McCormick & Co. beats Q3 expectations thanks partly to favorable trends, strong digital presence
The company’s financial success comes from strong top and bottom line performance, McCormick Chairman, President and CEO Lawrence Kurzius told financial analysts during a call Oct. 1.
Specifically, he noted that on the top line third quarter sales increased 1% from a year ago, led by higher volume and product mix in the company’s Consumer segment. At the bottom line, earnings per share rose a whopping 14% to $1.46 in the third quarter compared to the same time last year.
This growth was driven in part by strong performance in the Consumer Business segment, which saw sales grow 3% to $794.2 million thanks to product innovation, enhanced distribution and robust marketing, according to Kurzius.
In terms of product innovation, he noted that McCormick US branded spices and seasonings grew in line with the category and saw “double-digit growth in unmeasured channels.” In particular, he called out the success of the company’s branded dry recipe mixes and new products, including One Dish and Street Tacos dry recipe mixes, as well as co-branded products, such as Zatarain’s frozen entrée bowls.
The company also continues to “accelerate our condiment leadership” with its Stubb’s barbecue outpacing the category and Frank’s hot sauce reaching record high household penetration and strong distribution gains, Kurzius said.
Strong digital presence lifted marketing success
On the marketing side, McCormick’s digital performance – both ecommerce and advertising – also contributed to the company’s overall growth across all regions, and exemplifies why industry experts have called on brands both young and established to step up their online game.
In McCormick’s case, its ecommerce business grew double-digits in the third quarter – evidence that the companies “investments in content development, resources to support acceleration, as well as programs and items tailored to the ecommerce channel are paying off,” said Kurzius.
He added, “our digital presence includes not only ecommerce, but advertising as well, which is beating the ROI norms and consumer products.”
Kurzius also noted that investors need not just take the company’s word for claims about its digital prowess. Rather, he pointed out, “our digital leadership was again recognized in 2019 by Gartner L2 research” as “number one on their Digital IQ Index for food released in late August, and the only food brand to earn the title of genius, their top distinction.”
McCormick’s marketing game is also strong in real life as illustrated by the significant buzz it created on National Mustard Day when it created a limited batch of mustard flavored ice cream in a campaign that generated over 1 billion impressions.
“The campaign earned 15 times more media value than our actual investment,” Kurzius said, adding, “We’re making brand marketing investments like this across our entire portfolio, and their effectiveness was particularly evident in our third quarter consumption and sales growth.”
Based on these and other successes, McCormick expects strong performance from the remainder of the year – prompting it to narrow its guidance for the full year. It now expects sales to increase 1% to 2% to its previous statement of 1% to 3%, and adjust earnings per share for fiscal 2019 to be between $5.30 to $5.35 per share, up from previous estimates of $5.20-$5.30 per share.
