Dive Brief:
- The CEO of McCormick & Co. said innovation “is a priority” for the spices and flavorings giant as it improves its product volumes.
- In a conference call with analysts last week, Brendan Foley said innovation, along with marketing, contributed to an improvement in product volumes during its most recent quarter and will continue to play a meaningful role in its business going forward. “We expect it to drive strong performance in the second half,” he said. “Our pipeline for the remainder of the year remains robust.”
- Innovation has become a priority for food and beverage companies as they look to attract consumers who have less money to spend amid a multi-year rise in food prices. New products also provide companies with an opportunity to align themselves with trends and increase their ability to retain shoppers.
Dive Insight:
As more innovations from McCormick make their way to store shelves, the Maryland-based company is finding itself in an increasingly stronger position. Innovation will play an even bigger role throughout 2024, with new products expected to double in the second half of its fiscal year compared to the first.
“Everyone is engaged in innovation,” Foley said. “It meaningfully contributed to our results for the first half of 2024, and we expect it to drive strong performance in the second half.”
A large portion of innovation at McCormick is coming in heat, he noted, with the category expected to be “a long-term growth accelerator globally” for the company.
McCormick not only taps into hot with its extensive suite of flavorings, but it also owns a handful of brands that are synonymous with the segment including Cholula and Frank’s RedHot. Last month, Cholula entered the frozen category for the first time with the launch of bowls aimed at busy consumers who want flavor and convenience.
McCormick also pointed to other innovations including Lawry’s new seasoning blends, Flavor Makers blend as well as Frank’s RedHot Dip’N sauce and popular flavors in the squeeze bottle format.
During its second quarter, McCormick said sales declined about 1% from the prior year to $1.64 billion.
But analysts pointed out signs of improvement at the firm. In a research note, Robert Moskow with TD Cowen noted that consumer volume in the Americans during the latest quarter improved sequentially to -0.3% from -2.6%. Moskow noted that McCormick has shipped all of its renovated SKUs and 2/3 are on shelves.
“If McCormick can prove that the hard work it has done to restore its competitiveness in US Spice and Seasonings (corrected price gaps, improved packaging, introduce resonant innovation for Gen Z, and address supply chain inefficiencies), the stock should move higher,” he said.