McCormick & Company Inc.
Corporate Case Report
BUS 304 Wed. & Fri.
Kia Moore
11/22/2013
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Abstract
This report was written to explore different was McCormick & Company Inc. can further their
dominance in the spice and flavorings industry. The purpose of this report is to aid McCormick
& Company Inc. in choosing a suitable method to expand their market share. Three possibly
solutions are presented. Option 1: Product line expansion. Option 2: Expanding into new
markets/countries. Option 3: Develop smaller value packaging.
Each possible solution was evaluated by considering four criteria: cost, ease of implementation,
impact on stakeholders. Cost refers to the expense of implementing each option. Ease of
implementation is how easily the option can be put into motion. Competition refers to whether
their competitors can mimic the option easily or if they have something similar already on the
market. The impact on stakeholders refers to how each option will affect the stakeholders
(customers, stockholders, employees, the community, etc.).
After carefully evaluating each possible solution Option1 and Option 3 seem to be the most
reasonable. New products could bring in more revenue. The company makes efforts to keep up
with flavor trends so adding new products should be part of their market strategy. Cutting down
on packaging could save money. Adding a “value” product line could increase sales; due to a
new market segment being able to purchase their products. This could be a possible area for use
of sustainable (biodegradable) packaging. Using existing packet packing could lead to faster
implementation and cost savings.
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Table of Contents
Abstract ........................................................................................................................................... 2
Executive Summary ........................................................................................................................ 4
Background ..................................................................................................................................... 6
Company Overview: ................................................................................................................... 6
Company History: ....................................................................................................................... 6
Mission:....................................................................................................................................... 6
Top brands: ................................................................................................................................. 6
Key Products: .............................................................................................................................. 7
Key Executives: .......................................................................................................................... 7
Top competitors in the packaged food industry.......................................................................... 7
CONSOLIDATED INCOME STATEMENT ............................................................................ 8
Current Issue: .................................................................................................................................. 9
Option Analysis .............................................................................................................................. 9
Possible Solutions: ...................................................................................................................... 9
Criteria: ....................................................................................................................................... 9
Option 1: Product line expansion ............................................................................................ 9
Option 2: Expanding into new markets/countries ................................................................. 10
Option 3: Develop smaller value packaging ......................................................................... 11
Option Analysis Matrix: ............................................................................................................... 12
Recommendations: ........................................................................................................................ 12
Conclusion: ................................................................................................................................... 12
References: .................................................................................................................................... 16
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Executive Summary
McCormick & Company has been dedicated to providing the world with flavor
enhancement. They have done this through their many brands and products. McCormick has
made strategic moves to build its organization and maintain the high quality standards it is
known for. Though the organization has dominated the market; there is always room for growth.
This report was constructed to explore different was McCormick & Company Inc. can
further their dominance in the spice and flavorings industry. The purpose of this report is to aid
McCormick & Company Inc. in choosing a suitable method to expand their market share.
Possible Solutions:

Product line expansion

Expand into new markets/ countries

Develop smaller value packaging
Each possible solution was evaluated by considering four criteria: cost, implementation,
competition, and impact on stakeholders.
Criteria:

Cost

Implementation

Competition

Impact on stakeholders
Cost refers to the expense of implementing each option. Ease of implementation is how
easily the option can be put into motion. Competition refers to whether their competitors can
mimic the option easily or if they have something similar already on the market. The impact on
stakeholders refers to how each option will affect the stakeholders (customers, stockholders,
employees, the community, etc.).
Each option had advantages and disadvantages. The additional products from option 1 have
the potential to increase revenue and bring in more customers while providing more options for
existing customers. This option unfortunately has a few pit falls; implementing new products can
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be costly and time consuming due to the research and development involved. There is also a
possibility that the products could fail and or alter the brands image negatively.
Option 2 has great potential for market share growth. Entering new markets and countries
aids in staying competitive. This option however, has several disadvantages; acquiring property
internationally is very expensive, costing in hundreds of thousands and sometimes millions of
dollars to implement. There are many factors of difficulty when an organization globalizes and
conducts business internationally; difference in currency rates, language barriers, laws, tariffs,
and cultural differences. This option is the riskiest and most involved option.
Option 3 is modifying packaging to offer a smaller less expensive option for customers with
a tighter budget. By offering value packing options McCormick can reach a new audience and
stay competitive with many of the private labels that offer spices, herbs, and seasoning blends in
discount and dollar stores. The possible problems with this option are: changing the packaging
could change the value perceptions of current customers and implementing new packaging could
be costly if existing packaging cannot be utilized.
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Background
Company Overview:
McCormick & Company is passionate about flavor and aiding home cooks and chefs
alike from all over the world in creating tasty and nutritious dishes using their products.
McCormick & Company strives for sustainability and works closely with their raw materials
suppliers. The company has a vested interest in diversity and protecting and preserving the
world, while continuing to produce high quality goods. (McCormick, Company History).
Company History:
McCormick & Company was started in 1889 by a man named Willoughby M.
McCormick. Some of the products he sold were flavorings, extracts, and root beer. During the
earlier years products were sold under the “Bee Brand” label. Seven years after its start, 1896,
the F.G. Emmett Spice Company of Philadelphia was purchased; this positioned McCormick in
the spice market. In 1938 the company developed a sanitation process called “McCorization.”
This process made their spices the cleanest and safest around while preserving the flavor. The
company started producing tea in the year 1905 and introduces the “teabag” concept to the U.S.
Later they started packaging their tea in spice containers lined with metal; this was an innovative
idea and kept the tea fresher longer. In 1932 Willoughby M. McCormick passed away; his
nephew Charles P. McCormick took his place as president. Charles P. McCormick wrote and
published several books on management. After numerous acquisitions that included property in
Germany, Mexico, Venezuela, England, Canada, the Netherlands, and France McCormick &
Company has become what we know today; the manufacturers and distributors of “spices, herbs,
seasoning blends, and flavorings.”(McCormick, Company History) Two of their subsidiaries
include Golden West Food Inc. and Gilroy Foods Inc. of Gilroy, CA.
Mission:
McCormick & Company are dedicated to “be the leading global supplier of value-added flavor
solutions.” (McCormick, Our Company, Vision& Values, pp.1)
Top brands:
 McCormick
 Lawry’s
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



Zatarain’s
Thai Kitchen
Simply Asia
Old Bay
Key Products:
 Herbs and spices
 Extracts and flavoring
 Seasoning blends
 Sauces and Marinades
 Condiments
 Food coloring
Key Executives:
 Alan D. Wilson- President, (Wilson A. D., 2012)Chairman, and Chief Executive Officer
 Gordon M. Stetz- Executive Vice President and Chief Financial Officer
 W. Geoffrey Carpenter- Vice President of General Counsel and Secretary
 Lawrence E. Kurzius- President of Global Consumers and Chief Administration Officer
 Cecile K. Perich- Senior Vice President of Human Relations
 Charles T. Langmead- President of Global Industrial
Top competitors in the packaged food industry:







Nestle
Danone
Kraft Foods Group
Campbell Soup Co.
Contra Foods Inc.
Kellogg Company
Mead Johnson Nutrition
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CONSOLIDATED INCOME STATEMENT
for the year ended November 30 (millions except per share data)
2012
2011
2010
Net sales
$ 4,014.2
$ 3,697.6
$ 3,336.8
Cost of goods sold
$2,396.4
$ 2,175.1
$1,919.1
Gross profit
$1,617.8
$1,522.5
$1,417.7
Selling, general and administrative expense
$1,039.5
$982.2
$907.9
Operating income
$578.3
$ 540.3
$509.8
Interest expense
Other income, net
Income from consolidated operations before income taxes
Income taxes
Net income from consolidated operations
Income from unconsolidated operations
Net income
Earnings per share—basic
Earnings per share—diluted
$54.6
$2.4
$526.1
$139.8
$386.3
$21.5
$ 407.8
$ 3.07
$ 3.04
$ 51.2
$2.3
$ 491.4
$ 142.6
$ 348.8
$25.4
$ 374.2
$ 2.82
$ 2.79
$49.3
$ 2.2
$462.7
$ 118.0
$ 344.7
$25.5
$ 370.2
$ 2.79
$ 2.75
( McCormick Annual Report 2012, Form 10K)
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Current Issue:
Even though McCormick is the dominating leader in their industry they have shown only
moderate growth in recent years. In 2012 the organization saw nine percent growth from the
previous year. The organization has managed to reach double the net sales a decade later in
2012; reaching $4 billion from 42 billion in 2002. A good portion of their yearly profit comes
from the CCI program; through cost cutting McCormick was able to save nearly $56 million
dollars (Wilson, 2012).
Option Analysis
After researching McCormick & Company and evaluating the current issue, I will offer
three possible solutions for how McCormick can expand their market share.
Possible Solutions:
Option 1: Create new products (i.e. salad dressings, sauces, and more frozen meals).
Option 2: Expand into new markets by obtaining subsidiaries in India.
Option 3: Cut cost on packaging and market as value sized spice refills to compete with cheaper
market offerings.
Criteria:
I will evaluate each solution based on four criteria.
Cost refers to the expense of implementing each option. Ease of implementation is how
easily the option can be put into motion. Competition refers to whether their competitors can
mimic the option easily or if they have something similar already on the market. The impact on
stakeholders refers to how each option will affect the stakeholders (customers, stockholders,
employees, the community, etc.).
Option 1: Product line expansion
McCormick could add to their numerous offerings by creating new products. Innovation
and creativity are key elements in the modern food industry; McCormick is passionate about
adding flavor to the world. Expanding certain brands: Zatarain’s, Simply Asia, and Thai Kitchen
to include ready-made frozen entrees and sides could be one way to further their mission. Trends
for healthier eating and cooking more at home support branching out into the frozen meal sector.
The new frozen meals would provide restaurant quality healthy meals using their world famous
spices, herbs, and seasoning blends. Also they could create robust salad dressing and pasta
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sauces to round out their already extensive product line. These products would provide more
tools for home cooks to use to cook flavorful and nutritious meals for their families.
Advantages:
New products could bring in more revenue. The company makes efforts to keep up with
flavor trends so adding new products should be part of their market strategy.
Disadvantages:
The time and cost associated with research and development could be extensive. Products
could fail and or alter the brands image negatively. Many of their competitor’s already offer
similar products so McCormick would be a follower in this category at first.
Option 2: Expanding into new markets/countries
McCormick already owns subsidiaries in South America, Europe, and Canada; expanding
to into India could further solidify their dominance in the spice market. The company would
have to obtain, possible through acquisition, a spice and herb manufacturing plant in India.
Advantages:
Having a plant in a developing country with high potential such as India would not only
be profitable gain for McCormick they would be providing jobs for the people of that country,
setting up an infrastructure for business, and improving the quality of life for surrounding
communities. Due to the level of involvement for entering a new market competitor’s will
probably not be able to mimic McCormick quickly.
Disadvantages:
Recently India was found to have the highest level of contaminated spices for import into
the United States. McCormick is known for their high quality and sanitation and pasteurization
processes; bringing in their technology would raise the quality of the spices coming from that
part of the world. The cost involved with acquiring property could be substantial. Also
stationing a distribution channel in another country can be difficult due to: pricing, marketing,
the exchange rate of currency, and language barriers. Conducting business in other countries
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involves going through the red tape of international law; this could take lots of time making this
option harder to implement. (Armstrong, P.K., 2012)
Option 3: Develop smaller value packaging
McCormick has many competitors; in the spice market many are private labels that can
be purchased in both grocery and discount dollar stores. In order to reach consumers that are
choosing to purchase these less expensive spices they could start packaging their spices, herbs,
and seasoning blends in packets. McCormick could market the new packaging as refills for their
grinders and standard shaker containers. The bagged spices would be at a lower price point so
consumers could access the quality of McCormick at a less expensive price.
Advantages:
Cutting down on packaging could save money. Adding a “value” product line could
increase sales; due to a new market segment being able to purchase their products. This could be
a possible area for use of sustainable (biodegradable) packaging. Using existing packet packing
could lead to faster implementation and cost savings.
Disadvantages:
Value pricing could damage the high quality image of the company; which might affect
stockholder returns and company sales negatively if original customers lose trust in the brand.
Starting new packaging procedures could be costly at first to implement.
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Option Analysis Matrix:
Cost
Ease of
Competition
Implementation
Option1: Product
XX
Impact on
Totals
Stakeholders
XX
XX
X
7
XXX
X
XXX
10
X
XXX
XX
7
line expansion
Option 2: Expand XXX
into new
markets/countries
Option3: Develop
X
smaller value
packaging
X- most beneficial XX- less beneficial XXX- least beneficial
Recommendations:
I recommend that McCormick & Company embrace on both Options 1 and 3. Option 1
will expand their product offering through new products. Option 3 packages their world famous
spices, herbs, and seasoning blends in smaller containers, in hopes to reach a new target market
of budget conscious consumers.
Conclusion:
McCormick & Company is holding strong in the food consumer and industrial
manufacturing and service industry. The organization continues to make strides to improve with
every year of operation. McCormick has decrease their water, energy, and solid waste. Lowered
their number of greenhouse omissions nine percent in the past decade. With implantation of the
Comprehensive Continuous Improvement Program, McCormick has reduced cost and saved
millions. The company has invested deeply in creating new products and services for its millions
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of customers. Keeping close relationships with their industrial customers and staying passionate
to high quality and flavor enhance has helped the organization be a leader in the industry. In
order to stay competitive the recommended options should be put into motion.
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References:
Armstrong, P. K. (2012). Chapter 19 The Global Marketplace. In P. K. Armstrong, Principles of
Marketing (pp. 550-573). New Jersey: Pearson.
Edney, A. (2013, October 30). Imported Spices Tainted with Filth, U.S. FDA say Mexico and
India have the highest number of tainted spices. Retrieved November 12,2013 from
Bloomberg: www.bloomberg.com/news/2013-10-30/imported-spices-tainted-with-filthu-s-fda-says.html
McCormick. (n.d.). Business Units. Retrieved November 05,2013 from McCormick Corporation:
www.mccormickcorporation.com/OurCompany/BusinessUnits.aspx
McCormick. (n.d.). Company History. Retrieved November 05, 2013 from McCormick
Corporation- Our Company:
www.mccormickcorporation.com/OurCompany/CompanyHistory.aspx
McCormick. (n.d.). Vision & Values. Retrieved November 05,2013 from McCormick
Corporation:
www.mccormickcorporation.com/OurCompany/CorporateMissionVision.aspx
Talaga, T. (2013, November 4). Filth, excerment found in imported, spices, FDA says. Retrieved
November 12, 2013 from The Star:
www.thestar.com/new/2013/11/04/filth_excerment_found_in_imported_spices_fda_says.
html
Unknown. (n.d.). Retrieved November 12, 2013 from Netadvantage:
www.netadvantage.standardspoors.comlibrary2.csumb.edu
Unknown. (2013, October 14). Recipe Journey. Retrieved November 21,2013 from IMUSA &
McCormick Giveway- McCormick brand logo: recipejourney.com/?attachment_id=3959
Unknown. (n.d.). Company Profile. Retrieved November 05, 2013 from Mergent Online: www.
mergentonline.com.library2csumb.edu:2048/companydetails.php?compnumber=5324&p
agtype=synopsis
Unknown. (n.d.). Competitiors and Industry Peers. Retrieved November 05, 2013 from Morning
Star Financials:
financials.morningstar.com/competitors/industrypeer.action?t=MKC&region=usa&cultur
e=en-US
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Wilson, A. D. (2012, January). Annual Report Form 10K. Retrieved November 12, 2013 from
MKC_2012AR_Form_10-K.pdf: www.mccormickcorporation.com
Wilson, C. A. (2012). Letter to Shareholders. Retrieved November 12, 2013 from Mccormick
2012 Annal Report: media.corporateir.net/media_files/irol/65/65454/reports/MKC_2012AR/letter-to-shareholders.html
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