# Fellow SHAREHOLDERS

_Source: `DeepSeekOCR_Ardian_pruned_1k/consumer-defensive-packaged-foods/NYSE_MKC_2021/NYSE_MKC_2021.mmd` · pages 3-9_

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Fellow SHAREHOLDERS,

2021 has been another year of global challenge, change, and opportunity. Through it all, McCormick is stronger than ever. We delivered on our purpose to stand together for the future of flavor, remained forward-looking, and came together through our Power of People \( ^{™} \)  culture to strengthen our foundation and grow our business. We are relentlessly focused on growth, performance and people, actively responding to changing consumer behavior, and capitalizing on new opportunities from our relative strength. As we envision a world united by flavor where healthy, sustainable, and delicious go hand in hand, we are accelerating growth for a purpose-driven future.

## We are DELIVERING TOP-TIER
BUSINESS PERFORMANCE

We drove record sales growth in 2021, demonstrating again that the combination of our broad and advantaged portfolio, the effective execution of our strategies to capitalize on accelerating consumer trends, and the engagement of our employees have positioned us well to continue driving differentiated growth. Notably, on a two-year basis, we have grown sales by nearly a billion dollars, which reflects our robust and sustained growth momentum in both segments and strong contributions from our Cholula \( ^{®} \)  and FONA \( ^{®} \)  acquisitions.

• Net sales rose a record 13%, surpassing $6 billion in annual revenue in 2021. In constant currency, sales grew 11%. Incremental sales from our Cholula and FONA acquisitions contributed 4% to the increase. Our Consumer segment growth of 9%, or 7% in constant currency, was driven by consumers'

sustained preference for cooking more at home,
fueled by our brand marketing, strong digital engagement,
new products, and Cholula growth. Sales in our Flavor
Solutions segment grew 19%, or 16% in constant currency,
reflecting contributions from our FONA and Cholula acquisi-
tions as well as growth driven equally from our packaged food
and beverage customers and the robust demand recovery
5-YEAR RETURN VS. S&P 500 AND
S&P PACKAGED FOODS INDEX

![](images/3_0.jpg)

As of 11/30/2021

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13%
RECORD NET
SALES
GROWTH
in 2021

DIVIDENDS DECLARED
(Per Share Data)

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McCormick has increased its dividends each of the past 36 years. We have paid a dividend for 97 consecutive years.

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"With our overarching focus on growth and the successful execution of our strategies, we have consistently delivered industry-leading revenue growth. This performance resulted in McCormick's inclusion in the 2021 Fortune 500. We are proud of being included on this prestigious list. Our sustained performance positions us for continued success in 2022 and beyond."

– LAWRENCE E. KURZIUS
Chairman, President and
Chief Executive Officer

FORTUNE
500
2021

from our restaurant and other foodservice customers, which were impacted by COVID-19 restrictions and consumers' reluctance to dine out last year.

• Operating income increased 2%, driven by higher sales, and our Comprehensive Continuous Improvement (CCI) led cost savings, partially offset by special charges, transaction and integration expenses, cost inflation, and incremental strategic investments. Excluding special charges and transaction and integration expenses, adjusted operating income increased 8%, or 6% in constant currency.

• Our earnings per share increased to \(2.80 in 2021 from \)2.78 in 2020. Excluding special charges, transaction and integration expenses, and income from sale of unconsolidated operations, adjusted earnings per share grew to \(3.05 in 2021 from \)2.83 in 2020, driven primarily by higher adjusted operating income. This increase of 8% includes a favorable impact from foreign currency.
• At the end of 2021, our Board of Directors authorized a 9% increase in the quarterly dividend, continuing our long history of returning cash to shareholders. We are proud to be a dividend aristocrat, having paid a dividend each year since 1925 with increases for the past 36 years.

Our 2021 operating performance amidst a dynamic environment proves the strength of our business model and the value of our products and capabilities as well as the successful execution of our strategies. We have delivered strong underlying performance while making strategic investments that provide a foundation for long-term sustainable growth. Our strong fundamentals and performance give us confidence in our continuing momentum. With our steadfast focus on growth, performance and people, we are confident we will continue to build long-term shareholder value.

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## We are END-TO-END FLAVOR

McCormick's broad and advantaged global flavor portfolio ideally positions us to fully meet the demand for flavor around the world and grow our business. This has never been more evident than over the last two years as consumers adapted to the ever-changing environment. The breadth and reach of our portfolio across segments, geographies, channels, customers, and product offerings creates a balanced portfolio to drive growth and consistency in our performance. It gives us significant flexibility to adapt to changing conditions, wherever they may arise, and continue on our growth trajectory. This is a significant differentiator in the dynamic environment in which we currently operate.

Consumers are increasingly seeking authentic flavor experiences for every meal occasion, regardless of whether that meal is consumed at home or away from home. As a global leader in flavor, we are delivering these experiences through our products and our customers' products. Our Consumer segment brings great-tasting and trusted flavor to global consumers at every price point, ranging from premium brands to private label. Consumers know our leading iconic brands at first sight and taste. Our Flavor Solutions segment has a diverse portfolio of product offerings, enabling us to collaborate with a wide range of customers and channels. We provide the flavor for consumer packaged goods manufacturers, restaurants, and distributors to deliver great taste to the products they make or sell across the food and beverage industry. Every day, no matter what or where you eat or drink, you're likely enjoying something flavored by McCormick. McCormick is end-to-end flavor.

## Deliberately in Great Categories

The rising global demand for flavor remains the foundation of our sales growth. Growth in global flavor, which includes categories across our broad portfolio, is projected to accelerate over the next several years. Many of our top global Consumer segment categories are driving that acceleration and outpacing most food categories. Other high-growth categories are key ones for which our Flavor Solutions segment develops custom flavors. We have deliberately focused on great categories and have continued to expand our portfolio to meet the evolving tastes and needs of our consumers and customers around the world.

We are driving undisputed leadership in our core consumer categories, with a strong heritage in our largest category, spices and seasonings. We are the global market leader, nearly four times the size of the nearest branded competitor, with a leading brand share position in many markets. Spices and seasonings is one of the fastest growing global flavor categories, and we are fueling its growth by inspiring consumers' flavor and cooking experiences.

Condiments and Sauces is our second largest consumer category and also a major part of our branded foodservice category within our Flavor Solutions segment. These

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Consumer Segment
Americas ■
Europe, Middle East ■
and Africa
Asia/Pacific ■
Flavor Solutions Segment
Americas
Europe, Middle East
and Africa
Asia/Pacific

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Consumer Segment
U.S. Spices & Seasonings
International Spices & Seasonings
Recipe Mixes
Condiments & Sauces
Regional Leaders
Flavor Solutions Segment
Flavors
Branded Foodservice
Custom Condiments
Coatings, Bulk Spices & Herbs

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products represent significant profitable top line growth opportunities. We have intentionally grown our condiments portfolio through base business growth and acquisitions, with the addition of Frank's RedHot \( ^{®} \) , French's \( ^{®} \)  and Cholula advancing us to a leading market position.

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Frank's RedHot the #1 and Cholula the #2 hot sauce in the U.S. \( ^{2} \) 

McCormick is winning in hot sauce. In 2021, McCormick rose to be the #1 hot sauce company in the world, and Frank's RedHot, the #1 brand in the U.S., was joined at the top of the category by Cholula, which we have driven to the #2 ranking. We are incredibly proud of these positions and are confident our initiatives will allow us to continue to deliver strong growth in this highly attractive category. With over half of global consumers choosing spicy flavors and younger consumers outpacing older generations in their preference, we believe hot sauce is the condiment of the next generation. We are in the perfect position to capitalize on this opportunity through our global heat platform.

In our Flavor Solutions segment, we have continued to successfully execute on our strategy to migrate our portfolio to more value-add categories. Our flavors product category now comprises over half of the segment and is about the same size as our U.S. spices and seasonings category. We are accelerating this growth by focusing on flavor development for fast-growing end market applications such as beverages and snack seasonings, particularly hot and spicy flavors, as well as performance nutrition.

LEADING CONSUMER BRANDS
In nearly 170 countries and territories
across the globe

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FLAVOR SOLUTIONS
Flavors designed for a wide range
of applications

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Beverages

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Snacks

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Dairy

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Bakery/Confectionary

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Savory

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Performance Nutrition

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Health

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## Accelerating Our Condiment and Flavors Platforms

In 2021, we celebrated the one-year anniversaries of our two fantastic acquisitions, Cholula and FONA, and have created value and achieved synergies according to our plans.

The addition of the beloved, iconic Cholula brand is accelerating the growth of our global condiments platform. With Cholula's authentic, bold, and spicy Mexican flavors, we increased our breadth and reach in the hot sauce category, providing consumers and foodservice operators with an even more diverse product offering. We are unlocking Cholula's significant growth potential through effective brand marketing investments and innovation as well as increased menu participation with our foodservice customers. Our momentum with Cholula is very strong, and we are excited to build upon consumers' growing passion for heat.

The addition of FONA to our Flavor Solutions segment is accelerating the growth of our global flavors platform. FONA expanded our breadth in developing flavors for attractive and fast-growing categories, extended our technology platform and capabilities, including expertise in health and performance nutrition, and strengthened our clean and natural leadership. We are providing our customers with an even more comprehensive product offering to meet the growing demand for clean and flavorful eating, drinking, and nutrition experiences. FONA's performance has been very strong, and we are excited about the growth opportunities it is fueling across our entire portfolio.

We are thrilled with both Cholula and FONA. Our enthusiasm for these acquisitions, as well as our confidence that we will continue to achieve our plans, deliver differentiated growth with these portfolios and drive shareholder value, has only continued to strengthen.

## Capitalizing on Long-term Accelerating Trends

We are capitalizing on the long-term consumer trends in healthy and flavorful cooking, increased digital engagement, trusted brands, and purpose-minded practices. These long-term trends and the rising global demand for great taste are as relevant today as ever, with the younger generations fueling the demand for flavor at a greater rate. Consumers are enjoying the cooking experience, particularly scratch cooking, as it provides a creative outlet and makes them feel adventurous. Flavor fuels the cooking at home momentum by enabling exploration and allowing families to connect. Consumers are also enjoying dining out; however, most restaurant meals are now consumed as delivery or takeaway, and consumers are adding flavor at home. We are well positioned to benefit from both at-home and away-from-home behaviors with the strength and diversity of our broad global portfolio.

We are meeting consumers at the intersection of flavor and health. Many of our products are inherently good for you, delivering flavor that is not just delicious but healthy, and we are continually driving innovation to expand those offerings even further. We are also raising the awareness of our products with clean and healthier labels as well as the contribution they can make in helping consumers achieve their increasingly important health and wellness lifestyle goals. For our Flavor Solutions customers, making products that taste great is complicated by ever-changing consumer preferences and dietary guidelines. Our capabilities allow our customers to balance nutrition with great taste, as developing clean-label, organic, natural,

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50%
OF CONSUMERS
ARE COOKING MEALS
ENTIRELY FROM
SCRATCH \( ^{1} \) 

and better-for-you solutions is at the core of what we do. Delivering a superior flavor experience is what makes our brands great, and we are providing solutions to help make our customers' brands great as well.

We are continuing to strengthen our consumer connections by meeting them where they are thriving—online. As consumers increasingly rely on their digital connections to experiment with new flavors and cooking techniques, we are there empowering them to further hone their cooking skills and delve deeper into flavor exploration. Our investments in this space continue to bolster our online shelf to drive new, passionate users to our brands and digital properties, resulting in both McCormick and category growth. We expect to further capitalize on consumers' increased digital engagement with significant opportunities ahead of us.
Finally, with our relentless focus on quality—starting in the communities around the world from which we source until our flavors reach the table—we are the Taste You Trust \( ^{®} \) . Our reputation for sustainability, transparency, and community support strongly resonates with our customers and consumers.

We expect these long-term consumer trends and behaviors will continue globally, driving sustained demand for our products. The combination of the breadth and reach of our global portfolio and our alignment with these trends continues to sustainably position us to drive growth for a purpose-driven future.

88%
OF CONSUMERS
PLAN TO COOK AS
MUCH OR MORE
THAN NOW WHEN
THINGS RETURN
TO NORMAL \( ^{1} \) 

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Our 2021 investments spanned our portfolio as we connected with our consumers, particularly online.

## We are DRIVING GROWTH

We are driving growth with our brand marketing investments and new products, as well as our category management initiatives and our differentiated customer engagement.

## Investing in Brand Marketing

We are continually building our brand equity through increasing the level and effectiveness of our brand marketing investments. As a percentage of sales, our Consumer segment brand marketing is among the highest of our consumer industry peers and we are achieving returns above industry norms. From building confidence in the kitchen to inspiring healthy choices, we will continue to fuel differentiated growth through our strong brand marketing initiatives.

## Launching Insight-driven New Products

New product innovation is instrumental in uniting people through flavor. Our innovation, across both segments, attracts global consumers to just about every store shelf, real or virtual, and into restaurants across the world to discover new tastes and packaging innovation while seeking healthier, flavorful options. Our proprietary product development tool, SAGE, plays a key role in our innovation. It combines artificial intelligence with unparalleled insights from our consumer preference data and is a real competitive advantage in the development of our new products. SAGE provides a great starting point in delivering fresh, new flavor ideas faster. It has enabled us to win exciting opportunities, such as in flavors for hard seltzers in our Flavor Solutions segment, and in our Consumer segment to develop new recipe mix flavors, including our Instant Pot \( ^{®} \)  series.

In our Consumer segment, new product innovation differentiates our brands and strengthens our relevance with our consumers. Our 2021 launches broadened our global heat portfolio, advanced our sustainable packaging commitment, and met consumers' demand for healthy and convenient solutions. In Flavor Solutions, by capitalizing on our culinary foundation and insights from our own consumers, we not only solve our customers' flavor challenges, but also spur their innovation further. In 2021, we had strong new product momentum in this segment as our customers continue to move their portfolios to on-trend flavors, including hot and spicy, and better-for-you products, while not compromising taste. Across both segments, our 2021 launches drove strong growth, and we are excited about our robust pipeline as we move forward.