Founded in 1889, McCormick (MKC) is now a global leader in flavor by manufacturing, marketing, and distributing spices, seasoning mixes, condiments, and other flavorful products to food retailers, food manufacturers, and foodservice businesses, highlights Kelley Wright, editor of Investment Quality Trends.
MKC’s major sales, distribution, and production facilities are located in North America, Europe, and China. Additional facilities are based in Australia, India, Central America, Thailand, and South Africa.
MKC’s customers include grocery, mass merchandise, warehouse clubs, and discount and drug stores, as well as e-commerce retailers served directly and indirectly through distributors or wholesalers. In addition to branded products, MKC is also a leading supplier of private label items (i.e., store brands).
Walmart (WMT), MKC’s largest customer, accounted for approximately 12% of consolidated sales in FY 2022. PepsiCo (PEP) is MKC’s second largest customer and accounted for 11% of consolidated sales in FY 2022.
MKC sells products in about 160 countries. They include leading brands such as McCormick, French’s, Frank’s RedHot, Lawry’s Cholula Hot Sauce, Club House, and OLD BAY. MKC also markets authentic regional and ethnic brands such as Zatarain’s, Stubb’s, Thai Kitchen, and Simply Asia.
Consumer staple companies are battling declining volumes as higher prices cause consumers to focus on essentials, which indicates that high inflation and rising interest rates are having an impact. MKC does have a strong balance sheet and generates consistent free cash flow, however, which suggests the dividend, which has been increased 37 consecutive years, is safe.
Recommended Action: Buy MKC.
