McCormick & Co., the US-based spice firm, grew its sales in Europe, the Middle East and Africa by 3% in 2011 and – in the face of a deep economic crisis that has dented consumer spending across its key markets – the company plans to drive expansion in the region during the current fiscal year through a focus on innovation, marketing and new emerging markets, regional chief Brice de Forsanz suggests in this month’s just-food interview.
According to the company’s tag-line, US herb and spice group McCormick “brings passion to flavour”. To Brice de Forsanz, vice president of McCormick’s consumer markets in Europe, the Middle East and Africa, this mission is about more than generating top-line growth and shareholder returns.
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“We are passionate about flavour and we want to have our customer and consumer being passionate about it too,” he tells just-food. “It is very easy to be proud working for this kind of company because it is about cooking. It is about life. It is about families cooking together. It is a way to have the family being very close to each other. This is the power of our brand.”
However, de Forsanz admits this wholesome ideal can be increasingly hard to come by. Progressively, cooking from scratch is giving way to more convenient options as longer working hours, more women in the workplace and smaller households mean consumers are turning to meals that are quicker and easier to prepare, such as ready meals or takeaways.
Nevertheless, demand for single ingredients remains. According to Eurominitor International there is still strong global demand from consumers who cook from scratch, with research showing that 55% of consumers worldwide still cook a meal entirely from raw ingredients at least once a week, while 38% do so using some pre-prepared ingredients.
While McCormick attracts these consumers with its vast array of single ingredient SKUs, the company has also adapted its offer to appeal to consumers who are leaving the category through its development of recipe solutions. Essentially, these are products that walk the consumer through the cooking process by including all the flavours and seasonings needed to produce an entire meal.
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By GlobalDataMcCormick is now faced with the task of “balancing and growing” both of these aspects of its consumer business in the EMEA region, de Forsanz said.
In order to drive recipe solution sales, McCormick is highly focused on innovation in the category. Over the past year, the company has launched its Recipe Inspirations, Grill Mates and Bag ‘n Season products across Europe.
The need to effectively roll out innovation has prompted McCormick to alter its internal R&D processes in recent years, de Forsanz reveals.
He explains: “We are now innovating on the global or regional scale. Instead of having small innovation everywhere we now focus on big innovations across countries…. Where previously we were more country-by-country we now innovate on the global scale.”
While McCormick has identified a global trend in recipe solutions that will meet consumer needs the world over, de Forsanz adds the company also works to tailor its offering to specific market tastes.
“We need to bring to the consumer flavours from the world which are acceptable and tasty for everybody or technologies – such as bag and season – that meet a [universal] need. This is the global or regional innovation we can bring. The other part of our job is to locally fit with the local needs having some very specific innovations for the market. The fact is that, in the Netherlands for example, if you don’t have any spice mixes for meatballs – a very local food – then you can’t play. Everywhere there is some specificity that we need to fit with.”
McCormick has increased its global R&D budget each year for the past five years and in 2011 the total investment reached about US$60m. “This investment is key,” de Forsanz insists. However, he emphasises it must also be backed up by further investments in marketing and promotional activity.
“We are investing more on advertising to make the demonstration of our innovations. We are investing in more promotion as well to be able to propose our product at a good promotional price to get the consumer to test and try our new products.”
Through marketing McCormick hopes to promote newly-launched products alongside its existing – and rather extensive – range.
“What we need is to be more innovative, to communicate more to the consumer, to have more consumers trying our products. If you are in store in the UK looking at our Schwartz proposition there are maybe 150 SKUs. I am sure that 80% of them you just don’t know. That means that 80% of those products are new innovations for you. So we need to have you understanding what these products are.”
According to de Forsanz, if McCormick can increase the penetration of its existing products this would result in significant top-line gains. “If you look at the range on the shelf, most of them have only 1-2% penetration. The best-in-class products have maybe 15-20%. [Consumers] just don’t know how to use the products. If you increase penetration from 2% to 3% across all our SKUs, it is going to be a 50% total increase. This is the work we need to do and, thanks to the digital [marketing], we can improve that a lot.”
While McCormick will continue to invest in traditional media, such as television, de Forsanz says the company is excited by the opportunity of an open dialogue with consumers that digital and online media affords.
“We are still going to invest on TV in order to build awareness behind innovation or behind the brand. This is still our core media. But we need to invest more in digital in order to be closer to our customer and to help us increase penetration of the whole range. When you are advertising on TV you are advertising behind one innovation, range of products or brand. On the web you can interact with your customer. We are going to be more aggressive on the web, on digital, in order to have a community of consumers trying and tasting our products and giving us some feedback in order to improve.”
While the economic conditions in western Europe have proven tough for “every company” in the sector, McCormick believes its focus on innovation and its strategy to increase penetration will result in a rise in organic sales.
Meanwhile, the company is simultaneously planting its flag in emerging markets in the EMEA region as it looks to drive growth. Emerging markets now account for around 10% of McCormick’s total sales and the group expects to grow this figure to 15% by 2015. The emphasis for McCormick’s EMEA business is therefore on “both eastern and western Europe”, de Forsanz reveals.
McCormick is looking to expand in emerging EMEA markets by either acquiring a strong local player – “number one or number two in the market on core business” – or forming joint ventures that will quickly open the market to McCormick products. “The two methods are different, but are both working,” de Forsanz says.
In June last year, McCormick purchased Polish spice firm Kamis, which has businesses in Russia, Romania and the Ukrane in addition to its domestic operations. De Forsanz says the integration process has just been finalised.
“It is working, it is growing and we are on track with our target currently. Kamis is going to become one more pillar in our EMEA strategy, growing like France or the UK. There is a strong focus behind this brand in order to make this brand a big asset for us in Europe.”
Elsewhere, to enter Turkey McCormick established a joint venture with local food major Ulker.
“They are the Nestle or Unilever of Turkey,” de Forsanz explains. “We made that joint venture to be able to implement our range very quickly. We started more or less one year ago. We are now number two in the market with a very specific brand bringing quality and 100% natural products in a sachet, which is new to the market. We now have a 12% market share of the modern trade. We will also launch – or be aggressive – on the traditional trade as well.”
As McCormick enters emerging markets – be it through acquisitions or joint venture partnerships – the group expects these businesses to benefit from its global innovation platform. In this way, McCormick’s emphasis on R&D can create a cycle of growth that can be extended to new geographies, fuelling sales gains for years to come.
McCormick is able to sustain high levels of investment in expansion in part thanks to its low cost base. Its facilities in France and the UK are well-invested and efficient while its newly-aquired Polish factories are undergoing a process of modernisation, de Forsanz says. In addition, by adjusting its R&D capabilities to focus on large-scale innovations the group is able to increase its return on investment.
“If you ask a company ‘Are you happy with your cost base?’ and the company says ‘Yes’ there is something missing. But this is something that we always need to do: to improve the quality while leveraging costs. And the more we will be able to grow – to have regional innovation – the more we will be able to leverage our costs. This is a way to improve our efficiency – to grow the business and to bring more passion for flavour to the consumer.”
