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chairman's message: strategy for growth
For each step of our strategy...improve margins, invest in the business and increase sales and profit ...
we are turning up the heat!
A key to margin improvement is our B2K program, a global initiative that is significantly improving
our business processes through state-of-the-art technology. Utilizing the power of B2K, employees are
pursuing supply chain efficiencies throughout the Company. Following cost reductions of $24 million in
2004, we expect to reduce costs $25 million in 2005 and an additional $30 million in 2006. In addition, we
are driving margins with the development of more value-added consumer-preferred flavors. Today, more
than 70% of McCormick's sales are value-added products versus ingredients.
Margin improvement fuels our growth. A portion of this fuel will be invested in the business. We are
accelerating the marketing support behind our brands and have more than doubled advertising expense
since 1999. Product development expense has increased
84% since 1999, leading to many successful new
products. In 2004, 13%of sales were new products
launched during the past three years. We are also
increasing sales and profits with strategic acquisitions
such as Zatarain's, the leading brand of New Orleans-style
cuisine. Acquisitions during 2003 and 2004 have
added nearly $200 million in annual sales.
Our annual goals are to grow sales 5% with a range
of 3-7% and to increase earnings per share 10-12%.
We are growing sales through innovation, acquisitions and
extending our geographic reach. Higher sales and margin
improvement are increasing not only earnings per share
but cash flow. We expect cash from operations, less net
capital expenditures and dividends of approximately $450
million from 2005 to 2007. In a tough environment, these
are aggressive goals for McCormick and, for that matter,
any packaged food company. But we like a challenge at
McCormick and have established a strong track record in
meeting our goals.
Our key ingredient is the people of McCormick. Their enthusiasm, values and drive to win are
unmatched. Throughout the Company, our high performance employees are delivering great results – to
our customers, our consumers and our shareholders. I am confident of our continued commitment and
ability to build shareholder value at McCormick.
vision statement
McCormick will be the leading global supplier of high value-added flavor solutions.
Building on strong brands and innovative products, we will provide superior quality and
service
to customers and consumers around the world.
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