McCormick sees food industry innovation efforts picking up

by Keith Nunes
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SPARKS, MD. — Food company innovation efforts are starting to gain momentum, said Alan Wilson, chairman, president and chief executive officer of McCormick & Company, Inc. Mr. Wilson was speaking on April 2 and discussing McCormick’s first-quarter earnings.

In his opening comments, Mr. Wilson said seasoning sales to food manufacturers in the first quarter of fiscal 2013 had been fairly steady “with a solid stream of product innovation.”

“Our current pipeline includes a number of new seasoning blends for salty snacks, crackers and meal preparation kits,” he said. “For the food service industry we saw slowing demand later in 2012 and into the first quarter of 2013, particularly with quick-service restaurants.”

Mr. Wilson implied some food companies slowed their innovation efforts last year as several underwent structural changes and others placed an increased focus on managing costs.

“I think what I have seen from the food manufacturers is, as you well know, a lot of our customers were going through a number of structural changes last year as they changed – as some of the companies are being split, some were going through major restructuring and I think there was more of a focus on managing costs,” Mr. Wilson said. “What I am seeing right now is back to a focus on growth, but a focus on fewer bigger initiatives in innovation.

“So while I am comfortable that we have a good pipeline and expect to see that benefit us, as we talked about, through the second half of the year, there wasn’t the kind of new product activity that we have historically seen early in the year from a number of our customers.

“Now remember, we’re not necessarily a harbinger of what other — all the companies are doing because if we are participating in a new product launch we will benefit from it, they may still be launching stuff that we are not participating in.”

Addressing sales to McCormick’s food service customers, Mr. Wilson said that last year McCormick had started to see some sequential recovery in the food service category, but it went away in the first quarter.

“Consumers that are under stress are certainly experiencing the impact of the increased spike attacks and fuel prices as well as a whole lot of other stresses and they are not spending,” Mr. Wilson said. “Consumers at the higher end seem to be, at least so far, continuing to spend. So I think we are seeing a little bit of that play out in our business as well.”

Looking ahead to the rest of the year, Mr. Wilson said he anticipates sales into the food service category will increase.

For the quarter ended Feb. 28, McCormick & Co. had net income of $76 million, equal to 57c per share on the common stock, up 2% from $74.5 million, or 56c per share, in the same quarter a year ago.

Sales for the quarter were $934.4 million, up 3% from $906.7 million a year ago.

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