Manufacturers vital to McCormick’s industrial sales in 2008

By Jess Halliday

- Last updated on GMT

Related tags: Economics, Marketing, Flavor

McCormick is attributing good results in its industrial ingredients business for 2008 to a strong year with strategic food manufacturers, and a position at the intersection between taste, health and natural ingredients.

The seasonings and flavourings firm, which also has a consumer business, reported sales of $1325.9m for its industrial business for the year ended November 30 2008 – up from $1244.9m the year before.

The business’ operating income was seen to have increased by 6 per cent, excluding the costs of restructuring, to $21.6m. This, the company said, was despite falling sales to the restaurant sector.

Alan Wilson, president and CEO, said in a conference call to discuss the results that the consumer side of the business is growing faster than the industrial side (at a rate of 9 per cent).

However the down side of industrial sales was to restaurants; sales to manufacturers were said to be robust, and something of a counterweight.

“These customers were strengthening their brands with innovation around new taste, and healthy benefits and more natural ingredients,”​ said Wilson, adding that McCormick is “right at the intersection of flavor, convenient, benefits”.

Supportive supplier

The company put a lot of store by its strategic customers, stating that it has supported them throughout the year with innovative products, and “collaboration with them to manage through a period of volatile costs”.

However some higher prices have been necessitated by the higher costs of certain commodities.

Flexibility

Wilson said that the broad base of customers and products provides resiliency in tough economy.

However he also placed great emphasis on the company’s flexibility and adaptability. Since it has just two business segments, both focused on flavor, it is possible to shift funds and resources between the two, depending on opportunities and challenges.

For example, the company is “carefully evaluating its marketing priorities as we head into 2009 to fully support value priced items”.​ In the consumer segment, it is focusing on building up its lower cost, value priced brand and private label offerings.

Given the tough economic environment, McCormick is retaining a focus on sales, manage costs, and optimize cash and assets. “We are curtailing expenses, actively managing working capital and diligently monitoring the credit status of suppliers and customers,”​ Wilson said.

Related topics: Suppliers

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