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McCormick foresees flavor innovation in 2010

By Caroline Scott-Thomas , 01-Feb-2010

Seasonings and flavorings firm McCormick has said it is optimistic that food manufacturers will increase product innovation in the year ahead, as it recorded strong 2009 full year results.

The company predicted that innovation among its industrial customers would continue to be primarily driven by food industry efforts to reduce sodium content without sacrificing flavor.

In a conference call with investors, the company’s chairman and CEO Alan Wilson said that although food manufacturers’ innovation activity had slowed during the year, he was “encouraged by an increase in activity in 2010, and our innovation pipeline.”

McCormick said that it expects sales to grow by four to six percent during 2010, and attributed a 41 percent increase in profits in the fourth quarter to better margins, increased sales, and strong performance of the Lawry’s restaurant chain that it acquired in 2008. Profit during Q4 2009 stood at $116.4m, compared to $82.5m in the same period of the previous year.

The company has also taken advantage of increased consumer interest in coupons as a popular way to economize during the recession. Wilson said that coupon redemption rates were up by more than 50 percent in the US.

Looking forward, Wilson added that the company did not intend to carry out further restructuring during 2010, but that it would look to reduce debt and focus on acquisitions.

“Our search for more great acquisitions to fold into our portfolio continues with a focus in Asia,” he said. “Along with further pay down of our debt, acquisitions are our preferred use of cash in 2010.”

McCormick’s sales during the three months ended November 30 2009 grew by two percent overall, to $924.5m, from $906.9m for the same period of the previous year. For the full year, net income was up 17 percent in 2009, rising from $255.8m to $299.8m.

Increased liquidity

The company’s results also showed a marked increase in cash flow from operations, which exceeded $400m for the first time to reach $416m, up from $315m in fiscal 2008. McCormick is not alone in looking to shrink its debts. Other companies, including agricultural foods giant Archer Daniels Midland and natural and organic foods group SunOpta, have also been looking to increase liquidity – the availability of assets that are easily able to be converted to cash – and reduce debts to create a buffer against volatile commodity markets during the recession.

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