McCormick pivots marketing after sales disappointment

The maker of French's and Frank's Red Hot has a three-year plan focused on value messages and tapping product trends.

McCormick Store-472

After a Q2 sales slump, McCormick is updating its full-year outlook and pivoting its marketing to highlight value.

The manufacturer of French’s, Frank’s RedHot, Club House and Billy Bee disappointed analyst expectations with its revenue report of $1.54 billion in the period, down from $1.56 billion. Meanwhile, operating income was $157 million in the second quarter, compared to $237 million in the year-ago period, while sales declined 1% year-over-year.

Consumer sales in EuropeMiddle East and Africa (EMEA) and also Asia/Pacific regions slumped 18% compared to the year-ago period, while in the Americas, the decline was 4% for the same period.

In today’s earnings call, company chairman and CEO Lawrence E. Kurzius cited higher inflation and broad-based supply chain challenges for the results, as well as unanticipated disruptions in China, its second biggest sales country and the war in Ukraine.

However, the company’s B2B Flavor Solutions segment saw sales increase 10% from the second quarter of 2021. Kurzius says at home and away from home for the segment was “outstanding,” with volume driven CAGR of 8%. 

McCormick also says it plans to drive continued growth overall through the strength of its brands, as well as more brand marketing, new products and differentiated customer engagement.

To that end, it is beginning a three-year brand marketing pivot focused on communicating how its products help stretch consumers’ grocery dollar. Family and budget friendly digital messaging, it says, are going to be highlighting value of products for making flavourful meals economically.

It is also responding to new consumer behaviour, for example, with the launch of French’s premium mustard and it’s increasing support for its robust hot sauce category.

“We continue to capitalize on the long-term consumer trends that accelerated during the pandemic, including the sustained shift to cooking more at home, increased digital engagement, clean and flavorful eating, and trusted brands,” Kurzius claims. He adds that shelf conditions and consumer spend “continue to improve.”

In 2022, McCormick expects sales growth to be driven by pricing actions, which, done in conjunction with cost savings, are expected to offset inflationary pressures in time.