Company’s Strategies to Mitigate Costs and Maintain Growth
McCormick, a global manufacturer and marketer of spices and seasonings, estimates a $90 million impact on its costs due to tariffs imposed by the United States on imported raw materials. CEO Brendan Foley outlined plans to counteract these costs through supply chain initiatives, cost-saving programs, and strategic pricing adjustments.
Tariff Impact on Imported Materials
During a conference with analysts following the release of their second-quarter 2025 financial results, McCormick executives explained that while raw materials constitute a significant portion of the cost of goods sold (COGS), not all are subject to tariffs.
- Most of McCormick’s imports to the US from Mexico and Canada are not affected by tariffs, as they comply with the United States-Mexico-Canada Agreement (USMCA).
- Imports from China face a 30% tariff, while tariffs in other countries average around 10%, according to the executives.
When combined, these percentages result in approximately 2% of the global COGS impact due to tariffs. However, this figure could be higher in certain American countries.
Geographical Diversification of Supply Chain
Brendan Foley emphasized that in recent years, McCormick has focused on reducing geographical dependence for sourcing raw materials.
- In the US, Canada, China, and key European markets, more than 85% of McCormick’s products are manufactured locally.
- In the US, around 90% of products sold in the country are made domestically.
McCormick procures over 17,000 ingredients from 90 countries to manufacture its products. However, none of these ingredients have a “material, disproportionate” impact on their COGS, according to the executives.
Mitigation Strategies
To address the tariff-related impact, McCormick has implemented several strategies:
- Efficiency plans for their supply chain
- Cost-saving initiatives
- Revenue growth management
- A “surgical” pricing strategy for their products
With tariff estimates factored in, McCormick anticipates a 2% increase in sales for 2025.
Additional Cost Pressures
Besides tariff-induced cost increases, McCormick executives mentioned facing pressures from basic ingredient price hikes due to the global trade uncertainty environment, though they did not specify which ingredients.
