McCormick & Company (NYSE:MKC) is a consumer staple offering flavor solutions for the home chef as well as businesses across the world. McCormick offers spices that capture what they consider to be every flavor trend and for every occasion across every region as well as whether at home or on the go. McCormick sells their iconic flavors across 170 countries and territories giving them a truly global reach.
Approximately 60% of sales are from their consumer segment which includes the US and International spices that most everyone recognizes as well as recipe mixes, condiments & sauces. McCormick now holds the #1 spot in the US and Canada as well as the #2 spot in the US in hot sauce through their Franks Red Hot and Cholula brands of hot sauce.
The flavor solutions segment represents approximately 40% of sales and focuses on bulk spices, condiments, and flavorings for other businesses.
Their breadth of options, ~15,000 raw materials with over 80 countries as a source, is both a blessing and a curse and means they are heavily reliant on a functioning supply chain.
During the Q2 2022 earnings release McCormick cited continuing margin pressures due to supply chain issues as well as COGS inflation. Management plans to continue with price increases to help offset the COGS inflation and a targeting of internal cost cutting to combat the margin pressures.
After a greater than 20% pullback from their highs I wanted to re-examine McCormick to see if the valuation is finally palatable.