HUNT VALLEY, MD. — Results from its acquisition of the Frank’s RedHot brand are going well. Now McCormick & Co. is taking the brand into the frozen food aisle by launching Frank’s RedHot frozen chicken wings, said Lawrence E. Kurzius, president and chief executive officer.
“Frank’s RedHot was the secret ingredient used in the original Buffalo wings created in Buffalo, N.Y., in 1964 and earned the title of original Buffalo sauce,” he said in a Sept. 27 earnings call to discuss third-quarter results. “These new items are delicious and convenient products that offer the perfect blend of flavor and heat.”
The launch includes three flavors: Frank’s RedHot original, Buffalo and barbecue.
“The fully cooked antibiotic-free chicken is flavored with a custom blend of McCormick seasonings and marinades made with Frank's RedHot,” Mr. Kurzius said. “Consumer testing has been positive. Retailer acceptance is strong. We are not only excited about this new product line but also the speed at which it was developed from concept to market since we acquired the brand. This is an example of how we've been able to leverage our consumer insights, scale and culinary capabilities to drive growth.”
McCormick & Co. completed its acquisition of Reckitt Benckiser’s food division from Reckitt Benckiser Group in August 2017. The acquisition included the Frank’s RedHot, French’s and Cattlemen’s brands.
McCormick & Co. in the third quarter ended Aug. 31 reported net income of $173.5 million, or $1.32 per share on the common stock, which was up 60% from $108.2 million, or 86c per share, in the third quarter of the previous year. McCormick and Co. recognized $6 million of transaction and integration expenses in operating income related to the RB Foods acquisition versus $30 million in the previous year’s third quarter.
Third-quarter sales jumped 14% to $1,345.3 million when compared with $1,185.2 million in the previous year’s third quarter with the Frank’s RedHot and French’s brands accounting for 10 percentage points of the sales increase. Brand marketing expenditures increased 36%, or $21 million, in the third quarter when compared with the previous year’s third quarter.
Sales in the consumer segment rose 14% to $790.8 million from $696.8 million. Segment operating income rose 10% to $154 million from $140 million. Frank’s RedHot performed well in the segment.
“As of the end of August, we increased our U.S. total distribution points of original and Buffalo sauces by double digits,” Mr. Kurzius said. “Our ‘fix-the-mix’ initiative focused on having the right assortment on shelf continues to be a key driver of this growth.”
French’s contributed, too.
“We are continuing to convince retailers to remove duplicative secondary brands as they work to maximize the efficiency of their shelf space, and more of our recommendations are being implemented, eliminating lower-ranking yellow mustard brands and expanding the share of shelf of French's and store brands,” Mr. Kurzius said. “These efforts, combined with our merchandising and promotion as well as our new mustard marketing campaign, have driven significant sequential improvement from past quarters.”
Sales in the flavor solutions segment rose 9% to $554.5 million from $488.4 million. Segment operating income rose 37% to $88 million from $64.1 million.
McCormick & Co. in the third quarter had incremental sales to about 2,000 new restaurant locations and secured a new partnership with a leading U.S. pizza chain to launch menu items featuring Frank’s RedHot products.
In the nine-month period ended Aug. 31, McCormick & Co. companywide posted net income of $719.4 million, or $5.47 per share on the common stock, which was more than double the $301.7 million, or $2.40 per share, in the same time of the previous year. Nine-month sales rose 17% to $3,909.7 million from $3,343.2 million.
McCormick & Co. adjusted its financial outlook for the entire 2018 fiscal year as the company expects a lower favorable impact from currency rates.
The company now expects to grow sales 12% to 14% compared to 2017, down from its previous estimate of 13% to 15%, as it expects a one-percentage-point favorable impact from currency rates, down from two percentage points. Adjusted operating income is expected to grow 22% to 23%, down from 23% to 25% previously, with the favorable impact of currency rates to slip from 1 percentage point to “minimal.” Adjusted earnings per share should be in the range of $4.95 to $5, up from $4.85 to $4.95 previously, which reflects a reduction of the company’s expected adjusted effective tax rate to about 21% for 2018 due to the year-to-date favorable impact of discrete items. The updated adjusted e.p.s. guidance also reflected a lower favorable impact from currency.