McCormick & Company, which manufactures spices, seasoning mixes, and more for a large swath of the food industry, has worked feverishly in recent months to strengthen and diversify its business through strategic acquisitions.
In particular, the company has been placing emphasis on expanding its flavor portfolio. Here’s a closer look at McCormick’s major acquisitions.
McCormick recently acquired FONA International, manufacturer of clean and natural flavors, for $710 million in cash. FONA’s annual sales are approximately $114 million and are expected to grow at a mid-to high-single- digit rate.
“This acquisition also accelerates the strategic migration of our portfolio to more value-added and technically insulated products,” said CEO Lawrence E. Kurzius in a press release. “FONA’s portfolio is highly complementary to McCormick’s and will…meet the growing demand for clean and flavorful eating, drinking and nutrition experiences.”
McCormick anticipates the acquisition will drive long term shareholder value by broadening product offering and accelerating flavor growth. FONA also has a predominately natural portfolio, which will enable McCormick to increase its better-for-you product development.
It’s also worth noting that the transaction will increase McCormick’s net-debt-to-adjusted EBITDA ratio, but the company is committed to a strong investment grade credit rating.
The FONA acquisition comes on the heels of McCormick purchasing hot sauce maker Cholula for $800 million from L Catterton back in November.
Cholula’s annual net sales are about $96 million and are expected to grow in the mid-to-high-single digits in an environment beyond the pandemic, according to McCormick, which believes the acquisition accelerates its growth potential across the condiment platform and widens the product portfolio in the hot sauce category.
The company is betting on spicy foods, such as Cholula, being big in 2021. In its latest Flavor Forecast, it included the category “Spicy (R)evolution.”
Though it concluded in August 2017, McCormick’s acquisition of RB Foods is no doubt significant. Since the company included brands such as Frank’s RedHot, French’s, and Cattlemen’s, RB Foods will most likely continue to be a profitable asset for McCormick’s growing flavor portfolio, according to Zacks.
Frank’s RedHot and French’s Mustard currently hold important positions in McCormick’s condiment lineup. The addition of Cholula and FONA position it in the leading U.S. condiment and flavor categories.