Accelerating condiment growth: McCormick acquires Cholula Hot Sauce for US$800m
27 Nov 2020 --- McCormick & Company has agreed to acquire Cholula Hot Sauce, a hot sauce brand that delivers authentic Mexican flavors, from L Catterton, for US$800 million in cash.
The transaction will be complete by the end of the year and financed with a combination of cash on hand and commercial paper. The deal is also subject to customary closing conditions.
McCormick plans to elevate Cholula’s brand awareness, increase the availability of its products, and extend the Cholula brand into new formats and eating occasions to drive trial and household penetration.
“The acquisition of Cholula accelerates McCormick’s growth opportunities within our condiment platform and broadens our portfolio in the hot sauce category with the addition of the Cholula brand,” says Lawrence Kurzius, chairman, president and CEO.
Kurzuis further sees hot sauce as “an attractive, high-growth category” whose growth Cholula is “outpacing.”
“As McCormick continues to capitalize on the growing consumer interest in healthy and flavorful eating, Cholula is a strong complement to our portfolio, providing consumers and foodservice operators with an even more diverse product offering that we expect will strengthen our growth opportunities.”
Business growth
McCormick has a history of creating value through acquisitions, including snapping up the food unit of UK-based Reckitt Benckiser, for US$4.2 billion in 2017.
“We plan to grow Cholula by optimizing category management and brand marketing while also expanding channel penetration,” Kurzius adds.
In the last 19 months, McCormick has established Cholula as a high-performing standalone business, vastly improved commercial execution efforts and pivoted its foodservice strategy to position Cholula for long-term growth success, reveals Maura Mottolese, CEO of Cholula.
Cholula’s annual net sales are approximately US$96 million and are expected to grow mid-to-high single digits in a normalized environment beyond the COVID-19 pandemic.
McCormick plans to retain the Cholula brand name in both the retail and foodservice channels.Cholula’s portfolio of six distinctive flavors is made in Mexico using high-quality ingredients. It is based on a 100-year old recipe comprised of a unique blend of fresh peppers and regional spices.
Hot sauce potential
Cholula’s products are “highly complementary” to McCormick’s existing hot sauce portfolio and will broaden the flavor offerings to consumers and foodservice operators.
Cholula has strong brand equity and a differentiated, traditional Mexican hot sauce taste profile that builds on McCormick’s existing portfolio of condiments.
With a particular affinity among Millennials, Cholula’s fan base is incremental to Frank’s RedHot sauce, a hot sauce produced by McCormick.
The company’s category management, e-commerce and marketing capacities, in addition to its insight-driven innovation capabilities, are expected to accelerate momentum, expand distribution and drive growth.
Edited by Elizabeth Green
