Building on momentum during the fourth quarter of 2015, including a 1% sales increase in the consumer segment to $784.6 million, the company expects to grow sales an additional 4-6% in 2016, the firm’s new CEO Lawrence Kurzius told analysts Jan. 28.
Kurzius will succeed Alan Wilson as CEO effective Feb. 1, according to a previously announced succession plan. Wilson, in turn, will transition to the role of executive chairman.
“One of my conditions for stepping down was to have the company in great shape with strong financial performance and forward momentum,” Wilson said, noting he felt like the company achieved this with strong 2015 results and accomplishments and a “bullish outlook for 2016.”
He also is confidence in the firm’s future because it has a strong pipeline of new products that meet consumers’ evolving demands, in addition to an aggressive brand building campaign that will build on consumers’ awareness of McCormick’s high quality standards.
New products for 2016
About 40% of McCormick’s new products in 2016 will build on the firm’s health and wellness innovation agenda, Kurzius said.
This will include the national rollout in early 2016 of herb grinders, which can help reduce reliance on sodium, he said.
“Other product introductions in the first half of the year include new Grill Mates items, including seasoning blends, marinade recipe mixes and a new line of liquid 30-minute marinade,” he said, adding that the new products will include “gourmet healthy blends, such as citrus, chili and chia.”
McCormick also is plotting the launch of 56 products globally that will tie into its Flavor Forecast trends, including new Zatarain’s seasoned rice mix varieties and convenient portable rice cups.
The company also will “renovate our core business” with the 2016 rollout of Non-GMO labeling for 70% of its US spices, seasonings and extracts, Kurzius said. It also will move forward with a planned transition to 80% organic products within its gourmet line, he added.
McCormick will support the launch of these new products, as well as existing products, by expanding its purity message in the US, its digital programs globally and brand marketing in EMEA with an infusion of $20 million.
This increase in brand marketing builds on a $9 million increase in spending against the brand in the fourth quarter of 2015, Kurzius said.
“That’s pretty substantial,” he noted, adding the campaign will help drive trial of new products and help reconnect with consumers who want healthy, authentic products.
Price adjustments and acquisitions
The cost of the marketing campaign will be slightly offset by price adjustments in the range of 1-2% across the US business, Wilson said.
“We have not taken any pricing action in the US for the last two years while we addressed some of the fundamental challenges in that part of the business,” but “we’ve identified many areas where there are opportunities for us to adjust our pricing,” Wilson said.
He added that the changes are on a product by product basis, with some going up and some going down. As a result, “we’ve gotten really no meaningful push back on it at all,” he said.
The firm added competitors also are raising prices in the same areas due to global sourcing challenges.
Finally, the firm said it will fuel growth in 2016 by continuing to explore potential acquisition targets.