McCormick 2012 Profit Rises on Increased Pricing, Acquisitions

McCormick & Co.'s 2012 full-year profit and net sales both jumped roughly 9% due to increased pricing based on significant increases in raw and packaging material costs, as well as incremental sales from three acquisitions completed in 2011.

In identifying trends for its spices and herbs, the company also said 30% of its new product briefs for industrial customers had some "healthy attribute." 

McCormick posted full-year net income of $407.8 million, up 9% from $374.2 million a year earlier. Meanwhile, net sales for the year rose 8.6% to $4.01 billion from $3.7 billion a year earlier, beating the company’s long-term objective of 4% to 6%. 

Emerging markets were 14% of the company’s 2012 sales, up from 7% five years ago. The company said it has built up an increasing presence in emerging markets through internal growth initiatives in markets like China and Mexico, where it has increased sales 91% and 78% respectively in the past five years. In 2013, McCormick expects to complete an acquisition in China that will increase its business there by more than 60%. It also has set a goal to reach 20% of sales in emerging markets in 2015. 

Across both the consumer and industrial businesses, new products launched in the past three years accounted for 8% of McCormick's 2012 sales, and by 2015 it expects to move this to at least 10% annually.

Digital marketing, as a percentage of total brand marketing is up three times from just two years ago, according to the company. Also, as consumers spend more time on the internet, McCormick says it's connecting with them throughout the “flavor life cycle,” ranging from recipe ideas to sharing their successes with family and friends. 

As far as new products are concerned, McCormick has set a goal for new products launched in the past three years to exceed 10% of sales by 2015. This compares to a range of 8% to 10% since 2007. In its consumer business, this stepped-up activity is already underway with the launch of about 200 new products in 2011, followed by about 250 in 2012.

McCormick also said its global strategy team has identified local product successes that have global appeal such as recipe inspirations, gourmet recipe mixes and grinders, as well as grilling marinades and seasoning blends. Increasingly, industrial customers are turning to McCormick's foundation in spices and herbs and proprietary development processes, to improve the health profile of their products by using natural ingredients, the company said. More than 30% of its 2012 new product briefs for industrial customers had some healthy attribute, McCormick noted.