While many companies in food space are grappling with rising operational costs and stiff competition, McCormick & Company, Incorporated (MKC - Free Report) is among the few that have maintained their appeal to investors. This global leader of flavors and spices has managed to stay afloat on the back of its popular brands. In fact, McCormick’s well-strategized buyouts have boosted brand strength. Let’s take a look at some of the aspects that are driving this Zacks Rank #2 (Buy) company.
Adorning Kitchen Shelves With Popular Brands
Courtesy of popular brands, McCormick has become a cherished name in culinary. A significant chunk of the popularity is attributable to the acquisition of the food division of RB Foods. The deal, which is among the company’s largest, has added iconic brands such as Frank's and French's to the portfolio. These brands command popular products such as Frank's RedHot Sauce and French's Mustard. Indeed, such renowned products have positioned the company in the leading U.S. condiments category.
Encouragingly, the Frank’s and French’s brands drove McCormick’s sales by 10% in the third quarter of fiscal 2018. In fact, the brands boosted sales in the consumer and flavor solutions segments by 10% and 9%, respectively. Going ahead, management is on track with product launches under these banners.
Management expects gains from acquisitions to continue bolstering performance in the forthcoming periods. In the past as well, the company made important acquisitions, which include Italy-based Enrico Giotti SpA (Dec 2016) and Australia-based Botanical Food Company (April 2016). These takeovers have also fortified portfolio strength.
Apart from enhancing brand strength with strategic takeovers, the company has also been resorting to innovation. Notably, innovations enable McCormick to benefit from the evolving demand for new flavors, spices and herbs. Aided by a sturdy brand image, McCormick enjoys strong retail acceptance for new products. In fact, newly-added products boosted sales in the consumer and flavor solutions segments during the third quarter. Health and wellness also continue to drive the innovation agenda.
Further, to ensure brand popularity, the company regularly engages in marketing. In fact, the company has been consistently increasing spending on digital marketing. McCormick expects such moves to aid connecting with consumers in a more personalized manner and drive awareness for new products.
Buoyed by the company’s robust brand development strategies and savings from the comprehensive Continuous Improvement (CCI) program, McCormick flaunts a stellar top- and bottom-line growth record. Clearly, the company’s impressive performance is a treat for investors, as its shares have rallied 34.6% in a year, against the industry’s decline of 2.3%. That said, we expect the company’s yielding growth endeavors to sustain its bullish run in the forthcoming periods.
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