Dive Brief:
- McCormick's acquisition agenda plays an integral role in the company's long-term growth plan, though that strategy has changed to adapt to McCormick's increased size, portfolio variety, and presence in developing and emerging markets.
- The company's "broader and bigger" acquisition strategy will include value-added, higher-margin industrial targets, businesses at the intersection of health and flavor, and larger companies that "move the needle" more than smaller "bolt-on" acquisitions do, president and CEO Lawrence Kurzius said during a conference presentation last week.
- Instead of focusing on expansion into new markets, McCormick will concentrate on acquisition targets that increase the company's scale and boost returns in markets where it is established.
Dive Insight:
McCormick has closed 12 acquisitions and joint ventures since 2007, all with "a consistent focus on flavor" that will carry into the future, Kurzius said at the conference. While other companies quickly expand through acquisitions, this can make a company's portfolio and operations unwieldy and continued growth unsustainable. ConAgra is currently making big changes to slim down and overcome such growing pains.
But McCormick is keeping this need for a focused portfolio in mind, which will be especially critical as the seasonings giant enters the industrial ingredients market. McCormick is also watching fast-growing categories that might otherwise chip away at its own sales. Most recently, the company announced its acquisition of Botanical Food Company, an Australian company that manufactures the Garden Gourmet brand of chilled convenient packaged herbs.
Kurzius said he expects continued double-digit sales growth for these "closer-to-fresh" products. Chilled herbs also offer the company access to shelf space along the perimeter of the store, an increasingly highly-trafficked area. When McCormick noticed Garden Gourmet eating away at its market share, Kurzius' solution was simple: "So we just acquired that brand."
McCormick unsuccessfully pursued an acquisition of Premier Foods, a British producer of sweet goods, cooking sauces, flavors and seasonings, and soups with a handful of iconic brands in the region. But Premier felt McCormick's offer undervalued the company. McCormick decided to walk away from the deal rather than "sacrifice our financial discipline" and 80% track record of successful integration while earning a return on past investments, Kurzius said.