Key Statistics
EV/EBIT = 29.04x
ROE = 15.46%
Debt/Equity = 117%
FCF Yield = 1.69%
Dividend Yield = 1.77%
Market Capitalization = $22.47 billion
The Company
McCormick is the flavor company that likely flavors & seasons much of the food that you eat.
If you are human and eat food, then you likely consume McCormick products on a regular basis.
They are the global leader in flavor: spices, seasoning mixes, condiments. In fact, they presently control 20% of the market which is 4x their next biggest competitor.
McCormick’s history traces back to the 19th century. It was founded in 1889 selling products such a flavor extracts and fruit syrups. A few years later, they entered the spice industry.
A key moment for McCormick was when it purchased A. Schilling & Company in 1947. Schilling had a significant nationwide distribution network. This distribution network is what allowed McCormick to penetrate the spice aisles in supermarkets. This occured at a critical moment for the United States in the 1950’s as the middle class was growing. This was also a moment that grocery stores were consolidating and turning away from small local food markets to large supermarkets.
Most people think of this company solely by what they see in the spice aisle at the grocery store. The spice aisle is an excellent business and McCormick is practically the only brand you’ll see in that segment of the grocery store.
While the grocery spice aisle is significant component of this business, the business is much more than that.
McCormick owns many brands throughout the rest of the grocery store. A bulk of these brands have been acquired through acquisitions.
While McCormick expands into other food products, they have been careful to not diverge from the core competency of flavoring. Additionally, McCormick typically pays reasonable prices for these acquisitions.
Some key acquisitions in the last few decades include Old Bay in 1990, Zatarain’s in 2003, Stubb’s in 2015, and Cholula in 2015.
McCormick operates in two segments: 1) Consumer and 2) Flavor Solutions. Consumer represents 62% of net sales and Flavor Solutions represents 38%.
The consumer segment consists of an amazing array of brands. McCormick spices are a part of this. As for everything else, key brands include: French’s, Old Bay, Zatarain’s, Stubb’s, Simply Asia, Frank’s Red Hot, Thai Kitchen, Cholula Hot Sauce, and many others. This is the segment that you likely have the most direct interaction with.
Personally, my kitchen is full of McCormick products from the consumer segment. Your kitchen is likely full of McCormick products, as well. I currently have some French’s spicy brown mustard, Zatarain’s rice, and Stubb’s barbeque sauce. I have a spice cabinet full of McCormick seasonings. I have a bunch of chili seasoning in storage so I’m ready to go whenever I want to make a crock pot of chili on a cold day.
There are probably other McCormick products in my house that I’m not even aware of!