McCormick & Co Inc (MKC) Q1 2021 Earnings Call Transcript

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McCormick & Co Inc (MKC 0.59%)
Q1 2021 Earnings Call
Mar 30, 2021, 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Kasey Jenkins -- Vice President, Investor Relations

Good morning. This is Kasey Jenkins, Vice President of McCormick Investor Relations. Thank you for joining today's First Quarter Earnings Call.

To accompany this call, we've posted a set of slides at ir.mccormick.com.

[Operator Instructions]

We'll begin with remarks from Lawrence Kurzius, Chairman, President and CEO; and Mike Smith, Executive Vice President and CFO.

During our remarks, we will refer to certain non-GAAP financial measures. These include information in constant currency as well as adjusted gross margin, adjusted operating income, adjusted income tax rate and adjusted earnings per share that exclude the impact of special charges, transaction and integration expenses related to the acquisitions of Cholula and FONA. Reconciliations to the GAAP results are included in this morning's press release and slides. In our comments, certain percentages are rounded. Please refer to our presentation for complete information.

In addition, as a reminder, today's presentation contains projections and other forward-looking statements. Actual results could differ materially from those projected. The Company undertakes no obligation to update or revise publicly any forward-looking statements whether because of new information, future events or other factors. It is important to note, these statements include expectations and assumptions which will be shared related to the impact of COVID-19 pandemic. As seen on slide 2, our forward-looking statement also provides information on risk factors, including the impact of COVID-19 that could affect our financial results.

It is now my pleasure to turn the discussion over to Lawrence.

Lawrence E. Kurzius -- Chairman, President and Chief Executive Officer

Thank you, Kasey.

Good morning, everyone, and thanks for joining us.

Starting on slide 4. Our first quarter results were outstanding. As we said in our year-end earnings call in January, we have confidence in our strategies and are well positioned to deliver another year of differentiated growth in 2021. Following an extraordinary year in 2020, in 2021 we expect strong underlying base business performance and recent acquisitions to drive significant sales growth as well as strong operating income growth, even considering extraordinary COVID-19 cost and business transformation investments highlighting our focus on profit realization. During the first quarter, we delivered double-digit sales, adjusted operating income and earnings growth. We expect growth to vary by quarter in 2021 given 2020's level of demand volatility and the pace of COVID-19 recovery. But importantly, we have started the year with outstanding first quarter performance, giving us confidence in an even stronger outlook for 2021.

As seen on slide 5, we have a broad and advantaged global flavor portfolio with compelling offerings for every retail and customer strategy across all channels. The breadth and reach of our portfolio across segments, geographies, channels, customers and product offerings creates a balanced and diversified portfolio to drive consistency in our performance, as evidenced again by our first quarter results.

The sustained shift in consumer behavior to cooking and eating more at home continued to drive substantial increases in our Consumer segment demand in all regions as well as increases in our packaged food company customers in our Flavor Solutions segment. On the other hand, in our Americas and EMEA regions, we continued to experience reduced demand from our restaurant and other foodservice customers given the pressure on away-from-home consumption driven by continued COVID-19 government imposed restrictions which in several areas increased during the first quarter. Notably, our APZ region had substantial growth in both segments, driven not only by lapping the significant disruption last year caused by the COVID-19 related lockdown in China, but also by the sustained increase in at-home consumption and an increase in away from home consumption as restrictions have eased and the recovery momentum is building. Finally, with the addition of our Cholula and FONA acquisitions, we have further extended the reach and breadth of our portfolios, with new product offerings, channels and customers and are excited about their contributions to our first quarter and beyond. These impacts continue to demonstrate the strength and diversity of our offering, and we are confident our balanced portfolio will continue to differentiate McCormick and sustainably position us for growth.

This morning, I'll begin with our first quarter results, share some comments on business performance and then discuss our 2021 momentum and growth plans. After that, Mike will go more in depth on our first quarter results and provide an update on our 2021 guidance.

Starting with our outstanding first quarter results, as seen on slide 6. Total sales grew 22%, including a 2% favorable impact from currency. In constant currency, we grew total sales 20%, with increases in both segments. Base business growth, new products and acquisitions, our three long-term growth drivers, all contributed to the increase. In addition to our top line growth, adjusted operating income increased 35%, including a 3% favorable impact from currency, and adjusted operating margin expanded by 160 basis points. Growth from higher sales, favorable mix and CCI-led cost savings more than offset COVID-19 related costs and higher planned brand marketing investments. Our first quarter adjusted earnings per share was $0.72 compared to $0.54 in the prior year, driven by our strong operating performance, partially offset by a higher adjusted tax rate.

Turning to our first quarter segment business performance. Starting on slide 7. In our Consumer segment, we grew sales by 35%; on constant currency, 32%, with double-digit increases across each of our three regions. Our Americas constant currency sales growth was 30% in the first quarter, with incremental sales from our Cholula acquisition contributing 5%. The momentum Cholula carried in from last year continues to be strong, with consumption growing at twice the category rate. Excluding Cholula, our total McCormick US branded portfolio, as indicated in our IRI consumption data and combined with unmeasured channels, grew 15%, which reflects the strength of our categories as consumers continued to cook more at home.

For the first time in several quarters, our sales increase was higher than our US IRI consumption growth. We are realizing the benefit of our capacity expansion at the end of last year. The difference between shipments and consumption is attributable to beginning to catch up on the undershipment of consumption across all quarters of last year that resulted in depleted retailer and consumer pantry inventories. Demand has remained high as the steps we've taken to increase supply are beginning to show. As we mentioned in our January earnings call, after experiencing real pressure on our US manufacturing operations throughout 2020 due to elevated demand levels, we ended the calendar year with considerable incremental capacity and restoration plans for products which had been suspended. Throughout our first quarter, we removed products from suspension and continued to see service levels improve, which, combined with our overshipping consumption, indicates we are beginning to rebuild the inventory pipeline. As we've said previously, inventory replenishment will progress throughout the year. We continue to work with all our customers on improving shelf conditions and estimate more than half the suspended products are now back on shelf. The level of restoration is very customer specific.

Focusing further on our US branded portfolios. In spice and seasonings and all other categories, excluding dry recipe mixes, we grew first quarter consumption at double-digit rates and again increased our household penetration and repeat buy rates. In the first quarter, we continued to gain share in categories less impacted by supply constraints, including snacks and broths, barbecue sauce, wet marinates and Asian products. The categories most impacted affected by supply constraints, spice and seasonings and dry recipe mix, we know there is a high correlation between our share performance and the shelf conditions resulting from product suspension or allocation. Products that have had strong supply and remained on shelf have performed well, and as suspended products are restocked on shelf, we're seeing similar performance. We anticipate regaining share as conditions continue to improve.

All of our key categories continued to outpace the center of store growth rates favorably impacting not only the McCormick brand, but smaller brands as well such as Stubb's, Lawry's, Simply Asia, Thai Kitchen, Zatarain's and Kitchen Basics. And in e-commerce, we had strong double-digit pure-play growth, with McCormick branded consumption outpacing all major categories. We continue to use our strong category management capabilities in working with our customers as inventory is replenished throughout the supply chain to optimize category shelf sets, drive both growth for our customers and for McCormick. I'd like to thank our customers for their partnerships and working together with us on long-term solutions. We are well positioned for success in 2021 and have implemented efficient long-term solutions and strengthened our supply chain resiliency to support continued growth.

Now turning to EMEA, which continued its momentum with outstanding performance in the first quarter. Our constant currency sales rose 26%, with broad-based growth across the region. Each of our markets drove double-digit total branded consumption growth, with market share gains across the region. Spices and seasonings consumption was strong in all markets, driving market share gains across total EMEA region. And our Vahine brand in France again had strong consumption growth and outpaced the homemade desserts category. In the UK, both Frank's RedHot and French's Mustard also had strong consumption and gained share. Since the beginning of the pandemic, our EMEA supply chain has been very well positioned to meet the elevated demand and this has contributed to our ability to grow share across the region.

In EMEA, our household penetration and rate of repeat buyer increased again in the first quarter for the fourth consecutive quarter across our major brands and markets compared to last year, and we continue to work closely with our customers to ensure that elevated consumer demand will be met, even obtaining incremental placement for our branded portfolio as other manufacturers and private label faced supply challenges. We're excited with our growth trajectory in EMEA following challenging market conditions in the past.

In the Asia-Pacific region, our constant currency sales grew 55%. During the first quarter of last year, China's consumption was disrupted by the COVID-19 related lockdown. Recovering from that disruption increased sales in the first quarter of 2021 versus last year. Notwithstanding that recovery, the region still had double-digit growth, driven by strong China consumer and branded foodservice demand, partially fueled by the Chinese New Year holiday as well as strong consumer consumption in the rest of the region. For instance, in Australia, we continued to see elevated consumption in the brands where we gained household penetration last year such as Frank's RedHot, Gourmet Garden and Grill Mates.

Across all regions, we know second quarter consumption will start to be compared to the highly elevated levels from last year. And while we do not expect consumption at those same levels, we do expect continued and long-lasting growth from the increase in consumers' cooking more at home.

Constant currency sales in our Flavor Solutions segment grew 3%, driven by our Americas and APZ regions. In the Americas, we drove constant currency sales growth of 2%, driven by our FONA and Cholula acquisitions as well as growth with our consumer packaged food customers or our at-home base. With strengthened base business as well as new product momentum, we continued to shift our portfolio to more value-added and technically insulated products, not only with the combination of FONA's flavor portfolio, but also with considerable growth from snack seasonings in the US and Mexico as well as flavors from both savory and beverage applications. Demand from our away from home customer base, the branded foodservice and restaurant customers declined and continue to be impacted by the COVID-19 environment.

Sales in our EMEA region were comparable to the first quarter of last year for Flavor Solutions, with demand declines in our away from home customer base, offset by strong sales for our consumer packaged food customers. This growth was driven by a significant increase in new product growth versus last year as well as continued strength in the base business, partially from our customers' promotional activities. Our sales growth in the Asia Pacific region was outstanding, up 18% in constant currencies. Both China, excluding the recovery impact from last year's lockdown, and Australia delivered double-digit growth from quick service restaurants or QSR customers. This growth was driven by significant momentum in limited time offers as well as strength in the core business.

I mentioned our results related to Cholula and FONA. And now I'd like to provide a brief update on their integration status., For both acquisitions, our integration activities are progressing according to our plan. We continue to deliver on opportunities quickly and aggressively to drive growth and are pleased with our momentum on capturing our synergy opportunities. We remain on track to achieve synergies according to plan.

Starting with Cholula. As expected, our integration of the business has been straightforward. As of March 1, all functions have been integrated into our McCormick processes, and importantly, we are now servicing customers from our McCormick US distribution center. From a consumer commercial perspective, we are expanding distribution and are fueling growth, with robust brand marketing investments. We'll be activating both digital, where Cholula was underpenetrated, and in-store merchandising in the next few weeks for our exciting Cinco de Mayo campaign. In Flavor Solutions, we're also expanding distribution with new and existing branded foodservice customers and are leveraging Cholula's authentic Mexican flavor for increased menu participation, particularly in Cinco de Mayo menu offers.

Moving to FONA. The employees of FONA have been part of building a great business, and we are excited to be working with them to collectively integrate the business and drive plans to capitalize on growth opportunities. Our functional integration is very much on track and is using a best of both approach to ensure we optimize our operating model, similar to the approach we have with our RB Foods integration. The alignment of our organization is well under way, and we have had significant commercial collaboration yielding quick wins and identifying long-term strategic opportunities. Customer reaction has been extremely positive. They were impressed with our early collaboration and excited about the increased customer value proposition created by the combination of McCormick and FONA, a more comprehensive product offering, broader technical platform, deep technical and flavor talent and best-in-class customer collaborations. And we were excited with FONA's performance starting the year, with great results and a robust momentum across the business.

For both Cholula and FONA, we are pleased with our progress so far and our contribution to our results. Our enthusiasm for these acquisitions and our confidence that we will deliver on our acquisition plans, accelerate growth of these portfolios and drive shareholder value has only increased over the last few months.

Now I would like to briefly comment on the conditions we're seeing in our markets, their potential impact and our 2021 organic growth plans, starting on slide 10. Local demand for flavor remains the foundation for our sales growth. We are capitalizing on the growing consumer interest in healthy flavorful cooking, trusted brands as well as digital engagement and purpose-minded practices. These long-term trends have only accelerated during the pandemic, and our alignment, combined with the breadth and reach of our portfolio, sustainably positions us for continued growth. These underlying trends, current market conditions and our robust 2021 plans position us well to successfully execute on our growth strategies in both segments.

Turning to slide 11. Starting with our Consumer segment, around the world, we continue to experience sustained elevated consumer demand, which is real incremental consumption and reflects the trend of consumers cooking more at home. Across our APZ region, consumer demand continues to be strong. In China, consumer consumption remains strong, and we continue to see recovery in foodservice, which, in China, is in our Consumer segment, with approximately 90% of restaurants open during the Chinese New Year period. In Australia, even with restaurant restrictions eased and away from home demand increasing, at-home consumption has remained elevated. And as I mentioned earlier, we are retaining households that came into our brands last year. And we're also realizing growth with our away from home customer.

In many of our largest markets in EMEA, restrictive COVID-19 measures are still in place, further fueling at-home consumption, and we are seeing sustained levels of demand. In the Americas, as restrictions are easing and vaccinations are continuing, consumption remains elevated. Consumers are continuing to come to our brand, having a good experience and buying our products again. Consumers are cooking more from scratch and adding flavor to their meal occasions is a key long-term trend which has accelerated during the pandemic. As we've shared previously, our proprietary consumer survey data, supported by external research indicates consumers are enjoying the cooking experience as it provides a creative outlook, reduces stress and connects the family. And consumers feel meals prepared at home are safer, healthier, better tasting and cost less. In our recent consumer survey from February, these positive sentiments are not only still true but have strengthened.

Consumers' interest in cooking has increased in recent months versus the end of last year because they want to cook versus have to cook. For example, approximately 50% of the consumers surveyed indicated they are cooking more now because they want to try new recipe, ingredient, cooking method or tool or simply just cook from scratch, and approximately 40% also indicated they're trying to recreate restaurant meals at home. Importantly, over two-thirds of consumers surveyed claim they would maintain or increase their current level of cooking at home even if life were to return to normal next week, whatever normal may be.

We continue to believe that consumer behavior and sentiment driving an increased and sustained preference for cooking at home will continue globally and persist beyond the pandemic, further driving consumer demand for our products in 2021 and beyond, fueled by robust brand marketing, differentiated new products and our strong category management initiatives. Our category management initiatives are designed to continue to strengthen our category leadership by driving growth for both us and our customers. In the US, in 2020 we began our initiative to reinvent the in-store experience for spices and seasonings consumers by introducing new merchandising elements to improve navigation and drive inspiration, transforming and at times confusing shelves with three shoppable sections. Our rollout has continued in 2021, with plans to implement in thousands of stores, and the early indication is positive, with the category and McCormick branded growth outpacing the rest of the market in transformed stores.

We are also investing in e-commerce to drive McCormick and category growth. In the first quarter, we delivered over 90% global e-commerce growth, with particular strength in omnichannel. We are investing in content, retail research and innovation specifically for e-commerce, trialing new items of packaging in the direct-to-consumer channel first. For example, in the Americas we've launched unique flavor inspiration products such as Frank's RedHot Everything Bagel Seasonings, and in China we are launching a ready to eat chili paste on our direct to consumer platform. In EMEA, following the successful launch of the innovative street food seasonings the last year, we are now accelerating online growth with variety, bundle packs and multi-buy offers on our main e-commerce channels.

Turning to global brand marketing. We continue to increase our investments across our entire portfolio as evident in our 17% increase in the first quarter and plan for another significant increase in the second quarter. Our investments have proven to be effective, and we will continue to connect with consumers online, turning real-time insights into actions by targeting messaging focused on providing information and inspiration. We expect our brand marketing investments, combined with the valuable brand equities and strong digital consumer engagement will continue to drive growth with existing consumers and the millions of consumers gained in 2020.

Highlighting some of our first quarter investments in the Americas and EMEA regions on slide 12. Starting with the Americas. We continued our advertising campaign, It's Gonna Be Great, with a focus on consumers' continuing traditions and preparing the families' signature holiday dishes even if their celebrations look different. Our Frank's Super Bowl campaign integrated across digital, social, online, video and TV featured fan favorite Eli Manning promoting Frank's RedHot as approachably hot and was our best Super Bowl campaign yet garnering record high impressions. As part of our Zatarain's Bold Like That campaign, we partnered with New Orleanian author and poet Cleo Wade to promote virtual Mardi Gras celebrations with authentic New Orleans flavors, #Zatarain'sPorchParty, and recognizing virtual celebrations replace live Mardi Gras events, we supported Culture Aid NOLA, an organization which distributes food to hospitality workers impacted by pandemic restrictions.

Turning to EMEA, where we have invested a substantial portion of our brands' marketing, our digital marketing and promotional activities included our holiday campaign featuring a festive gold cap limited edition packaging which drove strong holiday results in our major markets. In the UK, with our New Year flavor resolutions campaign, we inspired consumers with recipes and products to flavor their healthy kick, whether it be through the heat of Frank's or spicing it up through Schwartz. And in France, we're giving families another reason to celebrate in 2021. In 2020, birthday celebrations were not just a piece of cake. So with the inspiration of our Half-py Birthday marketing campaign, consumers can celebrate their half birthdays, complete with Vahine's launch of a decimal comma-shaped candle to top their cakes made with our Vahine baking products.

Looking at just a few of our second quarter plans, in the Americas we'll inspire restaurant quality cooking with our It's Gonna Be Great campaign. Our Vahine brand in EMEA is sponsoring a prime-time French baking program which will showcase our homemade dessert line. In both regions, we launched Easter campaigns, bringing the family together with baking and crafting ideas. And moving to grilling season, we will acknowledge the importance of connecting through outdoor grilling occasions through campaigns targeting products such as French's and Grill Mates in the US and Frank's in the UK. Finally, our plans include support of our robust new product launches. New products are integral to our growth. In our Consumer segment, new product innovation differentiates our brands and strengthens our relevance with our consumers. Our 2020 launches have made exceptional trials and are providing significant momentum into this year. And in 2021, we have a robust global pipeline of new product launches, and I'm happy to share some of our first half launches as seen on slide 13.

We're meeting consumers at the intersection of flavor and health. We're launching Just 5 dry recipe mixes in the US, dips and dressing mixes in flavors like French onions and Homestyle Ranch, the clean and short ingredient statements, five simple ingredients delivering a classic flavor experience. And in France, we are expanding our range of organic products in our Vahine homemade dessert line.

When it comes to heat, we're continuing to broaden our French portfolio globally. In the US, we're expanding French green sauces, with a milder tangy Buffalo flavor and a garlic Buffalo flavor or combining savory garlic with spicy eats. Also in the US, we have just launched Cholula wing sauces in two flavors: Mexicali Cilantro Lime and Caliente Spicy Arbol Peppers in a unique bottle with the iconic wooden cap. And in the UK, we're launching Frank's craft additions, capitalizing on interest in Frank's heat with differentiated flavors such as roasted Jalapeno and raw [Phonetic] Habanero.

We are responding to consumers' demand for convenience and flavor. In the US, our launch of frozen appetizers, providing hot chicken bites and Buffalo chicken dips with Frank's flavor that are ready in minutes is gaining momentum with one of our best new product starts. We're excited at the launch of new Grill Mates all-purpose grilling seasonings for consumers who want to respect the need. Simple course ground seasonings for the open flame that cling to the meat and lock in juiciness.

Finally, our innovation is not only all about flavor but also staying relevant with our consumers through our packaging innovation. We're continuing the rollout of our first choice bottle with its consumer preferred transparent and functional design, modern look and a reinforcement of fresh flavor into our Eastern European markets. These markets have predominantly been sachet markets for spices and seasonings and perceive the bottle packaging as a premium offering. And in Canada, we're beginning the relaunch of our gourmet line in the First Choice bottle as well as adding new flavor varieties. In the UK, not only are we building on our Schwartz recipe mix momentum with the introduction of flavorful line extensions. We're also advancing on our sustainable packaging commitment with sachet packaging that is 100% recyclable. Schwartz will be the first brand in the UK dry recipe mix category with recyclable packaging. And in France, with the redesign of our Ducros grinder. Its appearance not only has greater consumer appeal, but it also reduces our carbon footprint.

Turning to Flavor Solutions. In this segment, we have a diverse customer base, and have seen various stages of recovery. From a food at home perspective, our Flavor Solutions' growth varies by packaged food customer. Overall, we are carrying our growth momentum with these customers into 2021, driven by strength in their iconic core products as well as new products and bigger-bet innovation in 2021. Overall, the sell-in of our new product launches and big bet innovations from these customers slowed in 2020 due to the focus on keeping core items on shelf. There are still new product launches, and in many cases they are smaller expansions of the core and more channel oriented.

Moving into 2021, we're excited about the momentum of the 2020 launches, but even more excited about the robust 2021 pipeline. Our customers have bigger bet innovations in their plans. I would look forward to collaborating with them and driving growth from those launches. The key enablers driving our success and developing winning flavors for our customers is our insight on consumer and culinary trends. We've been at the forefront forecasting emerging flavors for 21 years. Through the McCormick flavor forecasts, we have a history of identifying the top trends in ingredients, catering to future of flavor, many of which have stood the test of time, whether it was Ma Turmeric or pumpkin pie spices, the flavor of Chipotle or dishes with [Indecipherable]. In April, we'll be launching our newest addition that will shake up the way we cook, flavor and eat. We'll feature new trends, flavors and recipes that will not only flavor our Consumer segment innovation, but also drive wins with our Flavor Solutions' customer. In our away from home portion of this segment, as I mentioned earlier, we are seeing growth from our restaurant and other foodservice customers in our APZ region as restrictions have eased. The QSR demand momentum continues to strengthen, particularly as they continue to expand their menu options with limited time offers and are increasing promotional activities.

Branded foodservice demand as it relates to entertainment, stadium for hospitality venues, for instance, is recovering at a slower pace. In EMEA and the Americas, during the first quarter our restaurants and other foodservice customers were still impacted by government imposed COVID-19 restrictions in many markets. There is now optimism with many of these customers related to restrictions' easing and reopening plans. Focus has shifted from adapting operating model to the supply chain preparedness for the second half of the year. We're collaborating with our customers to ensure a strong recovery with pent-up demand being met. We expect the recovery of some of our branded food customers will start to begin, similar to what we've seen in APZ. As QSR customers are oriented less to dine-in, their recovery will be at a faster pace than the rest of the restaurant and foodservice industry. We have positive fundamentals in place to navigate through this period and are excited about the recovery momentum.

Across our entire Flavor Solutions portfolio, we were advantaged by our differentiated customer engagement and plan on driving further wins for both us and our customers in fiscal 2021. With our customer intimacy approach, we will continue to drive new product wins, collaborate on opportunities and solutions, manage through recovery plans and, importantly, further strengthen our customer partnerships. When we collaborate with our customers and our technical innovation center, we have a high win rate. Since we could not connect in person during 2020, we adapted to new ways of collaborating through creative, digital and virtual solutions. The interactive experience for our customers build their excitement, awareness and confidence in our unique capabilities in an engaging and inspiring way.

We continue to not only strengthen our engagement in 2020, but we also proved we could maintain a high win rate whether physically in our innovation centers or not, and have carried that momentum into 2021. In our Flavor Solutions segment, the execution of our strategy to migrate our portfolio to more technically insulated and value-added categories will continue in 2021. The top-line opportunities gained from our investments to expand flavor scale, our momentum in flavor categories as well as opportunities from our FONA acquisition, we expect to realize further results from this strategy.

Lastly, we continue to be recognized for our efforts for doing what's right for people, communities and the planet, our purpose-led performance. Following being named by Corporate Knights in their 2021 Global 100 Most Sustainable Corporations Index as number one in the packaged food and processed foods and ingredients sector, McCormick was also recently named to Barron's 2021 100 Most Sustainable Companies list for the fourth consecutive year. As we continue our sustainability journey, I'm excited to announce that later this week we will begin using 100% renewable electricity in all our Maryland and New Jersey-based facilities. This includes our manufacturing operations, distribution centers, offices and technical innovation center and will result in an 11% reduction in our global greenhouse gas emissions.

Moving to slide 16. In summary, we continue to capture the momentum we have gained in our Consumer segment and with our Flavor Solutions' at home customers, have positive fundamentals in place to navigate through the Flavor Solutions away from home recovery and are excited about our Cholula and FONA acquisitions, all of which bolster our confidence for continued growth in 2021. Our fundamentals, momentum and growth outlook are stronger than ever. Our achievements in 2020, our effective strategies, our robust operating momentum and the breadth and reach of our portfolio reinforce our confidence in delivering another strong year of growth and performance in 2021.

Following an extraordinary year in 2020, our 2021 outlook reflects both our strong underlying base business performance and acquisitions driving significant sales growth as well as strong operating income growth, even considering extraordinary COVID-19 costs and our business transformation investments which highlights our focus on profit realization. Our top-tier long-term growth objectives remain unchanged and we're positioned for continued success. Importantly, McCormick employees around the world drive our momentum and success, and I would like to thank them for their dedicated efforts and engagement.

Now I'll turn it over to Mike.

Mike Smith -- Executive Vice President and Chief Financial Officer

Thanks, Lawrence, and good morning, everyone.

I'll now provide some additional comments on our first quarter performance and an update on our 2021 outlook. As Lawrence mentioned, our first quarter results were outstanding.

Starting with our top line growth. As seen on slide 18, we grew sales 20% in constant currency during the first quarter. Our volume and product mix, acquisitions and pricing each contributed to the increase. Our organic sales growth was 16%, driven by our Consumer segment, and incremental sales from our Cholula and FONA acquisitions contributed 4% across both segments. The Consumer segment sales grew 32% in constant currency, with double-digit growth in all three regions. The sustained shift in consumer consumption continues to drive increased demand for our consumer product, fueled by our brand marketing, new products and category management initiatives and resulted in higher volume and mix in each region.

On slide 19, Consumer segment sales in the Americas increased 30% in constant currency versus the first quarter of 2020, with 5% of the increase from the acquisition of Cholula. The remaining increase from higher volume and product mix was broad based across majority of categories and brands as well as private label products, with particular strength in the McCormick, Frank's RedHot, French's, Zatarain's, Lawry's, Simply Asia and Gourmet Garden brands.

In EMEA, constant currency Consumer sales grew 26% from a year ago, with double-digit growth in all countries and categories across the region. The most significant volume and mix growth drivers were Schwartz and Ducros branded spices and seasonings. Vahine homemade dessert products, packing products and our Kamis branded products in Poland. Consumer sales in the Asia Pacific region increased 55% in constant currency, driven primarily by the recovery from the disruption in China consumption last year, as Lawrence mentioned. Excluding that recovery impact, the region had double-digit growth due to strong China consumer and branded foodservice demand, partially driven by the timing of Chinese New Year and related holiday promotions as well as continued strength in Australia.

Turning to our Flavor Solutions segment on slide 22. We grew first quarter constant currency sales 3%. In the Americas, Flavor Solutions constant currency sales grew 2%, driven by the FONA and Cholula acquisitions, a 7% increase, as well as pricing to offset cost increases. Volume and product mix declined due to a reduction in demand from branded foodservice and other restaurant customers, partially offset by higher demand from packaged food companies, with particular strength in snack seasonings and savory flavors.

In EMEA, constant currency sales were comparable to last year as pricing actions offset cost increases. Volume and product mix declined due to lower sales to branded foodservice and other restaurant customers, partially offset by sales growth with packaged food companies, with strength in snack seasonings. In the Asia Pacific region, Flavor Solutions sales rose 18% in constant currency, driven by higher sales to QSRs in China and Australia, partially due to our customers' limited time offers and promotional activities as well as the China recovery impact from last year's COVID-19 related lockdown. As seen on slide 26, adjusted operating income, which excludes transaction and integration costs related to the Cholula and FONA acquisitions as well as special charges, increased 35% or, in constant currency, 32%, in the first quarter versus the year ago period.

The Consumer segment adjusted operating income grew 59% to $190 million. The 54% constant currency growth from higher sales, favorable mix and CCI-led cost savings more than offset COVID-19 related costs and a 17% increase in brand marketing. In the Flavor Solutions segment, adjusted operating income declined 4% to $73 million with minimal impact from currency. Higher sales and CCI-led cost savings were more than offset by unfavorable manufacturing costs.

As seen on slide 27, adjusted gross profit margin expanded 60 basis points in the first quarter versus the year ago period due to favorable mix, both within the Consumer segment and due to the sales shift between segments. In addition, CCI-led cost savings were partially offset by COVID-19 related costs. Our selling, general and administrative expense as a percentage of net sales was down year-on-year by 100 basis points from the first quarter of last year. Leverage from sales growth drove the decline, partially offset by the increase in brand marketing I mentioned a moment ago. With the gross margin expansion and SG&A leverage, adjusted operating margin expanded 160 basis points from the first quarter of 2020.

Turning to income taxes on slide 28. Our first quarter adjusted effective tax rate was 22.7% compared to 18.4% in the year ago period. The first quarter adjusted tax rate in 2020 was significantly impacted by a favorable discrete item related to a refinement of our entity structure. Income from unconsolidated operations increased 28% in the first quarter of 2021 due to strong underlying performance of our joint venture in Mexico.

At the bottom line, as shown on slide 30, first quarter 2021 adjusted earnings per share were $0.72 as compared to $0.54 for the year-ago period. The increase was due to our higher adjusted operating income performance, partially offset by a higher adjusted income tax rate.

On slide 31, we summarize highlights for cash flow and the balance sheet. Our cash flow from operations was an outflow of $32 million for the first quarter of 2021 compared to an inflow of $45 million in the first quarter of 2020. This change was primarily due to a lower level of cash generated from working capital associated with increased sales, higher incentive compensation payments and the payment of transaction and integration costs related to our recent acquisitions. In February, we raised $1 billion through the issuance of five year 0.9% notes and 10 year 1.85% notes. We took the opportunity in a low interest rate environment to optimize our long-term financing following our Cholula and FONA acquisitions. We also returned $91 million of cash to our shareholders through dividends and used $49 million for capital expenditures this quarter. We expect 2021 to be another year of strong cash flow, driven by profit and working capital initiatives, and our priority is to continue to have a balanced use of cash: funding investments to fuel growth, returning a significant portion to our shareholders through dividends and paying down debt.

Now I would like to discuss our 2021 financial outlook on slides 32 and 33. With our broad and advantaged flavor portfolio and robust operating momentum and effective growth strategies, we are well positioned for another year of differentiated growth and performance. In our 2021 outlook, we are projecting top line and earnings growth from our strong base business and acquisition contribution, with earnings growth partially offset by incremental COVID-19 costs and ERP investments as well as a higher projected adjusted effective tax rate. We also expect there will be an estimated 2 percentage point favorable impact of currency rates on sales, adjusted operating income and adjusted earnings per share.

At the top line, due to our first quarter results and robust operating momentum, we are increasing our expected constant currency sales growth to 6% to 8% compared to 5% to 7% previously, which continues to include the incremental impact of the Cholula and FONA acquisitions at the projected range of 3.5% to 4%. We anticipate our organic growth will be primarily led by higher volume and product mix, driven by our category management, brand marketing, new products and customer engagement growth plans. As Lawrence mentioned earlier, we expect sales growth to vary by region and quarter in 2021, given 2020's level of demand volatility and the pace of the COVID-19 recovery, but importantly, we continue to expect we will drive overall organic sales growth with the full year in both of our segments.

We're now projecting our 2021 adjusted gross profit margin to be comparable to 2020 due to increasing inflationary pressure, mainly due to transportation costs. But our inflation expectation for the full year remains a low single-digit increase. Our adjusted gross margin projection reflects margin accretion from the Cholula and FONA acquisitions as well as unfavorable sales mix in both segments and COVID-19 costs. Our estimate for COVID-19 costs remains unchanged at $60 million in 2021 as compared to $50 million in 2020 and weighted to the first half of the year. As a reminder, fiscal 2021's COVID-19 costs are largely from third-party manufacturing costs. Reflecting the increase in our sales outlook, we are also increasing our expected constant currency adjusted operating income growth.

Our adjusted operating income growth rate reflects expected strong underlying performance from our base business and acquisitions projected to be 11% to 13% constant currency growth compared to 10% to 12% previously. This is partially offset by a 1% impact from increased COVID-19 costs compared to 2020 and a 3% impact of the estimated incremental ERP investment. This results in total projected adjusted operating income growth rate of 7% to 9% in constant currency, increase from 6% to 8% previously. This projection reflects the inflationary pressure I just mentioned as well as our CCI-led cost savings target of approximately $110 million. We also continue to expect a low single-digit increase in brand marketing investments, which will be heavier in first half of the year.

We also reaffirm our 2021 adjusted effective income tax rate projected to be approximately 23%. This outlook versus our 2020 adjusted effective tax rate is expected to be a headwind to our 2021 adjusted earnings-per-share growth of approximately 4%.

We are increasing our 2021 adjusted earnings per share expectations to growth of 5% to 7%, which includes a favorable impact from currency. This increase reflects our higher adjusted operating profit outlook and the impact from optimizing our long-term financing, which I mentioned earlier. Our guidance range for the adjusted earnings per share in 2021 is now $2.97 to $3.02 compared to $2.91 to $2.96 previously. This compares to $2.83 of adjusted earnings per share in 2020. This growth reflects strong base business and acquisition performance growth of 11% to 13% in constant currency, partially offset by the impacts I just mentioned related to COVID-19 costs, our incremental ERP investments and the tax headwind. Based on the expected timing of some expense items such as COVID-19 costs and brand marketing investments as well as a low tax rate in the first half of last year, we expect our earnings growth to be weighted to the second half of the year.

Our first quarter performance was a strong start to the year, and we are optimistic for the balance of the year, though we recognize we are lapping a very strong earnings performance in the second quarter of 2020 while also making investments to drive growth in 2021.

In summary, we are projecting strong underlying base business performance and growth from acquisitions in our 2021 outlook, with earnings growth partially offset by incremental COVID-19 costs, the ERP investments as well as a higher projected effective tax rate.

I'd like to now turn it back to Lawrence for some additional remarks before we move to your questions.

Lawrence E. Kurzius -- Chairman, President and Chief Executive Officer

Thank you, Mike.

Now that Mike has shared our financial results and outlook in more detail, I would like to recap the key takeaways, as seen on slide 34. Our first quarter results, with double-digit sales, adjusted operating income and earnings growth bode an outstanding start to the year and bolster our confidence in a stronger 2021 outlook. We have a strong foundation and a balanced portfolio, which drives consistency in our performance. We are confident the sustainability of higher at-home consumption will persist beyond the pandemic and we are well positioned to capitalize on accelerating consumer trends as well as prepared for away from home consumption recovery. Cholula and FONA have both started the year with strong momentum in results. Our enthusiasm for these acquisitions and our confidence that we will deliver on our plan has only strengthened over the last few months. Our fundamentals, momentum and growth outlook are stronger than ever. Our 2021 outlook reflects another year of differentiated growth and performance while also making investments for the future. We are confident we will continue on our growth trajectory in 2021 and beyond.

Now let's turn to your questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from the line of Andrew Lazar with Barclays. Please proceed with your questions.

Andrew Lazar -- Barclays -- Analyst

Hi, good morning, everybody.

Lawrence E. Kurzius -- Chairman, President and Chief Executive Officer

Good morning, Andrew.

Mike Smith -- Executive Vice President and Chief Financial Officer

Good morning.

Andrew Lazar -- Barclays -- Analyst

Hi there. I guess, first off, sounds like you are making, as expected, good progress on getting many of those suspended items and SKUs back on the shelf as your capacity comes on stream. It sounds like there is still some more to go as you move through the year, I guess particularly in 2Q. Is there any way you can maybe dimensionalize that a bit on how significant that refill might be in 2Q, even if it's like versus the magnitude of what you saw in 1Q, just to try and put some context around it? And have you had any challenges in getting some of those suspended items back on the shelf at all? Because I know that in Europe you mentioned you had actually benefited from incremental shelf placement at the expense of some competitors that had some capacity issues. I didn't know if the reverse had been an issue for you here. And then I've just got a follow-up.

Lawrence E. Kurzius -- Chairman, President and Chief Executive Officer

Sure, Andrew. Well, as we've gone through the COVID crisis in 2020, we undershipped consumption every quarter because we were not able to keep up with the extended elevated levels demand overall, and in order to keep our best selling items or core items and in particular as we got to the holiday items we did suspend a substantial number of items. And as we've added capacity, we've been steadily restoring them as we've gone through this -- this first quarter of this year. And I'd say that right now, we probably are around the halfway point in terms of getting items back on the shelf. But you or anyone on this call and certainly my friends and family who hecker me about this endlessly can walk into any store and find that there are a lot of holes on the shelf and a lot of our products that are not yet in full distribution and even within a given account the store by store situation, it might be different. There is a -- there is a supply chain aspect to it, there is a retail work aspect to getting on the shelf. And I think that this is going to be a steady rebuild as we go through the rest of the year. We've made a good start on it in Q1, but we have quite a long way to go. And I would hesitate to get overly precise about it. I would expect to see the shelf getting restored as we go through the year.

I think one of the big variables for us, Andrew, is just the strength of the consumer demand. Consumer demand has been higher than we originally planned. So we're actually not as far along in our restoration plans as we would have hoped. That's because as fast as we supply the market, consumers are pulling the product through. But I do think that it's hard -- I'd say it's hard for us to dimensionalize. I will emphasize it's an Americas problem. Most of the world we are shipping to, consumption in our supply chain is well caught up or service levels are solid. It's in the Americas where we've got some catching up to do. And in most categories here in the Americas, we're also shipping to consumption as well. It's primarily herbs and spices and our recipe mixes, particularly. I think you're going to see a big change in the TDP as we go through the coming weeks. And I think -- I'm sure we've hit bottom on that and have already turned the quarter just because of the restoration efforts there.

Mike Smith -- Executive Vice President and Chief Financial Officer

I think I'll just add to that too. We're being a little bit -- we're optimistic but prudent. I mean, the second quarter of last year, as you remember, we grew total consumer sales 28%; 36% in the Americas. So it's a tough comp as we look forward, but we're optimistic.

Andrew Lazar -- Barclays -- Analyst

Okay. Understood. And thank you for the TDP comment. That leads into just a quick follow-up, which is, where do you -- what's your best guess at where TDPs might end up like once we get to a steady state, let's say, versus 2019. I'm assuming they will be down a bit just as you have come through this and maybe in a more efficient shelf going forward even though I know they probably reached obviously more depth during the actual pandemic and then as you recover. But would you expect TDPs to be down maybe a couple of percent going forward as sort of steady state...

Lawrence E. Kurzius -- Chairman, President and Chief Executive Officer

Yes, that's a very astute observation. As we've gone through this, we've not only suspended SKUs, but we've also rationalized SKUs and we've eliminated a couple of hundred SKUs that were slower moving. The items that we have now are much higher velocity on average. We're also continuing the aisle reinvention program and setting store shelves. In spite of the COVID situation last year and all of the restrictions ramp working itself, we were able to reset over 5,000 stores. We expect at least that many this year. And we're definitely getting a lift from that, and at the same time, it does reduce the SKU count, so it's an efficient set.

Andrew Lazar -- Barclays -- Analyst

Great. Thank you very much, everybody.

Operator

Our next question is from the line of Ken Goldman with JPMorgan. Please proceed with your question.

Ken Goldman -- JPMorgan -- Analyst

Hi, thank you. You have a unique perspective because you see broadly across so many retail and foodservice categories. I'm curious, in the US, restaurant sales, they're doing better, right. Americans are traveling much more. But at the same time, we're seeing overall food at home takeaway really remains strong and I think probably better than what some may have expected. Obviously down on a weekly basis, but still better on a two-year. So I'm just curious, are you surprised and how do you reconcile the improved foodservice sales that we're seeing across the entire industry with what I would consider still impressive at home trends? I never want to bet against the simplest explanation which is that Americans are just eating more. But I think the total implied increase in food numbers is notable. I'm just curious for your thoughts there.

Lawrence E. Kurzius -- Chairman, President and Chief Executive Officer

Great. Hey, Ken, thanks. And by the way, you won the award for the best headline on your screen. That was awesome.

Ken Goldman -- JPMorgan -- Analyst

All the shorts are mad at me for overstating it. So it works both ways.

Lawrence E. Kurzius -- Chairman, President and Chief Executive Officer

Okay. Well, I would tell first of all, the food-at-home consumption really is strong. I mean, we're seeing that ourselves in our business, of course, and also in our Flavor Solutions business where other CPG companies are our customers and we see -- we're seeing a lot of strength there. I think on restaurant, it's actually a mixed bag. The quick service restaurants are doing well. I think during the first quarter, there were a lot of -- because everyone thinks about the state we're in today, but think about December and January. There were a lot of new lockdowns that were put in place, restrictions that had been lifted were reinstated. So I'd say that the branded foodservice side that of the restaurant customers might be off to a little bit slower start to the year than everyone maybe thinking. I do think there is a lot of optimism among restaurant operators as we go into -- into second quarter and as the vaccination rates go up and many of these restrictions are lifted. And I think that that group will come back -- come back stronger. But certainly for the beginning of the year, they're off to a little bit slower start.

Ken Goldman -- JPMorgan -- Analyst

Okay. Thank you. And I know we're running a little long but I wanted to sneak one more in, which is, it's always dangerous to ask about math on earnings calls but back of the envelope, it seems you're implying now that for the last nine months of the year, right, 2Q through 4Q, organic sales growth is actually going to be a little bit less than what you anticipated a few months ago, and I'm just basing this on some of your guidance items. So is it fair to say that the first quarter overshipment was so strong that it maybe pulled forward some of your expected shipments ahead or am I really parsing that info too finely and you're not really making any implied changes to that?

Lawrence E. Kurzius -- Chairman, President and Chief Executive Officer

Yeah, I know. It's our intent was to reflect the sales growth overdelivery that we got in the first quarter but which was -- which was high. But we really did not change our outlook for the rest of the year...

Mike Smith -- Executive Vice President and Chief Financial Officer

Year to go, for the total constant organic as we call it is basically the same, plus or minus 1% for the year. So we caught our base off the range of 2.5% to 4%, up 1%. But you're right, year-to-go is basically what we've said before. We haven't called it down. I know and as you and others -- the two-year CAGR was really an impressive part that as we start measuring that I'm looking at lapping things. So those are actually above our organic growth guidance long-term that we're seeing now.

Ken Goldman -- JPMorgan -- Analyst

Got it.

Lawrence E. Kurzius -- Chairman, President and Chief Executive Officer

And it is during the first quarter. So we're trying to be both -- express our optimism because, I mean, the business is very strong, but also be a bit prudent...

Mike Smith -- Executive Vice President and Chief Financial Officer

We're lapping a big second quarter.

Lawrence E. Kurzius -- Chairman, President and Chief Executive Officer

We're lapping a big second quarter.

Ken Goldman -- JPMorgan -- Analyst

Understood. Thank you.

Operator

Our next question is from the line of Robert Moskow with Credit Suisse. Please proceed with your question.

Robert Moskow -- Credit Suisse -- Analyst

All right. Thank you.

Lawrence E. Kurzius -- Chairman, President and Chief Executive Officer

Hi Robert.

Robert Moskow -- Credit Suisse -- Analyst

Hi, good morning. I don't think you are in the practice of giving us your COVID costs, but I was wondering if they now need to be higher this year than expected because you need to rely on third parties more than you thought. And if you can maybe compare that to 2020. I'm also wondering if I could look at second quarter in a different way. I know the year-over-year is difficult to look at, but sequentially you typically have higher sales in 2Q than you have in 1Q and higher first -- and higher profit, but I think consensus is assuming that that won't happen. So, I know you've given us first half, second half guidance, but I'm wondering for a little more clarity on how 2Q compares to 1Q maybe sequentially. Thanks.

Mike Smith -- Executive Vice President and Chief Financial Officer

Yeah, this is Mike. On the COVID cost, we said previously, and we haven't changed from that -- we spent about $50 million last year, and we're going to spend about $60 million this year, so up about $10 million. Now, the timing of that's a little different. It's going to be first half heavily weighted in 2021. A lot of that's the co-man costs we called out before. Kind of leading to your second question. Co-man was coming in the first quarter wasn't a full impact of the co-man costs as we ramped things up. So really the second quarter is where kind of every month, we'll have the full co-man costs. That's a little bit of the headwind in the second quarter. We talked about the first quarter, our consumer A&P was up around 17%. We're going to have another investment of A&P in the second quarter to drive sales as we said to -- again, that's part of the first half-second half story. So I think Q2 has a bit of a headwind from an expense perspective in a COVID and A&P cost perspective. And also the tax rates, they're going down to the EPS line.

Robert Moskow -- Credit Suisse -- Analyst

Okay. I'll leave it there. Thank you very much.

Mike Smith -- Executive Vice President and Chief Financial Officer

I'd say, maybe to summarize this. We've talked about the year being a first half-second half story. Within the first half, there was a first quarter and a second quarter story, think of it that way.

Robert Moskow -- Credit Suisse -- Analyst

Yeah. And again first half EPS still up versus year ago?

Mike Smith -- Executive Vice President and Chief Financial Officer

Yes.

Robert Moskow -- Credit Suisse -- Analyst

Okay. Great. Thanks a lot.

Operator

Next question is from the line of Alexia Howard with Bernstein. Please proceed with your question.

Alexia Howard -- Bernstein -- Analyst

Good morning, everyone.

Lawrence E. Kurzius -- Chairman, President and Chief Executive Officer

Good morning, Alexia.

Alexia Howard -- Bernstein -- Analyst

Hi there. So you mentioned commerce briefly in the prepared remarks. Could you give us a little bit more color region by region? You talked about strong double-digit growth, and I'm just wondering how that varies in the various parts of the world. And are you seeing a slowdown in some of those areas at this point as the reopening happens? And then I have a follow-up.

Lawrence E. Kurzius -- Chairman, President and Chief Executive Officer

Sure. Well, first of all, e-commerce is strong everywhere. We talked last year about triple digits, and at the end of the year we said e-commerce total was around -- I think it was 136% increase year-on-year. It's not quite triple-digit but it's -- but it's a very strong double digit increase in the first quarter, again, on top of the strong performance last year. So, I mean, I'd say that that's still pretty explosive growth and we have no disappointment about that. I'd say the omnichannel particularly is very strong. And I don't -- I think that while the numbers may be slightly different region to region, but the trend is the same direction globally.

Alexia Howard -- Bernstein -- Analyst

Great. Thank you very much.

Lawrence E. Kurzius -- Chairman, President and Chief Executive Officer

I think consumers have had a good experience shopping online.

Mike Smith -- Executive Vice President and Chief Financial Officer

I think as a habit, they're going to continue using [Indecipherable] according to some of our consumer research.

Alexia Howard -- Bernstein -- Analyst

Okay. That's very helpful. And then in terms of new product launches, it sounds as though you've obviously got an impressive lineup for 2021. Is your percentage of sales from new products trending upwards? I imagine it was slower last year because of the pandemic. I don't know whether you can quantify exactly what percentage of sales from new products you're anticipating this year and how that compares to maybe where you were a year ago.

Lawrence E. Kurzius -- Chairman, President and Chief Executive Officer

I'll let Mike speak to the numbers if...

Mike Smith -- Executive Vice President and Chief Financial Officer

I think it's a more -- think of it as a more normal year. And in a normal year, we're talking about 7% or 8% of our products introduced in the last three years to make up our sales base. It would have been less last year because of the pandemic, but kind of the strong ramp of new products into 2021, as you've seen that we get back to more than normal longer-term numbers.

Lawrence E. Kurzius -- Chairman, President and Chief Executive Officer

A number of the items that we launched last year we got -- we got less placement on it because of the focus on core items, not just by us but by the retailers. On the other hand, where we did get into distribution, they got an extraordinary amount of trial. So some of the items that we did launch last year are our best performing new items in a while. And we're really treating 2021 as a continuation of the launch year for the [Indecipherable] introduced last year. So it gives us quite a pipeline for this year.

Alexia Howard -- Bernstein -- Analyst

Great. Thank you very much. I'll pass it on.

Operator

Our next question is from the line of Adam Samuelson with Goldman Sachs. Please proceed with your question.

Adam Samuelson -- Goldman Sachs -- Analyst

Yes. Thanks. Good morning, everyone.

Lawrence E. Kurzius -- Chairman, President and Chief Executive Officer

Hi, Adam.

Mike Smith -- Executive Vice President and Chief Financial Officer

Good morning, Adam.

Adam Samuelson -- Goldman Sachs -- Analyst

So I just wanted -- two clarification questions. First, relative to the earnings call in January, the expectations on raw materials and cost inflation were unchanged. Just to be clear just in terms of what you're seeing in terms of freight, packaging, variety of raw material ingredients. Is that something where you've had enough contracted and not exposed to the spot market to insulate you for fiscal '21 or is it just year-over-year aggregate commodity basket really hasn't moved that much because more broadly, it seems...

Mike Smith -- Executive Vice President and Chief Financial Officer

Yeah. This is Mike. I mean, we haven't changed our guidance for the year. So low single digits. Obviously, a lot of commodities in packaging, to your point, is already contracted. And freight is a variable that we've talked about, and one of the reasons we said while we've had really great growth in mix and things like that and the long-term debt optimization, we didn't drop it off through to the bottom line because some pressure from increased inflation for transportation, just like every other company has been seeing recently. And we recognize that in our forecast and our guidance. But we are still low single digits generally.

Adam Samuelson -- Goldman Sachs -- Analyst

All right. That's really helpful. And then the second clarification, just, you talked about overshipping America's consumption growth of 15%, and I'm just trying to make sure in the slides, the Americas volume price mix, or product mix is up 25% -- 24.5%. Is that apples to apples versus the 15% or what's the -- just trying to understand the magnitude of how much you were actually overshipping in the period.

Lawrence E. Kurzius -- Chairman, President and Chief Executive Officer

In the year ago -- this is Lawrence -- in the year ago, in the first quarter of last year, it still seems like a long -- a lifetime ago, in the Americas, actually undershipped consumption in the first quarter a year ago. And so, at the time we said that about 4% impact on the Americas. And so I think you should factor that out. And so the overshipments versus consumption might be a little bit less than it kind of seems. Again, we hope actually to build -- rebuild stocks in the trade more than we did, and the consumption was very strong.

Adam Samuelson -- Goldman Sachs -- Analyst

All right. That's all. That's all really helpful. I'll pass it on. Thank you.

Lawrence E. Kurzius -- Chairman, President and Chief Executive Officer

Okay. Thank you.

Operator

We're nearing the end of our question-and-answer session for today and have time for one additional question, which is coming from the line of Chris Growe with Stifel. Please proceed with your questions.

Chris Growe -- Stifel Nicolaus -- Analyst

Hi, good morning.

Lawrence E. Kurzius -- Chairman, President and Chief Executive Officer

Hey, Chris.

Chris Growe -- Stifel Nicolaus -- Analyst

Hi. I just -- I'll make it quick here. I know we're at the end of this. Real quickly, just to understand, as we think about those third-party co-manufacturing costs and a bit of weight on the gross margin, do those continue all through the year? Just to understand, like are you using third parties just to rebuild inventory and then you kind of shut that down or is this something that will be ongoing in terms of your sort of supply of product in the future?

Mike Smith -- Executive Vice President and Chief Financial Officer

Hey, Chris, it's Mike. One, we're always using co-manufacturers. That's a part of our supply chain. As we've talked about, here we've really stretched some of those strategic co-packers that help us out shorter-term, really focused on the first six months of the year, very volume-dependent. So the way we're thinking now is, again, the second quarter will be the heavier spend. There'll be some probably growth in the third quarter or so, but, and we'll see what volume is too, what consumption continues. That's something we would assess, as we always do. And as our supply chain continues to recover, so that's another variable that could speed it up or slow it down. So those are all considered in our guidance stuff.

Chris Growe -- Stifel Nicolaus -- Analyst

Okay. Thank you. And just a quick one on -- as I think about what's happening in China, you saw double-digit consumption in consumer sales and I think that even excludes the branded foodservice who sells the products you sell as well as a really strong recovery in foodservice. I guess I just want to understand, make sure those numbers are accurate. And then to the degree to which that is somewhat of a predictor of what can happen in the US as we sort of lap the tougher comps on the consumer side with the easy comes in the foodservice side. Are you learning anything from what's happened in China as an indicator for the US?

Lawrence E. Kurzius -- Chairman, President and Chief Executive Officer

Well, I think the interesting thing in China is that even though they are well past that the COVID impact and are very far along in recovery, consumption of food at home remains strong even as foodservice has recovered. I think it's interesting to look around that region also because what we're talking about is the Asia-Pacific region. It's not just China. That's the biggest market there. But markets like Australia, which is also pretty far along in recovery. Even though foodservice has rebounded, it's not back to the same level that it once was. And consumption of food at home has continued to be very strong.

Chris Growe -- Stifel Nicolaus -- Analyst

Okay. Thank you very much.

Lawrence E. Kurzius -- Chairman, President and Chief Executive Officer

It goes to the point we have been making which is that this has been a long-term trend anyway for consumers. Once you cooked more at home and more from scratch [Indecipherable] they do, and the COVID situation reinforced that behavior. It's helped a whole new generation of cooks learn how to cook their family recipes that maybe they relied on mom or grandma or new eating occasions...

Mike Smith -- Executive Vice President and Chief Financial Officer

Like lunch.

Lawrence E. Kurzius -- Chairman, President and Chief Executive Officer

Whole new eating occasions like launch as people work remotely. I think there are a lot of reasons to believe that consumption at home is going to continue to be elevated.

Chris Growe -- Stifel Nicolaus -- Analyst

Okay. Thank you.

Operator

Thank you. I will now turn the floor back to Lawrence Kurzius for closing remarks.

Lawrence E. Kurzius -- Chairman, President and Chief Executive Officer

I'd like to thank everyone for your questions and for participating in today's call. I apologize to those that we didn't get to in the queue. We did have a very long script today. We had a lot of information to get out. McCormick is differentiated by the breadth and reach of our balanced portfolio which has sustainably positioned us for growth. We're very pleased with our outstanding first quarter operating performance which proves the strength of our business model, the value of our products and our capabilities as a company. We expect to drive even further growth as we continue to execute on our long-term growth performance and people strategies, actively respond to changing consumer behavior and capitalize on new opportunities. Our investments provide a new foundation for growth while enhancing our agility and our relevance with consumers and customers which positions us well for continued success and long-term shareholder value creation.

Kasey Jenkins -- Vice President, Investor Relations

Thank you, Lawrence, and thanks to everybody for joining today's call. And again, we apologize to those we did not get, and I would be happy to follow up with you after the call. If there are any further questions from anybody regarding today's information, please feel free to contact me. This concludes this morning's conference call. Thank you very much.

Duration: 73 minutes

Call participants:

Kasey Jenkins -- Vice President, Investor Relations

Lawrence E. Kurzius -- Chairman, President and Chief Executive Officer

Mike Smith -- Executive Vice President and Chief Financial Officer

Andrew Lazar -- Barclays -- Analyst

Ken Goldman -- JPMorgan -- Analyst

Robert Moskow -- Credit Suisse -- Analyst

Alexia Howard -- Bernstein -- Analyst

Adam Samuelson -- Goldman Sachs -- Analyst

Chris Growe -- Stifel Nicolaus -- Analyst

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