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McCormick boosted by marketing push
Sparks-based McCormick & Co. Inc. reported first-quarter sales growth of 6 percent Tuesday after substantially boosting its marketing efforts and emphasizing healthy eating and the company’s gourmet line.
One day ahead of its shareholder meeting, the company reported a profit of $124.6 million in the fiscal quarter ending Feb. 28, an 11 percent increase from the same period one year ago.
Consumer sales were up overall by about 8 percent, but declined 1 percent in the Americas from first-quarter 2013.
Industrial sales grew 4 percent year-over-year, with a 2 percent increase in the Americas.
McCormick’s results beat analysts’ expectations, said Brian Yarbrough, analyst for Edward Jones.
“When you look at the food sector, it’s hard to find companies getting this kind of revenue growth,” he said, calling McCormick’s single-digit increase relatively solid.
Price increases that took effect late in 2013 accounted for 2 percent of all consumer sales growth. This increase had initially caused a lull in sales in the fourth quarter, but Yarbrough said that the negative effects of the price change have subsided.
When McCormick reported its 2013 results, with sales growth of only 3 percent in the year, analysts were disappointed. The company promised to beef up its marketing efforts.
It did so in the first quarter of 2014, dedicating an additional $7 million to brand-marketing support.
That was used to drive core products in the United States, said CEO Alan Wilson, by emphasizing healthy eating and the company’s gourmet line.
“It’s working a little bit faster than they had originally planned,” said Yarbrough. But “they’re not out of the woods yet. They still have work to do.”
The company is also working to develop digital marketing programs, said Wilson. That mode of advertising is particularly effective in the food sector, said Yarbrough.
McCormick also said in the January report that it would be accelerating innovation as a way of addressing its lackluster 2013 results.
It seems to be following through. The company introduced burger seasoning mixes and gluten-free recipe mixes in the U.S., for instance, as well as various other items in the Americas, Europe and the Asia-Pacific region.
Wilson also hinted at new products yet to be announced. They will be discussed in the June earnings call, he said, and will launch in the second half of 2014.
The company reaffirmed its outlook for 2014, with an expectation of 3 to 5 percent sales growth for the year.
McCormick’s stock shot up following the earnings report. It closed at $71.21 Tuesday, an increase of almost 5.5 percent.
