McCormick Gourmet
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Driving innovative products: New products launched in the past three years accounted for 8% of sales in 2014. Consumer insights drive our product development work and we have 400 research and development professionals around the world.Innovation: Within a year of the launch, McCormicks skillet sauces have a10% share of the category. The McCormick Gourmet launch continues to dowell. Roughly 80% of retail distribution points have converted over to the newpackaging, and consumption for this line was up 4% during 2Q15. Newinnovation plans for the back half include slow cooker sauces, gluten freerecipe mixes, and Kitchen Basics stock cubes.Building brand equity: Management called out the recent Grill Matescampaign as a prime example of how this works well. 2Q sales of this linegrew 9%, and McCormick expects the momentum to continue through grillingseason. Management attributes the success to in-store execution, new TVadvertising, and the flavor line-up. The company is also increasing digitalrelevance. The McCormick website is now in the top 40 destinations forconsumers to get recipes (up from 175 in 2012).Leveraging category leadership and fine-tuning category price points:o Retail price points: The company has placed a sharper focuson retail price points and category management. McCormickbelieved that retailers were leaving money on the table withcategory price management—in many cases the value offeringswere priced below Private Label. McCormick has been partneringwith retailers on shelf price adjustments, and the company is veryencouraged by the results for both parties.
▪ In-roads from smaller competitors hurt McCormicksshare in 2014. In early 2014, the share losses wereparticularly pronounced in the Southeast U.S. One ofMcCormicks first actions in 2014 was a realignment ofthe sales force and putting more resources here. Manyof the in-roads were new competitor gourmet lines thatMcCormick believes were not priced high enough.Pricing optimization tools: In order to accelerate pricingoptimization, McCormick plans to launch a new comprehensivecategory management tool by the end of 3Q. The company iscreating a dedicated team to work with this. The tools focus onspices and seasonings (but have been applied to other linessuch as Recipe Mixes). The tool spans everything from Premiumand Gourmet to Private Label and Value offerings.▪ McCormick has used its analysis to adjust strategyaround specific products. The company shiftedpromotional support to ~12 key spice and seasoningitems that McCormick found to be particularly pricesensitive. The redirection of trade promotion wenttoward more price elastic items where there were manycompetitor options and items that consumers boughtmore often. One example of this type of item is VanillaExtract. McCormick could shift dollars out of PumpkinSpice Extract to support this. Pockets of strong growth ininternational marketsNew products launched in the past three years accounted for 8% of sales in 2014. Consumer insights drive our product development work, which has led to the introduction of gluten-free recipe mixes and the expansion of salt-free seasoning blends to inspire healthy choices. For price conscious consumers, we added squeeze pouch ketchup in China and Grill Mates® burger seasonings and value-priced grinders in the U.S. New skillet sauces meet demand for convenience in the U.S., and we introduced gourmet cooks in the U.K. to new FlavorLock™ herbs. In our industrial business, sales contribution from new products was particularly strong in 2014, led by snack seasonings and flavors for new restaurant menu items. Across our consumer and industrial business, new products increase our ability to flavor all types of eating occasions, from preparing a meal at home to fine dining to grabbing a quick snack. In 2014 we increased our investment in brand marketing support to US$227 million, and are planning further increases to create momentum for future growth. While a portion of this spending is devoted to creating awareness and trial for new products, the majority is aimed at building consumer equity for our leading brands in markets around the world. We are emphasizing product freshness, our role in preparing healthy food and the ability of a homemade meal to bring people together.