MCCORMICK & COMPANY 2004 ANNUAL REPORT 2004 highlights > Launched new products during the last 3 years that accounted for 22% of 2004 sales. > In the U.S., increased sales of coating systems by more than 30%. Directed primarily to the quick service restaurant industry, our flavorful products drove sales for key customers. > Doubled the sales of new products measured per each research and development professional in the past 5 years. Tripled cost savings per research and development professional in the past 3 years. > By focusing on more profitable items, reduced SKUs (number of items sold) in the European market from more than 3,250 in 2003 to less than 2,750 in 2004. In 2005, we will streamline our business to fewer than 2,000 individual products in Europe.  McCormick has the broadest range of flavor solutions in the industry. While there are many industrial competitors, most market only one or two of these five categories. And as a lead- ing supplier to food service distributors and warehouse clubs, McCormick is well-positioned to grow with these customers.  For all customers, new products are an essential element of growth. Our multifunctional sales teams work with customers to develop leading products that become marketplace winners.  We develop  flavorful coating  systems for quick service restaurants. In 2004, U.S. sales of coating systems grew by more than 30%. Spending for research and development has more than doubled since 1998. Our focus has been on value-added, higher margin products. Together, our development, application, culinary and sensory areas enable us to deliver consumer-preferred flavors. > Grew sales of food service herbs and spices 8% in China, establishing the brand as the product of choice among high-end restaurants and catering outlets.  > Recognized by our customers for innovation, quality products and reliable service. For the tenth consecutive year, Sysco ranked McCormick among its top 100 suppliers. Fewer than 10 other suppliers to Sysco share this honor. Frito-Lay named McCormick its 2003 seasoning and ingredient supplier of the year.  > Completed a formula management system that will provide a running start on new projects and reduce new product cycle time delivery to our customers beginning in 2005. > In the U.S., we are improving the quality of incoming materials through a rigorous vendor management program. This program led to a 36% reduction in incoming material defects during 2004. Our customers  have recognized McCormick for  delivering innovation, quality products and reliable service. Chefs in China are adding flavor with our McCormick brand line of spices and seasonings. We grew sales of these food service  products 8% in 2004.