McCormick’s mini hot sauce bottles pack outsized punch, lifting volumes & sales
“Hot sauce is an attractive category. There is new competition always entering the category, so that is something we deal with all the time. But … we really do like the underlying health of our base business and continued strong consumer loyalty,” CEO Brendan Foley told investment analysts yesterday during the company’s third quarter earnings call.
While he acknowledged McCormick’s share in hot sauce globally is impacted by a peer that is lapping supply chain disruptions, he said McCormick is “winning hot sauce tabletop share behind new distribution, packaging and promotion.”
Earlier this year, the company launched Frank’s RedHot Sauce Minis, including a Flavor Explorer pack, and for a suggested retail price of $1 it also launched 2-ounce squeeze sauces available in sriracha and creamy buffalo.
“We are seeing a lot of surge in unit volume from these mini trial sizes, which we were able to participate in or begin to participate in the third quarter. Our units are holding up well in this category” with a pickup in velocity, Foley said.
“What it is doing is helping us drive trial on new flavors. We have sriracha in there and we also have a creamy buffalo sauce. Both were super good, but at a dollar these are really low price points for consumers. … It lowers the barrier to trial, and so we have seen a nice pickup,” he said.
New flavors – including Frank’s Dill Pickle Hot Sauce – also are rolling out in the back half of the year, and “we like the performance that we have seen there,” he added.
The company’s Cholula line continues to be a “significant growth driver” with innovative recipe mixes bringing to the category new consumers – particularly Millennials and younger families, Foley said.
McCormick expects ongoing innovation, expanded distribution and brand marketing to drive further its success with hot sauce as 2024 wraps up with retail helping to offset pressure from food service, he said.
Spice blends, premium offerings attract younger shoppers
Beyond hot sauce, McCormick returned to sales volume growth more broadly, marking an “inflection point for total company volumes turning positive,” said Folely.
He explained, sales volume rose 1% in the quarter, which ended Aug. 31, compared to a 2% drop in the same period a year ago.
“This demonstrates that we are investing in the areas that drive the move value and reinforces our confidence in our plans and long-term objectives,” he added.
Growth drivers include consumer demand for seasoning blends, especially among Gen Z shoppers who are learning to cook and also want premium flavor items, Folely said. Likewise, McCormick’s range of pack sizes – both bulk and value trial – are helping more consumers access its products even as they balance their budgets after inflation drive up grocery prices in recent years.
Increase in eating at home helps lift McCormick’s sales, volumes
“Consumers are resilient, but remain challenged. They are exhibiting value-seeking behavior – making more frequent trips to the grocery store with smaller baskets and shopping just for what they need. They are also focused on reducing waste and stretching their budgets,” he said.
As such, he added, consumers are cooking and eating at home more – increasing their need to spices, which helped the company’s net sales of $1.68 billion for the quarter beat analyst expectations of $1.67 billion.
These trends and the company’s volume successes prompted McCormick to raise its full year guidance. It now expects sales to be between negative 1% and 1% compared to its previous forecast of negative 2% to flat.
