The Prudent Investor


How McCormick & Co. Makes Their Money
April 19, 2007, 7:02 am
Filed under: Consumer Goods

I will now begin looking at the small companies in line for consideration. At about $5 billion Market capitalization, McCormick & Company is not really small, but seems to be when compared to the previous three companies.

McCormick & Co. is the world’s largest spice company, with operations in the manufacture, marketing and distribution of spices, seasonings, flavorings and other specialty food products.

The company is divided into two segments, consumer products and industrial products. The consumer segment accounts for 57% of sales and 79% of operating profits, and sells spices, herbs, extracts, seasoning blends, sauces, marinades and specialty foods to the consumer food market. The industrial segment contributes 43% to sales and 21% to operating profits, selling seasoning blends, natural spices and herbs, wet flavors, coating systems and compound flavors to food manufacturers and the food service industry.

This company, like Unilever, is under transition, but unlike Unilever, is expected to complete restructuring next year. Among other things, the plan is to consolidate global manufacturing, improve its go-to-market strategy, and eliminate administrative redundancies. Last year it realized $10 million in savings and expects to triple that this year, so it appears that the direction is working.

Of note last year was its purchase of the assets of Epicurean International (Simply Asia Foods), which will allow it to more effectively market the Asian population. An effort to revitalize their brand spices and seasonings to include new products and packaging improve the bottom line, as it affects a third of their consumer sales.

Increased earnings and profit margins give me hope that this company will have a bright future, and will remain in consideration for addition to the portfolio.

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