Summary
- McCormick is the undisputed global seasonings and spices leader with operations characterized by profitability.
- The Company is trading at a well-deserved premium.
- We recommend buying this quality name at the current price for long-term steady value accumulation.
Investment Thesis
McCormick (MKC) is a foods giant with a plethora of attractive characteristics. It is the undisputed leader in spices and seasonings worldwide with 20% revenue share. The defensive nature of its revenues makes it an attractive place to park capital in this longest running bull market we're in. Its financials are best-in-class and the expectations are for improvement. We view McCormick as a quality company trading at a well-deserved premium, and as a key defensive holding for any portfolio. We recommend buying shares of McCormick for steady value accumulation.
A Diversified Food Giant
McCormick is a foods giant with a total of 16,300 products in 150 countries. Its revenues are characterized by the defensive nature of the spice and seasoning market. It is a great company to own in the longest running bull market ever.
The Company is looking at steady revenue growth thanks to several industry trends. McCormick claims that flavor enhancers are 10% of a meal's cost but 90% of the flavor and that consumers are beginning to pay more attention to the 90%. The Company claims a 5% 5-year CAGR for global demand for flavor driven by consumer preference. With 79% of U.S. consumers using flavorful ingredients and spices and the use of sauces doubling in the past 6 years, the trend is expected to continue. McCormick is sure to capitalize as it makes 20% of total global sales in its categories.
The opportunity is evident in growth numbers. McCormick boasts 5% brand growth in the U.S., 5% in Canada, 16% in the U.K., and double-digit growth in other international markets.
McCormick's portfolio is characterized by brand equity. It has some of the most well-known brands under its portfolio. It is by far the largest in its area and holds the #1 position in almost all key markets.
