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Category: Manufacturing

Supply Chain News: Interesting Earnings Calls from McCormick and PepsiCo, with Supply Chain Front and Center



McCormick Taking Supply Chain Action to Address Profit Slide, while PepsiCo benefitting from Supply Chain Tech

Oct. 19, 2022
SCDigest Editorial Staff

Two different tales from two giants in the food and beverage sector this week, with McCormick announcing a number of new supply chain tactics to reverse falling profits, while PepsiCo said technology was giving it a supply chain edge.

Supply Chain Digest Says...

PepsiCo also said it was creating a second tranche of “green bonds,” a vehicle for investors to fund various sustainability projects at the company and get a return on their money.

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First, spice leader McCormick is pursuing a number of new supply chain strategies after reporting its year-to-date profits through Q3 fell $63.1 million.

At the top of the list of those new strategies: vertical integration of packaging operations.

McCormick CEO Lawrence Kurzius said the company would be bringing back some packaging in-house after “excessive use” of contract packaging, using what are commonly call co-packers in the food sector.

Kurzius also said the company was investing in manufacturing capacity, reliability in bottleneck areas, and customer service.

Other supply chain strategies in motion at McCormick include returning to normal shift schedules and reducing spend on surge capacity, which it said would lower expedited freight and shipping costs. The company was also beginning to overcome persistent raw material and packaging supply issues, especially in glass and organic spices, by expanding its supply base.

McCormick also plans to decrease inventory levels, with Kurzius adding that “We're also executing on plans to return to historical safety stock levels, which were raised to protect against supply disruption.”

He noted that the impact of these moves should hit the bottom line “beginning in the first half of 2023.”

Meanwhile, PepsiCo CEO Ramon Laguarta said on the company’s Q3 earnings call that supply chain software was enabling it to integrate demand forecasting with supply capacity, while automation was helping to deal with supply complexity.

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Laguarta said that “We're becoming much more digital, becoming much more insightful and precise as a company,” adding that “We're able to execute a certain level of higher complexity in our business.”

He continued, noting that “We're automating. We're becoming better at execution in that respect. I would say we're not running a perfect company at this point, given all the challenges there are still in the supply chain of ingredients and some of the transportation bottlenecks, but I would say we're able to cope with higher levels of complexity.”

In terms of rising costs, Laguarta said that PepsiCo has created a “strong holistic cost management program in which we treat all costs like an investment.”

The company said it would also be identifying key waste areas in its value chain and supporting innovation through automating and digitalizing its supply chain.

PepsiCo also said it was creating a second tranche of “green bonds,” a vehicle for investors to fund various sustainability projects at the company and get a return on their money.

PepsiCo said Sustainability initiatives include the circular economy, virgin plastic waste reduction, decarbonization, and pursuing net positive water impact.

That includes a new Pepsi manufacturing facility planned for Denver that aims to use 100% renewable electricity sources and include best-in-class water efficiency.

What are your thoughts on the McCormick and Pepsico Q3 news? Let us know your thoughts at the Feedback section below.


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