McCormick & Co. is expected to make inroads into one of the world's biggest consumer markets for spices with a planned $35 million investment in an Indian spice and seasoning business.
Sparks-based McCormick, the world's largest spice company, said Tuesday it had agreed to acquire a 26 percent stake in Eastern Condiments Private Limited, based in the Indian state of Kerala. The deal is expected to close in the fourth quarter and is subject to regulatory approval.
McCormick says the partnership will help it capitalize on the rapid growth of the consumer spice and seasoning market in India — the second-most populous nation and, according to McCormick, the world's largest consumer of spices. Demand in India for convenient, packaged spices is strong and growing, said Alan D. Wilson, McCormick's chairman and chief executive.
"We want to have a presence in that market, so we are buying part of Eastern," said Jim Lynn, a McCormick spokesman. "Our objective is to partner with a flavoring company that is well-positioned to capitalize on that growth."
Eastern has grown rapidly since its inception in 1989, with profits in each of the past 10 years and annual sales of $67 million, according to McCormick. Eastern, one of the few national spice brands in India, exports its products to 15 countries, including the U.S.
The global growth in consumption of spices is being driven by growing ethnic diversity and increasing consumer health consciousness, according to an Edward Jones & Co. research report on McCormick released Monday.
For McCormick, the deal represents a relatively small investment, but one that could pay big dividends, one analyst said Tuesday.
"It enhances their position in arguably one of the most attractive, growing consumer markets in the world, given the population size of India and the growth rate of the middle class," said Matt Arnold, a consumer analyst at Edward Jones in Des Peres, Mo. He said the price is largely justified, "given the growth potential that's there."
Often, he said, such minority-stake joint ventures can evolve into larger ownership stakes.
"It's a good foot in the door," Arnold said.
McCormick said it will help find new export markets for Eastern's products and expand Eastern's business in the U.S. and other Western markets, where Indian cuisine is one of the fastest-growing segments of ethnic food.
Eastern, which procures spices grown in India, manufactures powders such as turmeric, chili, coriander and ginger and blended flavorings such as Tandoori masala and Chicken masala.
McCormick's "global presence will accelerate our efforts to bring authentic products to Indian consumers in international locations as well as introduce other consumers to Indian cuisine," M.E. Meeran, chairman of Eastern, said in a statement.
The partnership marks the second joint venture in India for McCormick, which has had a 50 percent interest in India-based AVT McCormick Ingredients Private Limited since 1994. AVT McCormick is an industrial business that locates and buys spices to sell to food manufacturers.
McCormick, which controls about 50 percent of the U.S. spice market, said the partnership with Eastern fits its long-term strategy of expanding through acquisitions and strategic partnerships. The company's shares were down 69 cents Tuesday on the New York Stock Exchange, closing at $38.58 per share.
lorraine.mirabella@baltsun.com
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