooking at home, dining out, purchasing a quick service restaurant meal, or enjoying a snack. We offer our customers and consumers a range of products, extending from premium to value-priced, to meet the increasing demand for certain product attributes including clean-label, organic, natural, reduced sodium, gluten-free, and non-GMO (genetically modified organisms).

Consistent with market conditions in each segment, our Consumer segment has a higher overall profit margin than our Flavor Solutions segment. In 2025, the Consumer segment contributed approximately 58% of consolidated net sales and 67% of consolidated operating income, and the Flavor Solutions segment contributed approximately 42% of consolidated net sales and 33% of consolidated operating income.

Consumer Segment. From locations around the world, our brands reach consumers in approximately 150 countries and territories. Our leading brands in the Americas include McCormick®, French’s®, Frank’s RedHot®, Lawry’s®, Cholula®, and Club House®, as well as brands such as Gourmet Garden® and OLD BAY®. We also market authentic regional brands such as Zatarain’s®, Stubb's®, Thai Kitchen®, and Simply Asia®. In the Europe, Middle East, and Africa (EMEA) region, our major brands include the Ducros®, Schwartz®, Kamis®, and La Drogheria® brands of spices, herbs, and seasonings and an extensive line of Vahiné® brand dessert items. In the Asia/Pacific (APAC) region, we market our spices and seasonings under the McCormick brand, DaQiao®, as well as other brands, our dessert products under the Aeroplane® brand, and packaged chilled herbs under the Gourmet Garden® brand.

Approximately two-thirds of our Consumer segment sales are spices and seasonings and condiments and sauces. Within the spices and seasoning category, we are the brand leader globally and a category leader in our key markets. In the condiments and sauces category, we are one of the brand leaders globally and in the U.S. There are numerous competitive brands of spices and seasonings and condiments and sauces in the U.S., as well as additional brands in international markets. Some are owned by large food manufacturers, while others are supplied by small privately-owned companies. In this competitive environment, we are leading with innovation and brand marketing, applying our analytical tools to help customers optimize the profitability of their sales of these categories, while simultaneously working to increase our own sales and profit.

Our customers span a variety of retailers that include grocery, mass merchandise, warehouse clubs, discount and drug stores, and e-commerce retailers, served directly and indirectly through distributors or wholesalers. In addition to marketing our branded products to these customers, we are a leading supplier of private label items, also known as store brands. In our businesses in China, foodservice sales are managed by and reported in our Consumer segment.

Flavor Solutions Segment. In our Flavor Solutions segment, we provide a wide range of products to multinational food manufacturers and foodservice customers. The foodservice customers are supplied with branded, packaged products both directly by us and indirectly through distributors, with the exception of our businesses in China, where

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foodservice sales are managed by, and reported in, our Consumer segment. We supply food manufacturers and foodservice customers with customized Flavor Solutions, and many of these customer relationships have been active for decades. Our range of Flavor Solutions remains one of the broadest in the industry and includes seasoning blends, spices and herbs, condiments, coating systems, and compound flavors. In addition to a broad range of Flavor Solutions, our long-standing customer relationships are evidence of our effectiveness in building customer intimacy. Our customers benefit from our expertise in many areas, including sensory testing, culinary research, food safety, and flavor application.

Our Flavor Solutions segment has a number of competitors. Some tend to specialize in a particular range of products and have a limited geographic reach. Other competitors include large publicly held flavor companies that are more global in nature and tend to focus on providing integrated solutions extending beyond flavor through the use of other functional and nutritional ingredients.

Raw Materials

The most significant raw materials used in our business are dairy products, pepper, garlic, onion, capsicums (red peppers and paprika), salt, tomato products, sugar, and soybean oil. Pepper, along with various spices and herbs, is generally sourced from countries outside the U.S. Raw materials such as dairy products, onion and soybean oil are primarily obtained locally, either within the U.S. or from our international locations. Because these raw materials are agricultural products, they are subject to fluctuations in market price and availability caused by weather, growing and harvesting conditions, market conditions, including inflationary cost increases and global trade policies, and other factors beyond our control.

We respond to this volatility in a number of ways, including strategic raw material purchases, purchases of raw material for future delivery, customer price adjustments, and cost savings from our Comprehensive Continuous Improvement (CCI) program. There has been, and there could continue to be, a difference between the timing of when these customer price adjustments and cost savings impact our results of operations and when the impact of cost inflation occurs. Additionally, in some instances, the pricing actions we take have been impacted by price elasticity which unfavorably impacts our sales volume and mix.

In addition, we rely on third-party transportation providers to deliver raw materials and our products to our customers. There has been, and could continue to be, reduced availability of transportation capacity due to labor shortages and higher fuel costs, which have caused and may continue to cause an increase in transportation costs for us and our suppliers.

Customers

Our products are sold directly to customers as well as through brokers, wholesalers, and distributors. In the Consumer segment, products are then sold to consumers under a number of brands through a variety of retail channels, including grocery, mass merchandise, warehouse clubs, discount and drug stores, and e-commerce. In the Flavor Solutions segment, products are used by food and beverage manufacturers as ingredients in their finished goods and by foodservice customers for menu items, as well as provided to their own customers for dine-in and take-out occasions, all to enhance the flavor of their foods. Customers in the Flavor Solutions segment include food manufacturers and the foodservice industry, supplied through a variety of channels, including directly and indirectly through distributors, wholesale foodservice suppliers, and e-commerce.

We have a large number of customers for our products. Sales to one of our Consumer segment customers, Wal-Mart Stores, Inc., accounted for consolidated sales of approximately 12% in 2025, 2024, and 2023. Sales to one of our Flavor Solutions segment customers, PepsiCo, Inc., accounted for consolidated sales of approximately 12% in 2025, and 13% in both 2024 and 2023. In 2025, 2024, and 2023, the top three customers in our Flavor Solutions segment represented 49% of our global Flavor Solutions sales.

Trademarks, Licenses and Patents

We own a number of trademark registrations. Although in the aggregate these trademarks are material to our business, the loss of any one of those trademarks, with the exception of our “McCormick,” “French’s,” “Frank’s RedHot,” “Lawry’s,” “Zatarain’s,” “Cholula,” “Stubb's,” “Club House,” “Ducros,” “Schwartz,” “Vahiné,” "OLD BAY," "Simply Asia," "Thai Kitchen," “Kamis,” “La Drogheria,” "DaQiao," and "Gourmet Garden" trademarks, would not have a material adverse effect on our business. The “Mc – McCormick” trademark is extensively used in connection with the sale of our food products in the U.S. and certain non-U.S. markets. The terms of the trademark registrations are prescribed by law, and the registrations will be renewed as long as we deem them useful.

We have entered into a number of license agreements authorizing the use of our trademarks by affiliated and non-affiliated entities. The loss of these license agreements would not have a material adverse effect on our business.

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The term of the license agreements is generally two-to-three years or until such time as either party terminates the agreement. Those agreements with specific terms may be renewable upon agreement of the parties.

We also own various patents, none of which are individually material to our business.

Seasonality

Due to seasonal factors inherent in the business, our sales, operating income, and cash from operations are generally higher in the fourth quarter because of the holiday season. This seasonality reflects customer and consumer buying patterns, primarily in the Consumer segment.

Working Capital

In order to meet increased demand for our consumer products during our fourth quarter, we usually build our inventories during the third quarter of the fiscal year. We generally finance working capital items (inventory and receivables) through short-term borrowings, which include the use of lines of credit and the issuance of commercial paper. For a description of our liquidity and capital resources, see Note 5 of the notes to our consolidated financial statements and the “Liquidity and Financial Condition” section of “Management’s Discussion and Analysis.”

Competition

Each segment operates in highly competitive markets around the world. In this environment, our growth strategies include customer engagement and product innovation based on consumer insights. In the Consumer segment, we are building brand recognition and loyalty through advertising and promotions. In our Flavor Solutions segment, we differentiate ourselves through culinary and consumer-inspired flavor development, as well as the breadth of our product offering and customer engagement.

Governmental Regulation

We are subject to numerous laws and regulations around the world that apply to our global businesses. In the U.S., the safety, production, transportation, distribution, advertising, labeling, and sale of many of our products and their ingredients are subject to the Federal Food, Drug, and Cosmetic Act; the Food Safety Modernization Act; the Federal Trade Commission Act; state consumer protection laws; competition laws; anti-corruption laws; customs and trade laws; federal, state and local workplace health and safety laws; privacy laws; federal, state, and local environmental protection laws; and other federal, state, and local statutes and regulations. Outside the U.S., our business is subject to numerous similar statutes, laws, and regulatory requirements.

Human Capital

We believe in the power of people and that by working together, every employee is an integral part of driving our success. Our key human capital objective is to attract, develop, and retain the best talent and we employ various human resource programs in support of this objective.

Throughout our global business, we work to create ethical, safe, accessible, and supportive workplaces where all employees thrive and belong. We believe that unlocking the full potential of all employees through inclusion drives innovation, collaboration, and growth, and enhances our competitive advantage. Respect for human rights is central to our business and reflects our commitment to ethical conduct.

We are committed to the safety, health, and well-being of our employees. Our global safety programs focus on hazard prevention to ensure that all our employees have access to safe workplaces that allow them to succeed in their jobs. We offer total rewards programs that support the physical, emotional, and financial well being of our employees.

As of November 30, 2025, we had approximately 14,100 full-time employees worldwide. In the United States, approximately 400 employees are covered by a collective bargaining contract and at our subsidiaries outside the U.S., approximately 2,450 employees are covered by collective bargaining agreements or similar arrangements. We maintain positive and constructive employee relations and our operations have not been affected significantly by work stoppages.

Through our continuous listening strategy, we measure employee engagement and enablement, receiving valuable feedback from our employees on our work environment and culture. The results from these surveys are used to advance programs and processes to enhance employee engagement and improve the overall employee experience.

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Information about our Executive Officers

In addition to the executive officers indicated in the 2026 Proxy Statement incorporated by reference in Part III, Item 10 of this Report, the other executive officer of McCormick is Ana G. Sanchez.

Ms. Sanchez is 51 years old and, during the last five years, has held the following positions with McCormick: February 2022 to present - President, EMEA; and February 2020 to January 2022 – Vice President Consumer, EMEA.

Operations Outside of the U.S.

We are subject in varying degrees to certain risks typically associated with a global business, such as local economic and market conditions, exchange rate fluctuations, and restrictions on investments, royalties, and dividends. In fiscal year 2025, approximately 39% of sales were from non-U.S. operations. For information on how we manage some of these risks, see the “Market Risk Sensitivity” section of “Management’s Discussion and Analysis.”

Forward-Looking Information

Certain statements contained in this report, including statements concerning expected performance such as those relating to net sales, gross margin, earnings, cost savings, special charges including transaction and integration expenses, acquisitions, brand marketing support, volume and product mix, income tax expense, and the impact of foreign currency rates are “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These statements may be identified by the use of words such as “may,” “will,” “expect,” "should," "anticipate," "intend," “believe,” “plan,” and similar expressions. These statements may relate to: general economic and industry conditions, including consumer spending rates, recessions, interest rates, and availability of capital; expectations regarding sales growth potential in various geographies and markets, including the impact of brand marketing support, product innovation, and customer, channel, category, heat platform, and e-commerce expansion; the expected results of operations of businesses acquired, including the additional 25% ownership interest in McCormick de Mexico; expected trends in net sales, earnings performance, and other financial measures; the expected impact of pricing actions on the Company's results of operations, including our sales volume and mix as well as gross margins; the expected impact of the inflationary cost environment on our business; the anticipated effects of factors affecting our supply chain, including the availability and prices of commodities and other supply chain resources such as raw materials, packaging, labor, and transportation; the potential impact of trade policies, including tariffs; the impact of legal challenges to U.S tariffs; the expected impact of productivity improvements, including those associated with our CCI program and the Global Business Services operating model initiative; the ability to identify, attract, hire, retain, and develop qualified personnel and the next generation of leaders; the impact of ongoing or future geopolitical conflicts, including the potential for broader economic disruption; expected working capital improvements; the anticipated timing and costs of implementing our business transformation initiative, which includes the implementation of a global enterprise resource planning (ERP) system; the expected impact of accounting pronouncements; expectations regarding pension and postretirement plan contributions and anticipated charges associated with those plans; the holding period and market risks associated with financial instruments; the impact of foreign exchange fluctuations; the adequacy of internally generated funds and existing sources of liquidity, such as the availability of bank financing; the anticipated sufficiency of future cash flows to enable payments of interest, repayment of short- and long-term debt, working capital needs, planned capital expenditures, quarterly dividends, and our ability to obtain additional short- and long-term financing or issue additional debt securities; and expectations regarding purchasing shares of McCormick's common stock under the existing repurchase authorization.

These and other forward-looking statements are based on management’s current views and assumptions and involve risks and uncertainties that could significantly affect expected results. Results may be materially affected by factors such as: the Company's ability to drive revenue growth; the Company's ability to increase pricing to offset, or partially offset, inflationary pressures on the cost of our products; damage to the Company's reputation or brand name; loss of brand relevance; increased private label use; the Company's ability to offset cost pressures or business impacts related to trade policies, including tariffs; the Company's ability to drive productivity improvements, including those related to our CCI program and other streamlining actions; product quality, labeling, or safety concerns; negative publicity about our products; actions by, and the financial condition of, competitors and customers; the longevity of mutually beneficial relationships with our large customers; the ability to identify, interpret and react to changes in consumer preference and demand; business interruptions due to natural disasters, unexpected events or public health crises; issues affecting the Company's supply chain and procurement of raw materials, including fluctuations in the cost and availability of raw and packaging materials; labor shortage, turnover and labor cost increases; the impact of changing political and geopolitical conditions, including conflicts and the potential for broader economic disruption; government regulation, and changes in legal and regulatory requirements

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and enforcement practices; the lack of successful acquisition and integration of new businesses; global economic and financial conditions generally, availability of financing, interest and inflation rates, and the imposition of tariffs, quotas, trade barriers and other similar restrictions; foreign currency fluctuations; the effects of our amount of outstanding indebtedness and related level of debt service as well as the effects that such debt service may have on the Company's ability to borrow or the cost of any such additional borrowing, our credit rating, and our ability to react to certain economic and industry conditions; impairments of indefinite-lived intangible assets; assumptions we have made regarding the investment return on retirement plan assets, and the costs associated with pension obligations; the stability of credit and capital markets; risks associated with the Company's information technology systems, including the threat of data breaches and cyber-attacks; the Company's inability to successfully implement our business transformation initiative; fundamental changes in tax laws; including interpretations and assumptions we have made, and guidance that may be issued, and volatility in our effective tax rate; climate change; Environmental, Social and Governance (ESG) matters; infringement of intellectual property rights, and those of customers; litigation, legal and administrative proceedings; the Company's inability to achieve expected and/or needed cost savings or margin improvements; negative employee relations; and other risks described herein under Part I, Item 1A "Risk Factors."

Actual results could differ materially from those projected in the forward-looking statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law.

Available Information

Our principal corporate internet website address is: www.mccormickcorporation.com. We make available free of charge through our website our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such documents are electronically filed with, or furnished to, the U.S. Securities and Exchange Commission (the SEC). The information and other content contained on our website are not part of (or incorporated by reference in) this report or any other document we file with the SEC. The SEC maintains an internet website at www.sec.gov that contains reports, proxy and information statements, and other information regarding McCormick. Our website also includes our Corporate Governance Guidelines, Business Ethics Policy and charters of the Audit Committee, Compensation & Human Capital Committee, and Nominating/Corporate Governance Committee of our Board of Directors.