McCormick says its China consumer business is still "robust"

McCormick says its China consumer business is still "robust"

McCormick & Co. has expressed confidence in its progress in China for 2016 despite acknowledgement of the ongoing turbulence in the country's economic environment.

For the year ending 30 November, its consumer division in China delivered 12% sales growth in constant currency as the firm focused on in-store execution and expanding its distribution. For the fourth quarter, though its Asia Pacific arm reported a 6% drop in revenues as a result of poorer sales in India, its Chinese consumer segment delivered 5% sales growth. This did however include some impact from distributors that held back on purchases in anticipation of the Chinese New Year, the company revealed.

Lawrence Kurzius, president and chief operating officer, who will move into the role of CEO on 1 February, said the Chinese consumer  business was "off to a strong start". Despite macroeconomic pressure in the country which he said makes McCormick "cautious" he remains optimistic about the firm's future in the country adding it has "grown to be such a large contributor to our total business".

He forecast constant currency sales growth in the high-single-digit to low-double-digit range for the full year.

"We see opportunities for further growth of our consumer business in China, especially with the cross-selling of the McCormick brand and WAPC brand products. While we are certainly cautious given the current economic environment, keep in mind that our products are a staple in Chinese cooking".

Alan Wilson, chairman and CEO, was also bullish on the firm's future in China despite the fallout of slow economic growth the firm's peers have seen in recent quarters.

Wilson said McCormick's Chinese consumer business was still "robust".

"We know there's a lot of discussion around China. We're obviously very aware of the economic discussion going on there but our own business, we're anticipating that continues to do well."

Kurzius noted that: "A great deal of the carnage that's happened around us has been more in the modern trade portion of the business. That part of our business is slow as well but it only accounts for about 20% of our consumer business in China."

He put McCormick's success in the country partly down to the acquisition of Chinese bouillon maker Wuhan Asia-Pacific Condiments in 2013, which allowed the firm access to "the interior, the smaller cities...and a more traditional trade outlet".

This, he added, has taken its Chinese business from having a stronger focus on its industrial business to now being "predominantly a consumer business".

"Years ago, China was more of an industrial business for us, and that's how we got our foothold there. But with the continued growth of our consumer business and with the addition of the acquisition we did a couple of years ago, that business is now...about two-thirds consumer".

With the firm planning a global new product development offensive, China too is set to see new McCormick products launched. In 2016, McCormick will launch Thai Chilli sauce in a squeezable pouch format in the country.

"We are excited about our plans and potential for even greater growth in 2016, with new products, incremental marketing, distribution expansion opportunities and tools for better retail partnership," said Kurzius.