The future of 125-year-old McCormick & Co. Inc. will be shaped by the cooking habits of the millennial generation, the rise of the middle class in emerging international markets and consumers' growing preference for fresh, healthy food, the CEO of the spice and flavorings maker told shareholders Wednesday.
"The demand for flavor is worldwide and growing," Alan D. Wilson told investors who jammed a ballroom at Martin's Valley Mansion in Cockeysville for the Sparks company's annual meeting. "The consumer is looking for variety, or filling special needs, shopping in multiple channels. … Some consumers are seeking premium specialty products while others are under financial pressure and are value-minded shoppers."
McCormick, whose sales increased 3 percent last year to $4.2 billion, is trying to meet those demands as the competitive pressure facing grocers, dollar stores, warehouse clubs and other retailers "flows to us, the manufacturers, with regard to pricing, promotions and product differentiation," Wilson said.
McCormick accounts for 22 percent of the growing $10 billion global packaged spice and herb category. But it has needed to move beyond traditional spices with new products such as the packaged skillet sauces introduced last year. Products launched in the past three years made up 8 percent of annual sales, and a third of new sales growth is expected to come from new products.
Besides creating new products, the company is spending more than ever on brand advertising — $227 million last year — focusing on ethnic cuisine that makes up 44 percent of U.S. flavoring use and targeting millennials. Demonstrating far more interest in cooking than Baby Boomers, consumers in their 20s and early 30s are health-conscious and becoming the largest users of spices, Wilson said.
"If we get them as loyal users now, we can have them forever," he said.
McCormick also is expanding in emerging markets as middle-class incomes rise in places such as India and Turkey. Last year, 17 percent of sales came from emerging markets, up from 10 percent three years ago.
Gordon Stetz, McCormick's chief financial officer and executive vice president, told shareholders that a strengthening dollar will hurt sales growth, which is projected at 4 percent to 6 percent without the currency rate impact.
The company remains in the early stages of its search for a new headquarters. Last year, Wilson said McCormick wanted to consolidate its offices, spread across several buildings in Hunt Valley, and was considering locations outside its longtime home in Maryland.
On Tuesday, he would only say that it has narrowed the list of possible sites.
Shareholders questioned him on the headquarters plans and on products and international strategy and offered suggestions.
One suggested the company evaluate the size of its packaging for spices, noting that his daughter had switched to a competitor because its spices fit better in drawers. One woman suggested the company offer cooking demonstrations to elementary school children as a way to both foster healthy eating and build brand loyalty at a young age.
And another suggested that when the company eventually consolidates office and headquarters space it consider including a "tea room," open to the public, similar to one in the former McCormick factory on Light Street in downtown Baltimore.
Shareholder Isabel Yau, accompanied by her son Joe, said she came to her first McCormick annual meeting to learn more about the company.
"My whole house is McCormick," Yau said.
Dick Patterson, a resident of Oak Crest Village in Parkville and shareholder for 20 years, credited the company's management team with its strong performance last year.
"They do an exceptional job and are very creative," Patterson said.
Like many shareholders who return year after year, Patterson was enticed as well by the company's famous "goodie bag," handed out this year in red bags with products such as gluten-free Taco Seasoning Mix, Pure Pumpkin Pie spice, Lawry's seasoning marinade, Simply Asia seasoning mix and a box of Zatarain's rice.
Louise Hoy of White Hall, who has owned McCormick stock for 40 years, said after the meeting that she's happy with the company's push into emerging markets.
"They're growing by leaps and bounds all over the world," she said. "The more people you have buying spices, the better the stock."