US spices and sauces major McCormick & Co. is to continue to invest in innovation in its efforts to drive volumes.
The Cholula hot sauce maker’s CEO Brendan Foley told analysts yesterday (27 June) that “innovation is a priority” adding it “drives one-third of our long-term algorithm”.
McCormick said innovation, alongside marketing, boosted its consumer-facing business, which saw volumes rise in the second quarter.
“We expect to double that innovation when you compare the second half to the first half,” he said.
“In the first half of the year, our results benefited from new products and packaging, and the performance of these launches continues to improve. Importantly, our pipeline for the remainder of the year remains robust.”
The chief executive noted upcoming innovation plans, such as launching Frank’s Scarlet Buffalo and Mango Habanero in the Americas, as well as Frank’s RedHot Mayo in the UK and France, will “drive a meaningful portion of our volume growth” across both major segments of the portfolio.
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He added: “In addition, in the second half of the year, sales from new products are expected to nearly double compared to the first half, and a meaningful portion of this innovation is in heat. Heat-infused products span our portfolio.”
McCormick’s second quarter resulted in a 1% decline in group sales compared to the year prior, amounting to $1.64bn. It attributed the drop to volume declines in the company’s flavour solutions segment.
However, after listing volume recovery as a key goal following the group’s opening-quarter results, investments in McCormick’s consumer segment “drove substantial sequential volume improvement in the second quarter, leading to volume growth”, according to Foley.
“It is the halfway point in the year, and we do like the progress that we’re making. If I were to add more context and unpack those levers that we’ve been talking about on this call and previous calls, a lot of it is we did ramp up brand marketing in the first half, and it wasn’t just in the first quarter.
“We also saw a significant ramp-up in the second quarter, too. And a lot of that investment was going more against our core categories to drive demand and support our initiatives,” he told analysts.
The group’s consumer segment includes spices, herbs, recipe mixes, condiments, marinades, toppings and salad dressings. The division accounts for 57% of sales, according to McCormick’s website, while the flavour solutions division, containing foodservice-focused products, comprises 43%.
Foley still noted that the company will “continue to take a cautious view on our outlook”, which it reiterated for the full-year results.
“When I think about broadly… just the overall consumer outlook, it hasn’t really changed a lot since our last guidance or even on our last call. We’re pretty confident in our initiatives, and we think they’re working. But our outlook assumes the consumer is kind of where they are or they have been like in the fourth quarter of 2023, in the first half of 2024.”
McCormick’s operating income increased in the second quarter to $234.1m, compared to $221.8m a year ago. Net profit jumped from $152.1m to $184.2m.
