McCormick Brings Spices to Retail Store Advertising

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McCormick Brings Spices to Retail Store Advertising

AS savings accounts shrank in recent years, spice racks expanded, with Americans cooking more to save money.

Revenue for individual spices (excluding salt and pepper) grew 4.1 percent, to $1.34 billion, for the 52 weeks that ended Aug. 12, according to SymphonyIRI Group, a market data firm whose totals do not include Walmart, warehouse club stores and convenience stores.

Over the same period, pepper revenue grew 6.8 percent; salt, seasoned salt and salt substitute grew 2.1 percent; and dry seasoning mixes for meat and seafood grew 1.3 percent.

Now McCormick & Company. the spice maker whose revenue grew 10.8 percent in 2011, to $3.7 billion, is feeling so bullish that for the first time in its 123-year history it has entered the retail business.

In late August, the company opened McCormick World of Flavors. a 3,800-square-foot retail space, in the Inner Harbor section of Baltimore. McCormick, which today is based in Sparks, Md. began in Baltimore in 1889. and for almost seven decades, until 1989, operated its factory and headquarters directly across the street from its new store. (Baltimoreans at the time grew fond of the emanating smell of cinnamon.)

Photo

McCormick & Company recently opened its first retail store in Baltimore. Credit Michael Pohuski

Along with its spice brand, the store also features other brands that McCormick owns, including Lawry’s, Old Bay, Zatarain’s and Thai Kitchen. While it carries products from those lines, along with branded items like cooking utensils, aprons and oven mitts, the objective of the store is less to make a sale than an impression.

“This is much more of a destination for building brand excitement than a traditional retail outlet,” said Alan D. Wilson, chief executive of McCormick.

McCormick spent $71.1 million on advertising in 2011, according to the Kantar Media unit of WPP.

Sales of seasonings have accelerated in recent years, both because of more eating in and because of Americans’ “growing interest in gourmet cooking and ethnic cuisines, which often requires an investment in new varieties of seasonings,” according to a Mintel report.

McCormick tops several spice categories including a 48.2 percent share of the pepper market, a 35.8 percent share of individual spices and a 52.3 percent share of flavor extract and food coloring, according to SymphonyIRI.

Brand loyalty is strong among spice buyers, with 64 percent telling Mintel that they usually buy the same brand.

High brand loyalty has helped McCormick thrive during the downturn because the company has been able to raise prices on some items with a smaller risk of losing customers, said James Early, a senior analyst at the Motley Fool, an investment Web site.

If price-sensitive consumers do switch to store-brand oregano, that, too, is apt to be made by McCormick, and it will still profit, albeit with smaller margins. McCormick produces about half of store-brand spices sold annually (though the company declines to reveal which stores), and store brands account for a significant share of spices like pepper (36 percent) and extracts and coloring (27.4 percent).“They’re the 800-pound gorilla,” Mr. Early said of McCormick. “Shelf space is the most precious commodity in retail and they just own the grocery store aisle.”

Consumer sales accounted for 59 percent of McCormick revenue in 2011, with the remaining 41 percent being industrial sales, primarily to restaurants and to snack makers. The flavors in a bag of mesquite-flavored chips, or a chipotle chicken sandwich from a chain may well have been custom-developed and produced by McCormick.

Since 2000, the company has issued an annual “flavor forecast,” directed primarily at the food industry, in which it collaborates with chefs internationally. Among the flavor combinations it is predicting this year, for example, is ginger with coconut. Its objective is to encourage restaurant and snack industry executives to introduce products with the flavor and then, naturally, to hire McCormick for its seasoning expertise.

McCormick Brings Spices to Retail Store Advertising

The company wants to be recognized not just for its sage, but also for its sage advice.

“People have tended to think of McCormick as a spice and seasoning company, and that’s absolutely true,” Mr. Wilson said. “But we definitely see ourselves as a flavor company.”

Sales for seasonings are, appropriately enough, seasonal. McCormick revenue is lowest in the first half of the year, picks up in the summer grilling months and peaks with holiday cooking in the last three months.

While McCormick brands are prominent in the spice aisle, the company strives to display them closer to foods they will accompany, like positioning taco seasoning near ground beef and marinade near chicken. Products in satellite displays outside the spice aisle account for 15 percent of supermarket sales, said Ken Stickevers, president of the United States consumer products division at the company.

“Consumers are looking for inspiration while they’re shopping, because they’re not sure what they’re going to have for dinner,” Mr. Stickevers said.

McCormick’s new store in Baltimore features an open kitchen for cooking demonstrations, display cases with company memorabilia and interactive displays with touch-screen monitors.

For a “flavor print analyzer,” visitors proceed through several screens where they highlight dishes they find most appealing, and based on those preferences are assigned one of 12 flavor print types, like “Cocoa Loco” (“You enjoy the sweet, roasted bitter taste of coffee or chocolate”) or “Hot” (“Heat from the chili pepper is your thrill of flavor”).

At “Guess That Spice,” a scent wafts out of a nozzle and participants seek it among choices on a touch screen, with those who ace the contest receiving 25 percent off purchases. The company also is sniffing around itself, offering some items exclusively at the store, like flavored oils and balsamic vinegars under the McCormick brand, and monitoring how they sell.

“If they work out in the store, we’ll roll them out nationally,” Mr. Wilson said. “We’ll use it as a laboratory to develop consumer insight.”

A version of this article appears in print on September 18, 2012, on page B3 of the New York edition with the headline: Savoring Success By Expanding the Brand. Order Reprints | Today’s Paper | Subscribe


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