- McCormick & Co reported an overall third-quarter sales increase of 14% to $1.34 billion from the same period a year ago. The majority of the Maryland-based company’s growth was attributed to Consumer segment sales in the Americas, which rose 18% compared to the third quarter of 2017. According to the company, 14% of that sales growth is attributed to its acquisitions of Reckitt Benckiser's food division.
- Operating income was $233 million in the most recent quarter, compared to $169 million in the year-ago period. Much of the increase is due to integration efforts from the Reckitt Benckiser purchase and a 36% increase in brand marketing. Still, earnings per share was $1.30, compared to 85 cents in the year-ago period.
- McCormick adjusted its sales growth and expects a 12% to 14% increase compared to last year — a drop from 13% to 15% earlier this year.
As McCormick passes the one year anniversary mark of its $4.2 billion acquisition of Reckitt Benckiser's food brands, which brought French's mustard and Frank's RedHot brands to the product mix, the former British company's sales are the star of the show. According to the report, the two condiments alone brought 10% sales growth to the company known for its spices and flavorings.
The sales increases of 14% — both in the Consumer segment and the Flavor Solutions segment — are a sign of demand for its products. Most of that demand — in the Consumer segment with its signature red-cap herbs and spices and brands like Lawry's and Zatarain's, and through custom flavors for food and beverage companies in the other segment — is coming from the Americas. McCormick reported flat consumer sales in Europe, the Middle East and Africa, despite an overall 1% increase for the Frank's and French's brands.
Although sales expectations decreased — and may have been the culprit behind a drop in early trading of about 3% — the overall outlook remains rosy.
The American region led overall growth by jumping 18%, compared to a year ago. Similarly, China helped raise third quarter consumer sales in the Asia/Pacific region by 9%. In both cases, the former Reckitt Benckiser brands accounted for much of that increase.
While the Reckitt Benckiser acquisition is proving especially shrewd, it isn't the only place in McCormick's portfolio that is ripe for growth. As the trend toward global flavors increases, the company finds itself ideally positioned to cater to those looking for them — especially in the U.S., which is the No. 2 global market for flavor experimentation.
“All over the world, people desire great tasting foods and drinks with rich, authentic flavor. And we deliver flavor across all markets and through all channels.,” Lawrence E. Kurzius, Chairman, President and CEO, said in the report.
At the same time, consumers are searching for culinary adventures, substituting the sugar and salt in their diets with other seasonings to offer the taste they crave. This trend toward flavorful yet clean home cooking has led to a strong uptick in direct-to-consumer sales of spices and brought McCormick to a sweet spot even as other CPG companies struggle.
Whether McCormick will further expand its presence with another acquisition remains to be seen. However, with a strong cash flow and an unrelenting demand from the market for bold flavor, the possibility remains. In the earnings report, the company announced it "expects to drive sales growth with new products."
As it stands, the company seems ideally positioned to capitalize on the consumer's interest to eat healthier, while at the same time not losing flavor and taste. With its continued keen eye toward on-trend acquisitions and innovation, things are looking hot for the company going into the future.