McCormick & Company, Incorporated (MKC - Free Report) is one of the few companies that managed to brave the Food – Miscellaneous industry’s hurdles this year. With its robust strategic endeavors in place, this Zacks Rank #2 (Buy) stock has returned a solid 39.2% year to date, whereas the industry declined close to 20%. Clearly, there are some solid factors that have been backing this provider of spices, seasonings, specialty foods, and also keeping it well positioned for 2019.
Focus on CCI Program
McCormick’s Comprehensive Continuous Improvement (CCI) program has helped the company focus on reducing costs and enhancing productivity. The company has used CCI savings to increase its investments, thereby leading to higher sales and profits. Cost savings through CCI and streamlining actions reached $117 million in fiscal 2017 compared with $$69 million in 2014. Notably, cost savings from CCI aided in expanding the company’s gross and adjusted operating income margins during the third quarter of fiscal 2018. Going ahead, McCormick continues to expect gaining from its savings efforts, which is likely to fuel the company’s overall profits. Progressing along these lines, the company expects to achieve cost savings worth $105 million for fiscal 2018.
Buyouts a Key Driver
McCormick has been making acquisitions to enhance its spices and seasonings portfolio. McCormick’s acquisition of the food division of RB Foods is the largest deal for the company till date. With iconic brands like Frank's RedHot Hot Sauce, French's Mustard and French's Crispy Vegetables, and Cattlemen's BBQ Sauce in its portfolio, RB Foods is likely to continue being an asset for McCormick’s spices portfolio. Encouragingly, the acquisition of Frank’s and French’s brands drove McCormick’s sales by 10% in the third quarter. Management expects such acquisition gains to continue bolstering performance in the forthcoming periods. Earlier, the company made significant acquisitions, like Enrico Giotti SpA and Australia-based Botanical Food Company. These takeovers have also led to augmenting portfolio strength.
Innovation & Solid Marketing
McCormick regularly enhances products through innovation to remain competitive and tap the evolving demand for new flavors, spices and herbs. In fact, newly-added products boosted sales in consumer and flavor solutions segments during the third quarter of fiscal 2018. Also, the company is well aligned with consumer demand for flavorful healthy eating. Evidently, in 2016, the company renovated its core products, with non-GMO labeling on everyday spices and seasonings. Additionally, McCormick continues to improve its brands through increased brand marketing to further drive sales. In fact, since 2011, McCormick has increased its spending on digital marketing to drive brands’ growth.
These upsides have enabled McCormick to witness year-over-year top and bottom-line growth for quite some time now. All said, we expect this major food player to remain a treat to investors in 2019.
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