# FELLOW SHAREHOLDERS

_Source: `DeepSeekOCR_Ardian_pruned_1k/consumer-defensive-packaged-foods/NYSE_MKC_2022/NYSE_MKC_2022.mmd` · pages 2-8_

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FELLOW SHAREHOLDERS

In 2022 we experienced a year of unique challenges as we navigated an increasingly dynamic global environment. The combination of persistently high cost inflation and supply chain challenges, significant COVID related disruptions in China, and the conflict in Ukraine contributed to a challenging and volatile year that impacted our financial performance.

- Net sales grew 3% \( ^{1} \) . Sales growth was driven by strong growth in our Flavor Solutions segment partially offset by a decline in our Consumer segment, which was impacted by the Kitchen Basics divestiture, significant COVID related disruptions in China, and exits of low margin business in India and our Consumer business in Russia.

- Adjusted operating income \( ^{1} \)  declined 16% primarily due to higher cost inflation and supply chain costs, partially offset by pricing, lower selling, general, and administrative costs, and CCI-led cost savings.

- Earnings per share declined 10% to \(2.52; adjusted earnings per share \( ^{1} \)  declined 17% to \)2.53.

Importantly, while we were short of our goals in 2022, we view these results as a temporary setback in our long-term performance, which includes generating double-digit annualized shareholder returns in the past 5-, 10-, 15- and 20-year periods that exceed both the packaged food index and our flavor house peers. The fundamentals that drove this industry-leading historical financial performance remain strong.

Consumers' rising demand for flavor, whether through our products or our customers' products is the foundation for our sales growth. We have intentionally focused on great, fast-growing categories. We continue to capitalize on the long-term consumer trends of cooking at home, clean and flavorful eating, valuing trusted brands, and purpose minded practices. Our alignment with these trends and the rising demand for flavor, in combination with the breadth and reach of our global portfolio and our strategic investments, provide a strong foundation for sustainable growth.

In our Consumer segment, we are entering 2023 with positive momentum. Our increased brand marketing investments, with our messaging emphasizing value and showing consumers how our products help to stretch their grocery dollars without sacrificing flavor, coupled with our new product innovation centered around value, freshness, convenience, and heat is resonating with consumers. We are also collaborating with our customers to ensure the right assortment and price points on shelf to optimize category performance.
McCormick has paid dividends since 1925 and has increased its dividend for the past 37 consecutive years.

In 2022, McCormick returned \(397 million to shareholders through cash dividends, an increase of 9%. At the end of the year, the quarterly dividend was increased 5%.

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In our Flavor Solutions segment, our sales growth has been outstanding with continued momentum across all regions, and we continue to realize the benefits from the combined capabilities of FONA and McCormick. In 2023, we plan to drive further growth with our culinary-inspired innovation, differentiated customer engagement approach, as well as by targeting opportunities in high-growth categories, expanding distribution, and leveraging heat as a competitive advantage.

We are taking action to optimize our cost structure and increase our profitability. Our top supply chain priority is keeping our customers in supply. As we responded to demand volatility over the past several years, we incurred additional costs to service our customers and have seen inefficiencies develop in our supply chain. Through our Global Operating Effectiveness Program, we are taking actions to normalize our supply chain cost structure as well as increase our organizational effectiveness and efficiency to drive cost savings. Our actions are already yielding results, and we expect to realize the benefits of the program in 2023 and 2024.

Our Purpose-led Performance commitment remains strong and we continue to be recognized for our achievements in doing what's right for people, communities where we live, work, and source, and the planet we all share. We were honored to be included on Fortune's 2022 Change the World list, named by Just Capital as one of America's Most JUST Companies for 2023, and most recently to be named in the Corporate Knights Global 100 Sustainability Index as the No. 1 most sustainable corporation in both the Food Products sector and in the Consumer Staples sector for 2023. This marks the seventh consecutive year that McCormick has been featured on the list. As a global citizen, we understand our role in ensuring a sustainable future and look forward to continuing on our Purpose-led Performance journey.

The collective power of our approximately 14,000 employees worldwide drive our momentum and success. Demonstrating our high-performance culture, which is rooted in our fundamental values of integrity, fairness, mutual respect, teamwork, and innovation, they did a tremendous job navigating this past year's volatile environment. I thank them for their dedicated efforts and engagement.
This past year we saw several changes to our executive leadership team:

- Brendan Foley was promoted to President and Chief Operating Officer in June 2022. Since joining McCormick in 2014, Brendan has been instrumental in leading McCormick's overall growth. He is a respected leader and a champion of our Multiple Management and Purpose-led Performance philosophies.

- Lisa Manzone, who served as Chief Human Relations Officer since 2015, retired from the company in December 2022 after 15 years of distinguished service.

- Sarah Piper was named Chief Human Relations Officer effective December 1, 2022. Sarah brings extensive human relations expertise both from her tenure at McCormick as well as her external experience.

I am incredibly proud of the entire McCormick team, and I am confident that we have the right team in place for continued success.

As we look ahead to 2023, we will focus on capitalizing on strong demand, optimizing our cost structure, and positioning McCormick to deliver sustainable growth. The compounding benefit of our relentless focus on growth, performance, and people continues to position McCormick to drive sales growth and, balanced with our focus on lowering costs to expand margins, realize long-term sustainable earnings growth, and create long-term shareholder value.

On behalf of the McCormick Board of Directors and the executive team, I would like to thank you for your continued support and confidence.

Sincerely,

![](images/3_0.jpg)

Lawrence E. Kurzius

Chairman and Chief Executive Officer