- McCormick & Co. purchased natural flavorings provider FONA International for $710 million, the flavor giant said in a statement.
- The acquisition will expand McCormick's reach into categories such as performance nutrition and health and wellness with a predominately natural portfolio — offerings that are in demand with consumers. FONA, with annual sales of about $114 million, is expected to grow at a mid-to high-single-digit rate, McCormick said.
- The purchase of FONA is the second M&A deal by McCormick in the last two months as it broadens its already robust portfolio of flavors, spices, seasonings and condiments. In November, McCormick said it was buying hot-sauce maker Cholula from private equity company L Catterton for $800 million in cash.
McCormick has been one of the hottest companies in the CPG space in recent years with its portfolio of on-trend products.
The 132-year-old Maryland business has offerings tailored to the public's desire to eat better without sacrificing flavor and taste. There also is a growing demand for experimenting with new flavors and cooking more from home, trends that have further accelerated during the pandemic.
As demand for flavor increases, McCormick has been busy growing its product line. While McCormick is best known for spices and other flavorings, it has moved aggressively into condiments in recent years. In 2017, it purchased Reckitt Benckiser's Food Division for $4.2 billion, marking its largest deal to date and adding the iconic French's mustard and Frank's RedHot brands to the fold. Then late last year, it doubled down by acquiring Cholula.
While these and brands such as Old Bay, Zatarain's, Lawry's and its namesake are known to most shoppers, McCormick also has a large presence among food manufacturers and quick-service restaurants. The purchase of FONA is likely to focus mostly on this segment of the business, though McCormick could certainly use the company's technology, manufacturing capabilities and expertise in flavoring health and performance nutrition products to complement its existing portfolio.
Ingredients giant Archer Daniels Midland said last summer that as the pandemic wore on, consumers were becoming more focused on healthy eating — and CPG companies have been working to introduce products to meet this demand as soon as possible.
Beneo, a supplier of functional ingredients, underscored the long-term impact of this push by noting that almost 75% of consumers globally plan to eat and drink healthier as a result of the pandemic. And New Hope found during the quarantine that consumers are spending more time walking, running, biking, doing yoga online or at-home exercise videos.
McCormick has prospered from these shifts even before the coronavirus. But as CPGs reformulate or introduce better-for-you products to meet this growing demand, the company stands to be a major beneficiary of the trend. FONA should play a meaningful role in helping McCormick when it comes to health and wellness for exercise-minded consumers and those concerned about what they eat.
In addition to acquisitions, McCormick has been innovating internally with its own portfolio. It has added products to appeal to busy people who can't spare a lot of preparation time but still want flavorful home-cooked meals. McCormick has expanded Frank's to the frozen foods space through the introduction of products such as chicken wings, and it has capitalized on millennials' interest in ethnic flavors and home cooking with a range of spice blends. At the same time, it has turned to artificial intelligence to reduce the time it takes to develop a new ingredient by up to 70%.
But the FONA purchase and the other recent acquisition show McCormick will remain on the lookout for more deals to complement the work already ongoing at the company. "Our long-term financial model is to have about a third of our growth come from acquired brands, and leveraging our financial strength to add new brands to the portfolio or new capabilities through acquisition," Lawrence Kurzius, McCormick's CEO, said in 2018. He noted that "every now and then" the company would make a "big" purchase.
McCormick's market recognition and broad portfolio means that if the company does make another deal anytime soon, it's likely to be complementary or aimed at fortifying its market presence.