SPARKS, MD. — McCormick & Co. put up double-digit sales growth numbers in the second quarter thanks to the “early innings” of two recently acquired brands – Frank’s RedHot and French’s. Planned promotional campaigns in the second half of the year are designed to keep sales going strong for the two brands.
Sparks-based McCormick & Co. registered net sales of $1,327.3 million in the quarter ended May 31, which was up 19% from $1,114.3 million in the previous year’s second quarter. Sales from the Frank’s RedHot and French’s brands added 13% to the increase. Net income of $123.3 million, or 94c per share on the common stock, was up 23% from $100 million, or 80c per share, in the previous year’s second quarter.
“We are really in the early innings of the improvement in distribution on French’s and Frank’s,” said Lawrence E. Kurzius, chairman, president and chief executive officer, in a June 28 earnings call. “They were tremendously 'under-s.k.u.ed' and under-shelved, and the progress that we’ve made, while it is meaningful and we’re going to see (that) in the numbers in the second half, there’s a lot more to be had there.”
McCormick & Co. completed its acquisition of Reckitt Benckiser’s food division from Reckitt Benckiser Group in August 2017. The acquisition included the Frank’s RedHot, French’s and Cattlemen’s brands. McCormick & Co. provides more category management capability for the brands than their previous owner, Mr. Kurzius said.
“In their core categories, they’ve got tremendous capability, but this was not one of their core categories,” he said of Reckitt Benckiser. “They regarded this as an off-strategy business, and so it didn’t get the resources that other brands in that company got.”
McCormick & Co. in the third quarter will launch the first dedicated mustard campaign for French’s in the United States in three years, Mr. Kurzius said. McCormick & Co.’s culinary team also has created 100 new recipes that feature mustard. The company will promote the recipes through digital platforms, including 15 how-to videos.
“We are seeing success in our initial category management efforts,” Mr. Kurzius said. “We are convincing retailers to remove duplicative secondary (mustard) brands as they work to maximize the efficiency of their shelf space. Our analyses have been well received, and retailers, including several large ones, are beginning to implement our recommendations, eliminating lower-ranking yellow mustard brands and expanding the share of shelf for French’s and their store brand.”
A U.S. national television ad for Frank’s RedHot will run in the United States for the first time in seven years, he said. Frank’s RedHot in the second quarter benefited from a “fix-the-mix” initiative that focused on having the right assortment of flavors on shelf to drive velocity. The original RedHot variety gained U.S. total distribution points by 7% in the quarter while the Buffalo variety gained by 12%. Frank’s RedHot is making regional gains in the United States as well. Total distribution points increased by 8% in the West and by 7% in the mid-South, he said.
Sales in McCormick & Co.’s consumer segment grew by 20% in the second quarter to $785.4 million from $656.4 million. Operating income of $131.1 million was up 44% from $91.3 million. Sales in the flavor solutions segment grew by 18% to $541.9 million from $457.9 million. Operating income of $76.8 million was up 67% from $46 million.
In the six months ended May 31, McCormick & Co. generated net income of $545.9 million, or $4.16 per share on the common stock, which nearly tripled net income of $193.5 million, or $1.55 per share, over the same time last year. Six-month net sales increased 19% to $2,564.4 million from $2,158 million.