: Soaring meat prices are leaving a bad taste in shoppers’ mouths, but McCormick says its spices are providing a solution
Sky-high inflation is driving many budget-conscious diners to opt out of restaurants, and McCormick & Co. Inc. says it’s helping to spice up those at-home meals.
Chief Executive Lawrence Kurzius said during his Tuesday earnings call remarks that 75% of consumers consider at-home meals more economical these days, which resonates as U.S. inflation hits a 40-year high.
“Our products are already part of the consumer solution to manage inflation across their whole grocery basket,” he said on the earnings call, according to a FactSet transcript.
“For instance, inflation is hitting the meat case hard and a little bit of our flavor can make less impressive meat more palatable, and make the consumers’ whole meal both affordable and flavorful.”
See: U.S. consumer confidence rises for first time in 2022, but inflation and Ukraine still big worries
Kurzius says the company is taking various price points into account as it launches new products. And with so many consumers picking up new recipes and new kitchen gadgets during the pandemic, like air fryers and Instant Pots, that’s become part of the company’s recipe for innovation. Snacks, cocktails and “performance nutrition” are also on McCormick’s radar.
“We continue to focus on ensuring we’re launching new products that appeal to all types of consumers such as additional entry-level price points for affordability as well as value offerings, including larger sizes to meet the needs of price-conscious consumers,” he said.
McCormick is also being hit by inflation. The company has raised prices and additional hikes could be in sight.
“[A]s costs have continued to accelerate, we will raise prices again this year where appropriate, ” he said.
Also: U.S. plant-based food market value reaches a high of $7.4 billion, but industry faces rough path to further growth
McCormick reported fiscal first-quarter profit and sales that beat the Street during premarket hours. Still, shares slipped nearly 1% in Tuesday trading. The stock has gained 7.4% over the last 12 months.
“McCormick has thus far been able to raise prices with minimal impact to demand (consistent with most packaged food companies), but how long this will last remains to be seen,” wrote CFRA in a note.
“The good news is McCormick is seeing stronger market share performance and is favorably positioned by competing in on-trend, fast-growing categories like spices, hot sauce, and condiments, which should make it a bit easier to pass through higher costs.”
CFRA rates McCormick stock at hold with a $100 12-month target.
Fellow food company General Mills Inc.
also beat expectations when it reported fiscal third-quarter results last week. The Cheerios parent raised its sales outlook as well.
Earlier this month, Campbell Soup Co.
reported a revenue miss with supply chain and labor disruptions hurting the quarter. But the company expects those issues to improve later in the year.
However, inflationary pressures could still drive prices up.
“We will remain nimble and use our full range of tools to offset additional inflation as needed, including potential further pricing actions where appropriate,” said Campbell Chief Executive Mark Clouse on that company’s earnings call, according to a FactSet transcript.
“Accordingly, we expect meaningful improvement and recovery in margins, profit and EPS in the balance of the year.”
The Invesco Dynamic Food & Beverage ETF
has run up 13.2% over the past year while the benchmark S&P 500 index
is up 16.4%.