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McCormick (MKC) Looks Solid on Strong Brands & Saving Plans

·3 min read

McCormick & Company MKC is poised to continue gaining from its robust growth strategies. The company is on track with innovations and is benefiting from robust marketing initiatives. Moreover, McCormick’s lucrative acquisitions have been yielding. Apart from these factors, the company’s robust cost-saving efforts bode well.

What’s Driving McCormick’s Growth?

McCormick regularly enhances products through innovation to remain competitive and tap the evolving demand for new flavors, spices and herbs. Aided by a sturdy brand image, the company enjoys strong retail acceptance for its new products. Notably, new products along with advancement in the base business aided its performance during first-quarter fiscal 2020. In fact, new products are supporting the company’s performance across various market locations of the company, such as the EMEA and Americas regions.

Apart from this, the company is well aligned with consumer demand for flavorful healthy eating and has developed a range of natural and organic offerings. In this regard, McCormick’s Flavor Real platform offers organic, non-GMO and gluten free products. Moreover, the company continues to improve brand performances through well-chalked marketing strategies. To this end, management has been raising spending on digital marketing for a while now.

Additionally, the company has strategically increased its presence through acquisitions to grow its spices and seasonings portfolio. The company’s acquisition of the food division of RB Foods (concluded in Aug 2017) is noteworthy. With iconic brands like Frank’s RedHot, French’s and Cattlemen’s, RB Foods is likely to continue being a profitable asset for McCormick’s flavor portfolio. Notably, Frank's RedHot and French's Mustard hold important positions in the company’s condiment portfolio. As a result, these brands position the company in the leading U.S. condiments category and place it well for international expansion.

Moving on, McCormick has been on track with saving costs along with enhancing productivity through its Comprehensive Continuous Improvement (CCI) program since 2099. In fact, the company has used CCI savings to increase investments, thereby leading to higher sales and profits. Notably, McCormick achieved cost-savings of $119 million in fiscal 2019, courtesy of the CCI program.

Wrapping up

We note that, McCormick is exposed to volatile foreign currency translations, as it has a widespread global business and undertakes business expansion efforts frequently. Markedly, adverse currency movements were a drag on McCormick’stop line by 1% during the quarter.

Nonetheless, we believe that the abovementioned upsides will continue to help the company maintain a strong footing in the food space. Notably, shares of this Zacks Rank #3 (Hold) company gained 14% in the past year compared with the industry’s growth of 4.9%.

Some Solid Staple Bets

The Kraft Heinz Company KHC, with a Zacks Rank #2 (Buy), has a long-term earnings growth rate of 6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Campbell Soup Company CPB, with a Zacks Rank #2, has a long-term earnings growth rate of 7.2%.

The J. M. Smucker Company SJM, with a Zacks Rank #2, has a long-term earnings growth rate of 2.2%.

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