A year after acquiring condiment brands Frank’s Red Hot and French’s, McCormick & Co. continues to see double-digit year-over-year profit and sales growth.
That growth continued Thursday when McCormick posted third-quarter results, including 14 percent sales growth from the third quarter last year, much of it attributable to the condiment brand acquisitions.
“Just a few weeks ago, we celebrated the one-year anniversary of the Frank’s and French’s brands joining our global flavor portfolio and are thrilled with the impact we have had on these brands,” Lawrence E. Kurzius, McCormick’s chairman, president and CEO, said during Thursday’s call with investors. “We’ve created value, achieved synergy and are achieving results according to our acquisition plan.”
When McCormick acquired the condiments brands, it believed it could leverage a lot of its existing infrastructure and relationships to further those brands. That idea appears to be paying off.
McCormick is on track to deliver $50 million of cost synergies related to the acquisition by 2020, said Mike Smith, the firm’s chief financial officer. That 2020 date is a year earlier than the company had initially planned for when it acquired the brands.
The firm also sees value in extending the condiment brands it acquired. For example, McCormick is now selling Frank’s branded frozen chicken wings, which Kurzius said went from concept to market in less than a year.
Many of these developments are happening on the consumer side for McCormick, where the condiment brands accounted for 10 percentage points of the 14 percent growth. But the firm is also utilizing Frank’s and French’s as part of its flavor solutions segment, which focuses on commercial customers, including restaurants.
Here, McCormick has pushed for more menu-item placements, condiment dispensers and table-top placements. French’s has seen double-digit growth in mustard and ketchup dispensers, Kurzius said.
McCormick may also be yearning for the days of summer because the firm’s grilling items, including French’s and grill seasonings, saw strong growth during the summer. Its Stubbs barbecue sauce brand became the top performing barbecue sauce during the quarter, with double-digit consumption growth, and its Grill Mates seasoning packages saw high-single-digit growth.
A lot of that growth has come from a significant marketing push. The firm’s brand marketing increased 44 percent from the same period last year, to $21 million.
In addition to its sales growth, McCormick also reported profit growth during the last quarter. The firm’s operating income increased to $233 million in the third quarter, compared to $168.7 million in the same quarter last year.
Overall, McCormick posted an adjusted net income of $170 million, up 19.3 percent from last year. This year’s net included a non-recurring payment of $10.3 million due to last year’s tax reform law.
Adjusted earnings per share also increased over last year’s third quarter, from $1.12 per share last year to $1.28 this year, a 14.3 percent growth.
Because of its performance this year, McCormick raised its projection for earnings per share for the 2018 fiscal year. It now expects adjusted earnings per share between $4.95 and $5.00 by the end of 2018. It had been predicting earnings per share of between $4.85 and $4.95.