Acquisitions driving sales higher
McCormick’s (MKC) top-line growth has improved significantly over the past two quarters, thanks to incremental sales of its acquired brands, which contributed more than half of this growth. During the last reported quarter, McCormick’s acquired brands, Giotti and RB Foods, added ~2.4% to its overall sales growth of 19%.
Food manufacturers are expanding into fast-growing avenues such as the pet product space and acquiring in-demand brands to revive sales. Recently, J.M. Smucker (SJM) strengthened its pet portfolio with the acquisition of Ainsworth Pet Nutrition. Meanwhile, General Mills (GIS) acquired Blue Buffalo Pet Products. Conagra Brands (CAG), Campbell Soup (CPB), Kellogg (K), and Hershey (HSY) have also acquired in-demand brands to spur sales growth.
McCormick benefits from strength in its base business and incremental sales from acquired brands. McCormick’s innovation-led products, increased demand for spices and seasonings across all channels, expanded distribution, and focus on value-added products further support its sales growth.
Guidance instills confidence
McCormick has remained upbeat and expects its top line to rise 13%–15% year-over-year in fiscal 2018. Acquisitions, primarily RB Foods, are likely to contribute ~8% to overall sales growth, volume and pricing are expected to add ~3%–5%, and currency exchange rates are expected to add 2%.