Public Company
Incorporated: 1915
Employees: 7,500
Sales: $3.34 billion (2010)
Stock Exchanges: New York
Ticker Symbol: MKC
NAICS: 311423 Dried and Dehydrated Food Manufacturing; 311930 Flavoring Syrup and Concentrate Manufacturing; 326122 Plastics Pipe and Pipe Fitting Manufacturing; 326160 Plastics Bottle ManufacturingMcCormick & Company, Inc., is one of the world’s leading producers of spices, seasonings, and flavorings. It led the U.S. market for most of the 20th century and became the largest firm within the spice industry throughout the world.
McCormick operates in two business segments, consumer and industrial. Its main facilities are based in North America and Europe but the company also operates in Mexico, Central America, Australia, China, Singapore, Thailand, and South Africa, and markets in more than 100 countries. Increasingly international, the company reaped 39 percent of revenues outside the United States in 2010.
McCormick owns such leading spice brands as Mc-Cormick and Lawry’s in the United States; Club House in Canada; and Ducros, Schwartz, McCormick, and Silvo in Europe, where it also sells dessert mixes under the Vahiné label. The company also owns Australia’s Aeroplane brand of gelatin. It has expanded into ethnic cuisines through Zatarain’s, El Guapo, Thai Kitchen, and Simply Asia and is the owner of Canada’s Billy Bee brand of honey.
ORIGINS
A 25-year-old Baltimore man named Willoughby M. McCormick founded the company in 1889 when he began making fruit syrups, juices, flavoring extracts, and root beer in his home. McCormick enlisted three young assistants to help with production and with door-todoor sales. Early marketing techniques included the use of the Bee Brand and Silver Medal labels and the adoption of the motto: “Make the Best—Someone Will Buy It.” The company earned a reputation not only for its condiments and other consumables but also for such household and medicinal products as Iron Glue (“Sticks to Everything but the Buyer”) and Uncle Sam’s Nerve and Bone Liniment (“For Man or Beast”).
Within a year the company was profitable enough to move to larger quarters. McCormick added a number of new products at this time, including food colorings, cream of tartar, liver pills, castor oil, talcum powder, witch hazel, blood purifier, cold cream, bay rum, tooth powder, and toilet water. Three years later, after McCormick’s brother, Roberdeau A. McCormick, had joined the business, the company again moved. Soon even more everyday products (bluing compound, ammonia, roach traps, flypaper, and birdseed) were added to the line. By 1894 the company had begun to export overseas.
The following year the corporation was dissolved so that a partnership could be formed between Willoughby and Roberdeau (the two ultimately incorporated in 1903). That year the Clover Brand made its debut. In 1896 the company took a crucial step forward by acquiring Philadelphia-based F. G. Emmett Spice Company and firmly committing itself to the spice industry. Promotions coinciding with this event included the sale of the firstMcCormick cookbook and a novelty premium offer.
At the dawn of the 20th century the company opened an export office in New York City and began shipping its products to and from the East and West Indies, South Africa, Europe, and Central and South America. In 1902 the company acquired a four-story plant and unveiled the Banquet Brand for its line of spices and mustards. Promotions continued apace and McCormick was fast becoming the East Coast leader in its selected fields.
Although in 1904 a great fire in Baltimore destroyed the majority of the company’s assets and records, temporary quarters were quickly established and the company eventually regained its foothold through new product introductions. These included Clover Blossom spices and Banquet teas. The company gained welcome publicity in 1907 at the Virginia Exposition in Jamestown, when it received gold medals for a number of its branded products.
GROWTH, EXPANSION, AND THE CHALLENGE TO SUCCEED
The next two decades were characterized by more rapid growth and the company’s rise to national prominence. In 1910 the company was among the first in the country to introduce gauze-pouch tea bags. That same year Willoughby McCormick was chosen to preside over the newly formed Flavoring Extracts Manufacturing Association, the purpose of which was to ensure uniformity in materials and packaging while elevating the status of regional spice companies. Willoughby’s nephew, Charles P. McCormick, joined the company as a part-time shipping clerk in 1912. Years later, Charles would prove instrumental in resuscitating the business following Willoughby’s death.
By 1920 the company was manufacturing more than 800 products, embracing the national mood of prosperity and optimism. In 1921 it started construction of a new corporate headquarters, a nine-story building, complete with printing plant, analytical lab, machine shop, cafeteria, and railroad siding, overlooking the inner harbor of Baltimore. Five years later McCormick stock was offered to wholesale grocers for the first time. Although the company would not achieve coast-to-coast distribution until after World War II, it hired Scottish bagpipers (the symbol for the company’s Bee Brand) to advertise its products on the streets of large cities across the United States.
Sales reached $5 million in 1928, prompting the company to schedule office openings in Houston and San Francisco within the next few years. However, the stock market crash and the Great Depression placed the company in serious peril by 1930. Willoughby McCormick’s initial response to plummeting sales was to drastically reduce wages. Within two years, he was forced to seek outside capital from New York investors to sustain the company’s operations. McCormick died of a heart attack before accomplishing his mission. It was left to his nephew, 36-year-old Charles P. McCormick, to turn the business around.
NEW BUSINESS PHILOSOPHY
As the new president and chair of a floundering company, the potential for expansion of which was still enormous, Charles instituted a new business philosophy in 1932, which he termed “Multiple Management.” Mc-Cormick’s guiding belief was that a company, whatever its products or services, was nothing without its workforce, and an empowered workforce made for an empowered, efficient, and successful company. He established junior boards of directors to implement this philosophy and to provide regular forums for the exchange of ideas that might ultimately lead the company to become more productive and to seek new directions for growth. A radical departure from established business practices at the time, McCormick’s plan also included a 10 percent increase in general wages and a reduction in weekly hours from 56 to 45.
McCormick’s leadership and his emphasis on employee productivity enabled the company to return to profitability within a year. Pioneering programs in profit sharing and medical benefits were among the company’s rewards to its dedicated employees. The Multiple Management system became ingrained in theMcCormick corporate culture and soon found hundreds of adherents in businesses across the United States, Canada, and Great Britain. McCormick’s unique views and experiences were published in book form in 1938 asMultiple Management (reprinted as The Power of People) and The McCormick System of Management.
Within the first five years under the new McCormick system, some 2,000 separate ideas were generated and implemented by the junior boards. Among the company’s most visible innovations were a spoon-sift top and new metal containers for its spice line. In 1938 a McCormick research team developed a spice fumigation process called “McCorization” that produced the highest-grade spices available without any detectable flavor loss. The early 1940s were distinguished by Mc-Cormick’s undisputed rebirth as the East Coast’s largest seller of spices. It was at this time that the company also began consolidating its product line under the McCormickname and the big “Mc” trademark.
THE POSTWAR ERA
In 1947 McCormick gained coast-to-coast distribution with the acquisition of A. Schilling & Company of San Francisco. A spice, coffee, and extract concern with a history older than that of McCormick, Schilling’s house brand was so popular that it was retained for domestic spice sales west of the Mississippi. “United to Serve the Nation’s Good Taste” became the new corporate slogan. Sales surpassed $25 million during the first full year of consolidation. Because of McCormick’s growing presence overseas, with exports to 44 countries, the company opened the 1950s with another slogan: “From All the World—Known the World Over.”
Acquisitions, joint ventures, and the formation of new subsidiaries became an area of concentration forMcCormick. The company’s early acquisitions included the 1959 purchase of Canada’s largest spice company, Gorman Eckert & Co. (whose name was later changed to Club House Foods); the 1961 purchase of California-based Gilroy Foods, a producer of dehydrated onions, garlic, and other vegetables; the 1962 purchase of Baker Extract Co., a venerable New England competitor; and the 1968 purchase of Tubed Chemicals Corporation, a packer and manufacturer of plastic tubes.
DIVERSIFICATION IN A CHANGING MARKETPLACE
In 1959 McCormick introduced its Gourmet line of spices. Four years later, it modified its spice tins with a plastic duo-flip top and also established the industrial products division to provide custom service for food processors. However, McCormick’s most dynamic move occurred outside the food and spice industry. In 1962, while searching for a 50-acre plot near Baltimore to satisfy its needs for expansion, the company learned of a much larger piece of commercial property whose developers were in financial trouble.
Guided by President John Curlett and Chairperson C. P. McCormick, the company decided to form a real estate company, Maryland Properties, Inc. (later renamed McCormick Properties), to purchase and bring the Greater Baltimore Industrial Park project to completion. Through various leasing arrangements, the subsidiary made money during its first year and soon began acquiring and developing other properties in the Washington, D.C., and Baltimore areas.
From 1973 until 1988, McCormick’s real estate arm operated as an unconsolidated subsidiary. In one of its best years, 1983, it reported a strong profit of $13 million on revenues of $86 million. Three years later, aFinancial World article reported Chairperson Harry Wells’s plans to build the subsidiary, with operating assets of close to $300 million, into a $1 billion operation by 1991. Shortly after that, however, new leadership determined that the company’s long-term health would be best served by a concentrated refocus on its food-and-spice businesses.
Despite the regular introduction of new products, new slogans, new subsidiaries, and new distribution arrangements, McCormick’s core industry had suffered from slowing growth almost since the time of C. P. Mc-Cormick’s death in 1970. Depressed stock values during the late 1970s enhanced the possibility of a takeover and one company, Sandoz Ltd., appeared as if it might become the majority shareholder in McCormick. An immense Swiss chemical and pharmaceutical firm, Sandoz succeeded in acquiring almost 5 percent of McCormick’s nonvoting stock in 1979 at $19 a share. It then offered to buy the remainder of the company for $37 a share. Nearly a year later, McCormick succeeded in buying its shares back, at $28 each, amid wild rumors on Wall Street and roller coaster speculative trading. Sandoz had made a profit and McCormick had recovered its equilibrium, at least for a time.
REORGANIZATION AND REVITALIZATION
In 1982 it was found that for a four-year period, from 1977 to 1980, expense accounting had been delayed in order to satisfy corporate profit goals. Stockholder suits quickly followed. Because of this dereliction, the heretofore-exclusive board of directors then decided to open its doors to outside executives. This change alone was not enough to deflect further setbacks related to profits, however.
During the first half of the 1980s, domestic spice consumption dropped an alarming 20 percent. The company unveiled a new gourmet line of spices in 1985, supported by a massive consumer education campaign and the slogan: “McCormick/Schilling Gourmet. Quite simply, the best spices on earth.” Two years later, the company planned another major rollout with the largest marketing budget in its history to date. Nevertheless, despite its increased attention to marketing, McCormick’s profits and market share were still crumbling at the end of 1986.
The spice company’s modern rebirth came with the ascension of Charles P. McCormick, Jr., grandnephew of the founder, to the positions of president and CEO in 1987. Assisted by then COO Bailey A. Thomas (elected chairperson and CEO in 1993), McCormick sold off the real estate and underperforming food divisions and sunk some $200 million into consumer marketing and product development. The revitalization campaign, known as Project One, involved shelving the traditional red-and-white spice tins in favor of elegantly labeled clear plastic bottles, produced by a corporate subsidiary. Other product rollouts included a line of dehydrated sauce mixes. The company also began fortifying its relations with the industrial and foodservice businesses and by the early 1990s counted at least 80 of the 100 largest U.S. food processors as its clients.
AGGRESSIVE ACQUISITIONS STRATEGY
McCormick’s strategy for future growth included increasing its domestic market share to around 50 percent. The most important step toward meeting this goal involved the implementation of a comprehensive and aggressive acquisitions strategy, including the 1991 purchase of Mojave Foods Corporation and the 1993 acquisition of the Golden Dipt Division of DCA Food Industries. The company’s other primary strategy was to increase its international presence, which it hoped to do through a series of joint ventures and through expansion of its foreign subsidiaries.
Management formed a joint venture with Rudolf Wild GmBH & Co. KG of Heidelberg, Germany, in 1990 and acquired Glentham International Ltd. of Northampton, United Kingdom, in 1992. Acquisitions in 1994 included Grupo Pesa, a Mexican seasoning company; Tuko Oy, a spice company in Finland; Butty of Switzerland, an affiliate of Unilever; and Minipack, a packaging company in Southampton, United Kingdom. In 1995 the company continued its acquisition strategy in Europe, Asia, and India. A restructuring of the entire company was also announced, including staff reductions, plant and departmental consolidations, and a streamlined yet more aggressive marketing campaign. However, Bailey Thomas was not able to see the fruits of his labor. He died unexpectedly of a heart attack in 1994 and was replaced by H. Eugene Blattman as CEO.
As the spice supplier for such expanding global chains as McDonald’s and Burger King, McCormick was also growing in this area. During the late 1990s, the company’s U.S. Consumer Business and Food Service Group reported record revenues, and the formation of a Global Industrial Group signaled management’s commitment to expand its packaging operations around the world.
THE LEADER IN SPICES
Meanwhile, people were using an increasing variety of spices, herbs, extracts, and seasonings in their home cooking and becoming more adventurous when eating out. In 1999 McCormick introduced its “Flavor Forecast” to spotlight trends in food and flavoring. With 1999 sales of $2.0 billion, McCormick was the world’s largest spice company at that time. In 2000 the company acquired leading European spice manufacturer Ducros for $400 million. Headquartered in Paris, Ducros had been part of the Eridania Beghin-Say group, a producer of cooking oils and sugar. Ducros added about $250 million a year to McCormick’s annual revenues.
McCormick bought Zatarain’s, the Louisiana maker of jambalaya and gumbo mixes, from a group led by Citigroup Venture Capital in June 2003. It paid $180 million. Zatarain’s had national distribution and employed 270 people. It had annual revenues approaching $100 million, which McCormick aimed to take it further.McCormick helped pay for the Zatarain’s acquisition by divesting its packaging business to Kerr Group Inc. for $142.5 million.
McCormick Tubed Products Inc. and Setco Inc. together had 1,400 employees and sales of $170 million a year at that time, having suffered a downturn in demand from vitamin and herbal remedy manufacturers. In 2005 Hurricane Katrina shut down the Zatarain’s plant in Gretna, Louisiana, for three days. Also in 2005, McCormickbought a large amount of vanilla beans just before the price dropped. Furthermore, sales were dismal in England and France at that time.
RESTRUCTURING
Robert J. Lawless, chairman, president, and CEO since 1997, led a restructuring that cut 1,000 jobs over three years. In 2006 McCormick closed its 400,000-squarefoot spice plant in Salinas, California. It had operated the facility since moving the Schilling division there from San Francisco in 1967. The closure affected 400 employees, about 5 percent of McCormick’s total workforce. The company was also closing a small condiment plant in Sparks, Maryland, which employed 100 workers. The headquarters and other facilities in the area had 2,000 employees.
The company continued to acquire market-leading niche businesses. In 2006 it bought Epicurean International Inc., a marketer of Thai Kitchen cuisine mixes. The next year it added Thai Kitchen SA, the brand’s European operator. Innovation was another important platform for growth. A constant stream of new products included a line of sauces in microwaveable pouches. Lawless stepped down as president and CEO in early 2008 and retired as board chairman the next year. Alan D. Wilson succeeded him as CEO.
Meanwhile, the acquisitions continued. In February 2008 McCormick acquired Canada’s leading honey business, Billy Bee Honey Products Ltd., for $76.4 million. Billy Bee had annual revenues of about $37 million. In July 2008 McCormick bought the New Jersey-based seasoning mix and marinade brands Lawry’s and Adolph’s from Conopco, Inc., (indirectly owned by Unilever N.V.) for $603.5 million. No plants or employees were included in the deal. This added annual revenues of about $150 million.
THRIVING THROUGH A DOWNTURN
The acquisitions helped boost consumer sales despite the slow economy. The company posted record results in 2008, with sales exceeding $3 billion and net income of $255.8 million. McCormick continued to set record profits in the fiscal year ended November 30, 2009, with net income of $299.8 million on revenues of $3.2 billion. It recorded 38 percent of sales outside the United States.
Although the economic downturn dampened sales in the United States and Europe, McCormick enjoyed strong growth from emerging markets such as China and Mexico. It entered new joint ventures abroad in 2010, partnering with food manufacturer Yildiz Holding in Turkey and acquiring a 26 percent interest in India’s Eastern Condiments Private Limited.
McCormick posted net income up 23.5 percent to $370.2 million on revenues up 4.5 percent to $3.3 billion for the fiscal year ended November 30, 2010. With debt from the Lawry’s purchase paid down, the company was looking for more acquisition opportunities, particularly in the consumer segment.
Fortune named McCormick to its list of 100 Best Places to Work during the year. The company also marked its 25th consecutive year of paying dividends. The company looked to the future with plans to continue the three-part strategy that had served it well in the preceding decade: improving margins, investing in the business, and increasing sales and profits.
COMPANY PERSPECTIVES
Our passion for flavor … our uniquely collaborative culture … our high quality and healthful spices and flavors allow us to make a difference in the way people create and experience food. Making food more distinctive and enjoyable is what inspires our people, who are deeply committed to delivering high performance in every aspect of our business.
| 1889: | Willoughby M. McCormick begins selling syrups, juices, and extracts from his Baltimore home. |
| 1896: | Philadelphia’s F. G. Emmett Spice Company acquired. |
| 1932: | Multiple Management business management philosophy unveiled by new company president, Charles P. McCormick. |
| 1947: | McCormick gains coast-to-coast distribution with purchase of San Francisco spice company A. Schilling. |
| 1962: | Real estate company formed. |
| 1987: | Founder’s grandnephew Charles P. McCormick, Jr., becomes president and CEO. |
| 1994: | McCormick makes acquisitions in Mexico, Finland, Switzerland, and the United Kingdom. |
| 2000: | McCormick acquires leading European spice manufacturer Ducros for $400 million. |
| 2003: | Zatarain’s is acquired; packaging business is sold to Kerr Group Inc. |
| 2006: | Epicurean International Inc., marketer of Thai cuisine mixes, is acquired; spice plants in California and Maryland are closed. |
| 2008: | McCormick acquires Billy Bee Honey and Lawry’s and Adolph’s seasoning mix and marinade brands; total revenues exceed $3 billion. |
businesstrainingset 