McCormick & Company is more than just the flavor of the month. As the world's #1 spice maker, the company offers a tasty assortment of herbs, spices, seasonings, flavorings, sauces, and extracts. McCormick distributes and markets its products under brands including Lawry's, Club House, and McCormick, and ethnic labels Zatarain's, Thai Kitchen, and Simply Asia, as well as regional brands Ducros and Schwartz, and private labels. Its products are sold in some 110 countries to customers spanning the entire food industry, from food retailers to foodservice businesses and industrial food manufacturers. McCormick operates in North America and Europe, and, less so, in South Africa, Central America, and Asia/Pacific.
During 2011 McCormick exceeded its long-term goals, realizing approximately a 10% increase in sales. Results were driven mainly by increased prices in its consumer and industrial businesses (prompted by higher raw and packaging material costs) along with a modest contribution from larger product sales volumes, new product development, and expanded distribution. Earnings, which remained relatively flat, were pressured by the cost of three acquisitions: Kitchen Basics, Kamis, and Kohinoor.
Acquisitions and joint ventures are fundamental to McCormick's strategy to grow sales and earnings. In 2011 McCormick acquired US-based Kitchen Basics for $40 million and Poland-based Kamis for $287 million. Both investments are anticipated to boost consumer business. Kitchen Basics sells its namesake brand of ready-to-serve liquid stocks in North America. Kamis' mustards, spices, and seasonings are sold domestically, where it claims a 45% market share, and throughout Central and Eastern Europe. McCormick is further strengthening Kamis' position by launching new products in other categories, and extending the brand's presence to foodservice businesses. McCormick also expanded into India by purchasing an 85% stake in a joint venture to market the Kohinoor brand for $113 million. Kohinoor Specialty Foods is an established producer of basmati rice and other food goods for Indian consumer markets. And McCormick is looking to secure a foothold in China through its pending purchase of Wuhan Asia-Pacific Condiments Co., Ltd., a privately held company that makes bouillon products under the DaQiao and ChuShiLe brand names. The deal, which is expected to be completed in mid-2013 subject to regulatory approval, is valued at Rmb 900 million (US $141 million).
Meanwhile, McCormick has found success in attracting more customers by annually adding at least 100 new products that cater to evolving consumer preferences. Nearly 10% of its sales are generated by products introduced during the past three years. Among them, McCormick has launched a line of Hispanic seasoning blends along with a stable of some 450 salt-free products to US shoppers. Abroad, it introduced Vahiné brand dessert items in France, and sachets in Australia. McCormick's largest customers are Wal-Mart and PepsiCo, which each account for about 11% of consolidated sales. – less