McCormick bets on flavor for growth as food budgets tighten

As financially strained consumers rein in their food budgets, many are turning to spices, condiments and other low-cost flavor solutions to stretch ingredients, elevate everyday meals at home and repurpose leftovers, creating a tailwind for McCormick even as lower spending present a headwind for other food companies across the broader industry.

“The consumer backdrop, particularly in the US, is increasingly challenging. We are managing through uneven category and channel dynamics, which have become more pronounced recently,” McCormick CEO and President Brendan Foley acknowledged earlier this month at Barclays 19^th Annual Global Consumer Conference.

But, he added, while this is leading to volume declines for much of the US food industry, it is creating an opportunity for McCormick, which is seeing growth in several of its core flavor categories.

As “consumers remain under pressure,” they “are making deliberate choices to stretch their budgets. We are seeing behaviors such as using more of what is already in the pantry, making meals from leftovers, and looking for simple, affordable ways to add flavor at home,” he explained.

“These behaviors reinforce the relevance of our portfolio” and “are helping to drive consumption improvement in our core categories” – specifically within herbs, spices and seasonings, and condiments and sauces, including hot sauce, he added.

For example, Foley’s presentation shows shifts in consumer spending are creating “enduring tailwinds” that will help the $18 billion herbs and spices category grow 5% in the next five years – building on a steady 5% 10-year revenue compound annual growth rate.

Likewise, the presentation positioned the $6 billion hot sauce category as “bringing long-term heat” with a 6% 10-year revenue CAGR and 4% long-term outlook that is fueled in part by growing household penetration, which is up 10 percentage points in the US since to 2019 to reach 67.5% of homes.

McCormick is betting that these behaviors will extend well beyond its traditional spices and seasonings business. Its pending combination with Unilever Foods would broaden its exposure to categories including bouillon, mayonnaise and hot sauce, giving the company a larger platform from which to capitalize on consumers’ appetite for affordable, convenient ways to build flavor into everyday meals.

Flavor is necessary, not discretionary

Central to McCormick’s growth proposition is the idea that flavor is not a discretionary indulgence, but rather a relatively inexpensive tool for making basic meals – and leftovers – more appealing.

In addition, Foley argues, flavor is not an “add on” or “finishing” element, but rather a foundational component to building meals.

“In bouillon and other cooking aids, the opportunity is to win bigger in a category that is aligned with meal building, value, convenience and everyday cooking. This is an underappreciated category with durable structural tailwinds,” he said.

“Across emerging and developed markets, consumers face increasing time pressure from urbanization, workforce participation and value-seeking consumption. At the same time, they are still seeking flavorful meals rooted in culinary traditions that require slow-simmered stocks, complex spice bases and labor-intensive preparation,” he explained.

He added: “Bouillon is uniquely positioned to meet that need. It delivers depth of flavor, consistency and time savings. Often for just pennies per serving, it helps consumers build flavor quickly across everyday meals while also helping stretch ingredients in value-conscious environments.”

Unilever’s Knorr can help McCormick deliver against this proposition after the companies combine, thanks to the brand’s strong equity, deep local capabilities and global leadership, Foley said.

Condiments move from the side of plate

McCormick also sees strong potential for condiment growth coming from increased household penetration, younger consumers and expanded usage occasions – not simply more consumption of the same product.

“In condiments and sauces, we see a large and attractive platform, particularly across mayonnaise and hot sauce. Both categories have similar tailwinds, including growing household penetration, especially with younger consumers. Both provide a runway for growth through flavor innovation, new usage occasions, premiumization and broader global expansion,” said Foley.

As fast as hot sauce sales have grown in recent years, McCormick’s forecast suggests mayonnaise could grow faster in the coming years.

The company estimates the mayonnaise category is worth $14 billion and could grow 5% in the next five years, thanks in part to increased household penetration and younger consumers expanding usage occasions.

According to McCormick, 71% of Gen Z consumers use mayonnaise – up 6 percentage points since 2019.

In addition, flavored mayo is outgrowing the category, according to Foley’s presentation.

The combination would also strengthen McCormick’s position in mayonnaise.

Unilever’s “Hellmann’s brand brings global presence, strong brand equity and sustainable growth, and we see further opportunities for more product innovation to continue winning in this category,” Foley said.

Younger consumers’ embrace of flavor promises long-term growth

The appeal of flavor, however, is not limited to consumers looking to make the most of a tight grocery budget. McCormick sees the category benefiting from a broader shift toward experimentation, premiumization and global flavors, particularly among younger consumers who also seek experiences.

“Gen Z, who are our new and future consumers, over-index to flavor. They are leaning into and exploring higher quality, premium global flavors and they are looking to create those restaurant-quality meals at home,” Foley said.

That could give the company opportunities to expand usage beyond traditional seasoning occasions, while also bringing brands such as Maille and Cholula into more households globally following the combination with Unilever Foods.

“Flavor is ubiquitous, yet highly local, shaped by distinct consumer preferences across geographies and markets,” Foley said.

Ultimately, McCormick’s pitch is that flavor can play both sides of the consumer equation: helping households make inexpensive ingredients go further today, while giving them new ways to explore and enjoy food tomorrow.

As Foley put it: “Others compete for calories every day. We flavor them.”