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McCormick to slow acquisitions after busy 2017

McCormick to slow acquisitions after busy 2017

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A shopper reaches toward a display of McCormick spices and flavorings. (Tim Fadek/Bloomberg News.)
A shopper reaches toward a display of McCormick spices and flavorings. (Tim Fadek/Bloomberg News.)

McCormick & Co. touted the spice maker’s recent acquisitions at the company’s annual shareholder meeting Wednesday, saying last year’s additions will allow it to pursue significant sales growth this year.

The Sparks company will also slow down its acquisition efforts in the near future while it adjusts to the new acquisitions and pays down debt incurred financing the deals, McCormick’s CEO said.

“Right now we’re going to spend this year digesting the acquisition that we did and integrating it fully into our business and driving growth behind the brands that we bought,” said Lawrence E. Kurzius, who also serves as McCormick’s chairman and president. “We took on a fair bit of debt when we acquired that business, and we promised the bondholders and the financial markets that we would pay that debt down and get back to our historic conservative financial metrics.”

McCormick’s biggest acquisition last year was Reckitt Benckiser PLC’s food business, including French’s and Frank’s Red Hot. The brands were acquired for $4.2 billion.

The company also completed in the first month of its 2017 fiscal year its acquisition of Italian flavor manufacturer Enrico Giotti SpA, including its blend of flavored beverages. That acquisition came at a $127 million cost to McCormick.

The acquisitions of brands known primarily for condiments and beverages signaled McCormick’s intention to be known for flavor, not just spices, Kurzius said.

“I think that you’re going to see continued growth of our flavor business beyond traditional herbs and spices,” he said. “That’s a fantastic core business of ours. We’re the leader of herbs and spices and extracts around the world by a very wide margin, but we have to grow beyond that and address the broader flavor opportunities or our potential as a company will not be achieved.”

McCormick wants French’s and Frank’s to be a significant part of the company’s growth plans this year. The company expects to increase sales 13-15 percent over last year.

Pushing the condiment brands into international markets will account for much of the sales growth. French’s and Frank’s currently rank as the top mustard and hot sauce, respectively, in the United States and Canada, but have little presence abroad.

McCormick will put significant marketing resources behind the brands this year. It also plans to push for more inclusion of the condiments on tabletops in restaurants.

Advancing technology

Kurzius told shareholders Wednesday that the company has taken steps to be more innovative and adapt to technology. Two examples seem to back up his point.

Later this year, McCormick will roll out scannable labels for its red-topped spice containers, a grocery story mainstay. These labels will allow consumers to use their smartphone to access product information and recipes.

“This is really new technology. No one else in food actually has it on their labels yet,” Kurzius said. “We’re trying to innovate. You think about spices, well, gosh, they’ve been around for 3,000 years, what could be innovative about it? There’s still plenty.”

The company has also been using artificial intelligence to develop new flavors. Computational creativity technology will allow McCormick to more efficiently discover what flavors consumers want.

Already, early use of the technology has reduced the need for prototypes by 80 percent and accelerated product development time. Those outcomes have improved as the system is used more and its learning grows, Kurzius said.

“We believe this unique technology will provide a significant competitive advantage and usher in a new paradigm of flavor development,” he said.

McCormick also plans on increasing use of e-commerce to sell its products. Last year, sales using those platforms grew 67 percent this year.

New headquarters update

McCormick will begin moving people into the company’s new Hunt Valley headquarters at the end of July, Kurzius said. He anticipates having largely vacated the company’s current space by the end of August.

The company will consolidate more than 900 employees into the new space. The new headquarters aims to be focused toward a younger workforce. Half of the building’s planning committee was made up of millennials to make sure the building was targeted toward them, Kurzius said.

The building will have an official ribbon-cutting and grand opening Oct. 2.

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