|
|
|
Recipe for higher margins |
|
|
|
During the last five years, McCormick has increased gross profit margins from less than 33% to nearly 37%. Over the next five
years, we expect to reach a gross profit margin of 40%.
Emphasis on value-added products improves margins. In our consumer business, we are directing our development and
promotional resources toward value-added products. In our industrial business, food service customers are seeking products that
reduce preparation time and provide consistently great menu items. The percent of sales from value-added products has reached
65% and continues to grow.
Beyond 2000 provides a seamless platform. Beyond 2000 (B2K) is a global program utilizing state-of-the-art information
technology to increase the efficiency and profitability of our business processes. In 2002, we began to implement B2K in selected
U.S. operations and we will move to B2K in our remaining operations over the next few years.
Focus on supply chain to realize efficiencies. We are achieving cost reductions throughout the supply chain – from
procurement of our raw materials to product delivery. With the new capabilities of B2K and a renewed organizational focus, we are
positioning ourselves to achieve the highest level of customer satisfaction and cost optimization. |
|
|
Recipe for innovation |
|
|
Innovation at McCormick begins with recognizing emerging eating trends and developing great flavors. Both lead to successful new
products. New products developed during the last three years accounted for 10% of sales in 2002. We continue to invest in people,
facilities and equipment to maintain our competitive edge in flavor innovation.
Developing consumer-preferred flavors. The process begins with recognizing current trends in categories such as ethnic
cuisine, easy food preparation, and eating on-the-go. Our research development teams bring together the skills of chefs, flavor
chemists and analytical scientists. Sensory evaluation of new products by consumers is the final step in the development process.
The result of this multi-staged methodology is that we are able to deliver integrated products that are winners with consumers as
well as our retail and industrial customers.
Providing a wide range of flavor solutions. When you enjoy great tasting food you are most likely tasting a McCormick flavor. In
our consumer business we are creating zesty flavors that offer convenience. For the food service industry, we can provide an array of
flavors to satisfy changing tastes and dining preferences. For a lunchtime chicken sandwich we can create the marinade, coating, sauce
and bread topping. Our breadth of flavor solutions is unique in the industry and gives McCormick a competitive advantage.
Investing in enhanced capabilities. McCormick’s research and development spending has nearly doubled in the last five
years by hiring experts who excel in value-added product development, by adding equipment to analyze flavors and instituting
state-of-the-art facility improvements. In 2000 we opened a new culinary center for our research chefs, and in 2002 a new sensory
center to support our product analysis. |
|
|
Recipe for growth |
|
|
Sales have grown at a 6% average annual growth rate since 1997. An annual sales growth of 3-7% is our target for the next five
years. While we are gaining sales with innovative products, further sales growth will be achieved by strengthening customer relationships,
expanding geographically, and through further acquisitions.
Strengthening customer relationships to maintain our leadership. McCormick is regarded as a premier supplier and category
leader in the spice and seasoning industry. We have built many long-term relationships with industrial customers for whom we play
an important role in developing the next unique flavor solution. In our consumer business, we are a supplier of both brand and
private label products and our market share in our key markets is well ahead of the next competitor.
Expanding geographically because the desire for flavors knows no boundaries. Since the acquisition of Ducros in 2000,
McCormick has established a foundation for growth in Europe. We are prepared for further market penetration in Europe by utilizing
new distribution channels, by employing better merchandising and strengthening brand support. In Asia and South America we
established new supply sources for industrial customers in 2002. In China, where sales increased 14% in 2002, we are continuing
distribution of branded products into new regions and supporting the growth of key industrial customers.
Growing through acquisitions that enhance our portfolio of flavors. We plan to acquire leading consumer brands that deliver
flavor as well as industrial businesses that specialize in value-added products. We are concentrating on companies located in
geographic areas that offer the best opportunity for growth, namely North America, Europe and parts of Asia. We will be aggressive,
yet disciplined in seeking acquisitions.
|
|
|