At the same time, changing consumer shopping habits due to COVID-19 also prompted McCormick to shift more of its trade marketing to online and pull back on some in-store promotions as well as delay new merchandising elements, executives told investment analysts March 31 during the company’s first quarter earnings results conference call.
“Brand marketing is a key driver of sales growth and we’re increasing our investments in 2020 as planned,” but at the same time the company has had to “quickly pivot and adjust our messaging in light of the COVID-19 developments,” said McCormick chairman, president and CEO Lawrence Kurzius.
He explained that because McCormick has an in-house “marketing excellence organization,” it has been able to change and produce new advertising content quickly, and fine-tune messaging to be more relevant to consumers’ new reality following voluntary or government mandated orders to stay home more.
For example, Kurzius said, McCormick has changed advertising content to focus on “home family times,” as well as providing more basic meal planning and prepping advice. To this end, the company’s new advertising campaign with the tagline ‘It’s Gonna Be Great,’ is well timed for consumers’ evolving needs during the pandemic.
“This TV and digital campaign is focused on consumer education, on what to make, how to prepare, and build confidence in the kitchen, which is all the more relevant today as consumers cook more at home,” he said.
Responding to consumers in real time
Recognizing that COVID-19 has forced many home cooks into their kitchens for the first time, McCormick has “resourced up an area where consumers can write in and get real-time answers to their questions,” Kurzius said. “That’s a somewhat people-intensive thing, but it’s been very much appreciated by consumers.”
Kurzius said many of the early questions submitted by consumers center on how to occupy kids at home and prepare recipes to promote health and wellness. Based on sales data from earlier this month, Kurzius added that the answers McCormick staff are supplying are heavily influencing consumers’ purchases.
“With kid-friendly recipes from painted sugar cookies to scented slime or window clings, and we’re seeing increased consumption in related product. US scanner sales show vanilla is up 54% for example, in the weekend of March 15,” he said.
Similarly, he said, US consumption of McCormick’s stocks and broth increased 140% and turmeric was up 22% during the same period after the company shared content and recipes on turmeric, bone broth and soup to help with health and wellness.
Now that more consumers’ pantries are stocked, Kurzius said some of the questions have shifted to how to create flavorful meals with items that have been stockpiled.
“Canned tuna, eggs and pasta are frequent searches, and we have and will continue to create content to add flavor to these items and more,” he said, adding, “Consumers want more convenient solutions to add flavor, as evidenced by recent 104% US consumption growth in dry recipe mixes.”
Hitting pause on in-store promotions
While McCormick focuses on reaching consumers digitally, it has hit pause on in-store promotions and the introduction of new merchandising elements, despite a “strong favorable customer reaction” to their rollout earlier this year.
“As we partner with retailers to maintain stocked shelves and business continuity, we will have some delay in our rollout” of new merchandising elements, Kurzius said. But, he added, he expects it to be just as impactful once it is reinstated after the peak of COVID-19 passes as he expects that cooking at home will be a longer-term trend as Americans continue to grapple with the economic fallout of sheltering in place.
The decision to pause promotions that retailers were struggling to execute against could have some negative impact on the sales bump most food and beverage brands see around Easter, but Kurzius said this will be minimal for McCormick.
“I think that whatever impact there is on Easter, it’s going to be lost in the shuffle because of the tremendous surge right now. We are seeing the right seasonal items doing strongly,” he said. For example, “vanilla for baking [is] a big item right now.”
He also noted that Easter is a less important holiday for McCormick than grilling, which is a “bigger factor for us,” and which he said he expects will be “really good” this year with people staying at home more.
Marketing is a bright spot
While McCormick’s ability to quickly adjust its advertising and marketing strategy should help the firm in both the short- and long-term with brand awareness and loyalty, the company – like many others – is still feeling a negative impact from COVID-19.
According to executives, COVID-19 heavily impacted sales in China, where many consumers did not have a chance to stockpile as they did in the US. As a result, Asia Pacific’s consumer sales fell 28% year-over-year and China’s profit fell 10% -- creating a headwind that slowed the company’s overall growth during the quarter, which saw a 6% drop in organic sales year-over-year.
Negative impact on the business’ foodservice channels, which represents about 20% of McCormick sales also dealt a sizeable blow to the company.
Unsure how extensive the pandemic’s negative impact will be, McCormick declined to provide additional guidance for 2020 at this point. It noted that many of the other large CPG companies that are still providing guidance are in their fourth quarter and therefore only need to predict about six weeks. McCormick, however, is just at the start of its second quarter and as the duration of the pandemic is still unknown, executives said they cannot confidently make any predictions.
