McCormick on the move with innovation and acquisitions

by Eric Schroeder
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NEW YORK — Growing in the U.S. market, nourishing an active acquisition pipeline, and securing spices and seasonings a place on the food pyramid are among the moves being undertaken by McCormick & Company, Inc. to strengthen the company’s core business, said Alan Wilson, chairman, president and chief executive officer, during the Sanford C. Bernstein Strategic Decisions Conference held May 31 in New York.

Mr. Wilson said McCormick still sees room for growth and distribution opportunities for the company’s core established products.

“We see certain markets in the country where our shares are not what they are nationally, and we see opportunity to build and grow those,” Mr. Wilson said.

But at the same time, he said McCormick must be laser-focused on innovation, especially in established markets, “because if we’re waiting for consumers to just come and replace the cinnamon that they’ve used up, it’s going to be a pretty long purchase cycle.”

“What we want to do is offer (customers) new items that give them a reason to keep coming to the category, and when they do they may remember that they’re running low on cumin and repurchase some of those cycles,” he said. “But it’s a good blend of driving our core platforms, and we do that through recipe, marketing, and helping people find new uses for the products. But we also do it with product innovation so that they have a reason to visit the category.”

Within the U.S. market, the retail environment has been “volatile,” Mr. Wilson said, noting some companies are doing well while others are struggling to build and drive sales.

“I think the companies that are doing really well have found a way to differentiate their offerings either because they have a passion for food and they’re building, or they have a unique price positioning,” he said.
He said those companies trying to be everything to everybody are “getting squeezed.”

McCormick has attempted to develop relationships across multiple channels and with all its customers so it fits their needs, he said. To date, the company has been successful in the dollar channel, mass merchandiser channel and the emerging e-commerce channel, he added.

Looking at the merger and acquisition environment, Mr. Wilson said McCormick has “a very active acquisition pipeline.” He noted some acquisitions take a little longer to bring to closure than others, citing the acquisition of Wuhan Asia-Pacific Condiments Co., Ltd., a privately held Chinese manufacturer of DaQiao and ChuShiLe brand bouillon products, as an example. Mr. Wilson said McCormick worked on the transaction, which closed May 31, for almost five years. The company has set its sights on other moves as well.

“Our thought process on the kinds of targets that we look at in our developed markets are adjacent categories,” he said. “We recognize in the U.S. and in a lot of our developed markets it would be very difficult for us to make an acquisition directly in spices and seasonings. We were able to buy Lawry’s about five years ago. That’s been a great acquisition for us. That also put us into liquid marinades, the leader in liquid marinades. And so as we look at adjacent categories in the sauces and condiments area, we believe that’s really right in our developed markets.

“In our emerging markets we want to focus more along our core platforms of spices and seasonings or recipe mixes and buy a leading brand. Now, we made a decision in India to really focus on distribution channels, and so we acquired 85% of Kohinoor to gain access to those distribution channels. It’s not about being in the rice business, it’s about being able to bring our value-added products like rice mixes to masala mixes in India through that distribution channel, and that’s how we’re building and growing that.”

Also during the conference, Mr. Wilson was asked to weigh in on the prospects of getting spices and seasonings onto the food pyramid.

“It’s not so much that we’re trying to — we’re not advertising health claims or anything like that,” he said. “But by using more spices, which tend to be natural and have positive benefits, you can also eliminate some of the stuff that you should be eating less of, like salts and fats and sugars, which make the products taste great. But we believe spices have a key role in that.”

The U.S. Department of Agriculture on May 31 announced the new members of the 2015 Dietary Guidelines Advisory Committee. Meetings to discuss changes to the guidelines — and potentially the food pyramid — will begin this month.

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