McCormick expands Asian business with new acquisition

By staff reporter

- Last updated on GMT

Related tags: Flavor, Compound annual growth rate

Leading spice firm McCormick continues in its strategy to expand
its business into areas of strong growth potential, announcing last
week that it is to acquire an Asian food company.

The acquisition of Epicurean International, which is subject to customary closing conditions, is expected to have an immediate impact on the company's earnings.

The business currently brings in around $50m per year in sales, with a compound annual growth rate of 32 percent since 2002. McCormick said it is to purchase the independently owned company for $97m.

Epicurean International currently develops, imports and markets a line of Asian food products under the Thai Kitchen and Simply Asia brands. Its primary products include noodle soup and bowls, meal kits and coconut milk.

"A key avenue for growth at McCormick is the acquisition of leading value-added brands in high growth categories. We seek acquisitions that complement our established leadership in the development and marketing of flavors for food, with particular interest in specialty and ethnic food businesses,"​ said the company's chairman, president and chief executive officer Robert Lawless.

"The acquisition of the Epicurean International assets fits squarely within this strategy. The management and employees of this business have built a rapidly growing line of on-trend, high-quality products. We look forward to working with this team to further expand the in-store penetration and consumer awareness of these products both in the US and in certain international markets,"​ he added.

McCormick also recently announced that it is to acquire the remaining 49 percent of Dessert Products International (DPI). It had acquired a 51 percent stake in DPI as part of its acquisition of condiments firm Ducros almost six years ago. Since that time, the company claims to have increased sales and net income by over 50 percent, through innovation in new products and expanded distribution.

The leading spice, seasoning and flavor company recently embarked on a three year restructuring plan in an effort to improve sales and profit margins.

This involves reducing its number of business customers in the US by around 25 percent, while also eliminating one quarter of its products. However, McCormick said sales related to these customers and products represent only 2 to 5 percent of industrial business sales in the US, and claims the reduction will ultimately lead to higher margins.

"We have realized that we can better create value by rationalizing our business and driving our products through fewer customers, which will generate better margins,"​ said Lawless in a statement.

"During the next three years, we will eliminate underperforming products and customers, reallocate resources to strategic customers, lower costs and leverage our systems and capabilities. These steps will lead to more consistent sales growth and profit contribution from our industrial business,"​ he added.

By 2008, the company said it aims to consolidate its global manufacturing, rationalize its distribution facilities, improve its go-to-market strategy and eliminate administrative redundancies.

It will also increase prices on lower-volume products to meet new margin targets. The restructuring plan, which is expected to carry costs of around $130-$150 million, will also result in the loss of 800- 1,000 jobs globally.

McCormick said it expects the restructuring plan will "reduce complexity and increase the organizational focus on growth opportunities"​ in both its consumer and industrial businesses.

It also aims to achieve $50 million of cost savings by 2008, which it says will drive margin expansion and fund initiatives to grow sales.

Related topics: Flavours and colours

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