Acquisitions are key to growth
McCormick’s (MKC) strategic acquisitions have been one of the key components of the company’s sales and margin growth. Acquisitions not only fortify the company’s product portfolio but also improve its product pipeline, which drives future revenues. In 2016, McCormick acquired Gourmet Garden, Cajun Injector, and Giotti, all of which are contributing meaningfully to growth.
The company noted that last year, retail sales of Gourmet Garden rose about 27.0% in the United States (SPY), with household penetration increasing 110 basis points. Brand Aromatics, which the company acquired in 2015, is also demonstrating strong growth, with sales rising in the double digits last year.
McCormick expects its business segments to report strong sales and profitability, driven by a focus on digital marketing and the expansion of new distribution channels, including e-commerce. For example, its new breakfast platform is likely to drive incremental growth.
McCormick holds the lion’s share of the packaged spices and seasonings market. It remains well positioned to drive category growth through its strong portfolio of brands. An innovation-led product pipeline, effective marketing techniques, and robust category management have helped the company increase its household penetration rate in the United States and across global markets.
Management noted that new product launches contributed positively to the company’s sales in fiscal 2016. The contribution of new products to sales rose 40 basis points compared to the prior fiscal year.
Regionally, McCormick is experiencing strong growth in the Asia-Pacific region, mainly China. To further strengthen its business in the region, the company is focusing on investing in the business to increase the market share of its namesake brands. It’s also in the process of completing its new factory in Shanghai, which will beef up its current production capacity. All these measures are expected to boost McCormick’s top-line performance.
In the next part of this series, we’ll look at McCormick’s dividends.