McCormick & Company MKC has been benefiting from robust saving initiatives, yielding product launches and lucrative buyouts. These upsides have been boosting investors’ optimism in the Zacks Rank #2 (Buy) stock that has rallied 21.5% year to date. In the said period, the industry registered growth of 15.2%. Let’s discuss the factors that are likely to help this spices and seasonings biggie sustain its growth.
Prospects From CCI Program
McCormick has been focusing on saving costs and enhancing productivity through its Comprehensive Continuous Improvement (CCI) program. Notably, cost savings from CCI continued to boost adjusted operating income in the third quarter of fiscal 2019, with the metric increasing nearly 9% year on year. Moreover, McCormick is expected to generate savings worth $110 million in fiscal 2019, which will be utilized for enhancing margins, sponsoring growth-oriented investments and offsetting high costs.
Buyouts: Key Driver
The company has undertaken prudent acquisitions to widen its brand portfolio. For instance, the buyout of the food division of RB Foods in August 2017 has added iconic brands like Frank's RedHot Hot Sauce and French's Mustard, French's Crispy Vegetables and Cattlemen's BBQ Sauce to its portfolio. These brands have positioned the company to expand its presence in the United States and other international markets.
Some of the other noteworthy acquisitions are Enrico Giotti SpA and Botanical Food Company. Management expects to continue exploring new opportunities via acquisitions, as such moves are integral to long-term growth strategies.
Innovation Strengthens Brand Portfolio
McCormick has a strong brand portfolio and owns more than 250 brands that are sold in the United States and international markets. This apart, the company regularly enhances products through innovation to stay competitive and tap into evolving market for new flavors, spices and herbs. Moreover, the company enjoys strong retail acceptance for its new products, courtesy of a robust brand image that has been driving its performance for a while. In fact, new products are boosting the company’s performance across some key market locations of the company, such as the Americas and Asia-Pacific regions.
Further, McCormick focusses on product launches to boost revenue prospects. In this regard, health and wellness are also driving the innovation agenda. The company is well aligned with consumer demand for flavorful healthy eating and has developed a range of natural as well as organic offerings. Moreover, the company has relaunched the Flavor Real platform to introduce organic, non-GMO and better-for-you products.
All said, we expect McCormick to continue with its growth trajectory.
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