(Reuters) -Cholula hot sauce maker McCormick (NYSE:MKC) forecast annual sales and profit below analysts' estimates on Thursday, hurt by a persistent weakness in demand for its spices and condiments, especially in China, as well as higher marketing expenses.
Packaged food companies including McCormick, General Mills (NYSE:GIS) and Conagra Brands (NYSE:CAG) have also faced slowing demand across geographies as sticky inflation has compelled budget-conscious customers to hunt for value even for essential items such as groceries.
"The environment in China remains challenging," McCormick CEO Brendan Foley said on a post-earnings call, but he expects to see gradual recovery in the region through the year.
Foley also added McCormick was working towards making changes to product formulations including removal of artificial colors and sodium reduction after the U.S. Food and Drug Administration banned the use of a synthetic food dye that has shown to cause cancer in laboratory rats.
"These are areas that we have been working on, well up and prior to 2025," Foley said.
For fiscal year 2025, the company expects sales to be flat or grow as much as 2%, compared with analysts' estimate of a 2.4% rise, according to data compiled by LSEG. Sales had risen 0.9% in fiscal 2024 and 4.9% in 2023.
McCormick now projects annual adjusted profit to grow 3% to 5%, below expectations of 6.5%, according to data compiled by LSEG after posting a 2% rise in selling and general expenses in the fourth quarter.
Shares of the company, however, rose 2% after it reported a narrow beat for sales and profit in the fourth quarter ended Nov. 30.
The company posted net sales of $1.8 billion for the quarter, beating estimates of $1.77 billion, while it earned adjusted profit of 80 cent per share compared with analysts' estimates of 77 cents.