McCormick & Company, Incorporated History

Address:

18 Loveton Circle
P.O. Box 6000
Sparks, Maryland 21152-6000
U.S.A.

Telephone: (410) 771-7301
Fax: (410) 771-7462

Website: www.mccormick.com

Public Company
Incorporated: 1903
Employees: 7,600
Sales: $1.88 billion (1998)
Stock Exchanges: NASDAQ
Ticker Symbol: MCCRK
SICs: 2099 Food Preparations, Not Elsewhere Classified; 2087 Flavoring Extracts & Syrups, Not Elsewhere Classified

Company Perspectives:

When people hear the name McCormick, they think of the spices they use every day. Indeed, we are the world's largest spice company. Yet, the Company is also the leader in the manufacture, marketing and distribution of not only spices, but seasonings, flavors and other food products to the entire food industry&mdashø foodservice and food processing businesses as well as to retail outlets. In addition, our packaging group manufactures and markets specialty plastic bottles and tubes for food, personal care and other industries. McCormick products are sold in more than 100 countries. How do we manage this complex business from the growing fields to the consumer purchase? It all starts with Multiple Management, an enlightened corporate philosophy and system of participative management begun in 1932. Multiple Management fosters the importance and power of people by encouraging participation at all levels of employment and sharing the rewards of success. This interaction of people is instrumental in shaping our Corporate culture and enhancing strengths throughout McCormick.

Company History:

McCormick & Company, Incorporated has been the largest U.S. seller of spices, seasonings, and flavorings for nearly the entirety of the 20th century, and now has grown to become the largest firm within the spice industry throughout the world. Its estimated market share is more than double that of its closest competitor, Durkee Foods. McCormick now operates seven divisions, including: McCormick Consumer Products, which provides a wide variety of spices, seasonings, and extracts under well-known brand names; McCormick Food Service, which offers spices and various other food products to foodservice distributors and membership warehouse clubs; McCormick Flavors, which supplies natural and artificial flavors for industrial needs; McCormick Foods Australia, which produces 400 items and markets them throughout the Asia and Pacific regions; Schwartz Herbs and Spices, the number one brand of herbs, spices, and seasonings in the United Kingdom; SupHerb Farms, which produces frozen and freeze dried culinary herbs; and Tubed Products, the leading producer of plastic squeeze tubes within the United States.

Early History

A 25-year-old Baltimore man named Willoughby M. McCormick founded the company in 1889 when he began making fruit syrups, juices, flavoring extracts, and root beer in his home. McCormick enlisted three young assistants to help with production and with door-to-door sales. Early marketing techniques included the use of the Bee Brand and Silver Medal labels and the adoption of the motto: "Make the Best--Someone Will Buy It." The company earned a reputation not only for its condiments and other consumables but also for such household and medicinal products as Iron Glue ("Sticks Everything But the Buyer") and Uncle Sam's Nerve and Bone Liniment ("For Man or Beast").

Within a year, the company was profitable enough to move to larger quarters. At this time, McCormick added a number of new products, including food colorings, cream of tartar, liver pills, castor oil, talcum powder, witch hazel, blood purifier, cold cream, bay rum, tooth powder, and toilet water. Three years later, after McCormick's brother, Roberdeau A. McCormick, had joined the business, the company again moved. Soon even more everyday products--bluing compound, ammonia, roach traps, flypaper, and bird seed--were added to the line. By 1894, the company had begun to export overseas. The following year the corporation was dissolved so that a partnership could be formed between Willoughby and Roberdeau (the two ultimately incorporated in 1903). This year the Clover Brand made its debut. In 1896 the company took a crucial step forward by acquiring Philadelphia-based F.G. Emmett Spice Company and firmly committing itself to the spice industry. Promotions that coincided with this event included the sale of the first McCormick cookbook and a novelty premium offer.

At the turn of the century the company opened an export office in New York City and began shipping its products to and from the East and West Indies, South Africa, Europe, and Central and South America. In 1902 the company acquired a four-story plant and unveiled the Banquet Brand for its line of spices and mustards. Promotions continued apace. With such slogans as "McCormick Means Merit" and the title of "Manufacturing Chemists, Drug & Spice Millers, Importers and Exporters," McCormick was fast becoming the East Coast leader in its selected fields. Although in 1904 a great fire in Baltimore destroyed the majority of the company's assets and records, temporary quarters were quickly established, and the company eventually regained its foothold through new product introductions. These included Clover Blossom spices and Banquet teas. The company gained welcome publicity in 1907 at the Virginia Exposition in Jamestown, when it received gold medals for a number of its branded products.

Growth, Expansion, and the Challenge to Succeed

The next two decades were characterized by more rapid growth and the company's rise to national prominence. In 1910 the company was among the first in the country to introduce gauze-pouch tea bags. This same year Willoughby was chosen to preside over the newly formed Flavoring Extracts Manufacturing Association, the purpose of which was to ensure uniformity in materials and packaging while elevating the status of regional spice companies. Willoughby's nephew, Charles P. McCormick, joined the company as a part-time shipping clerk in 1912; years later, Charles would prove instrumental in resuscitating the business following Willoughby's death. At the onset of the Roaring Twenties, the company was manufacturing over 800 products, embracing the national mood of prosperity and optimism. In 1921 it started construction of a new corporate headquarters: a nine-story building, replete with printing plant, analytical lab, machine shop, cafeteria, and railroad siding, overlooking the inner harbor of Baltimore. Five years later, McCormick stock was offered to wholesale grocers for the first time. Although the company would not achieve coast-to-coast distribution until after World War II, it hired Scotch bagpipers (the symbol for the company's Bee Brand) to advertise its products on the streets of large cities across the United States.

Sales reached $5 million in 1928, prompting the company to schedule office openings in Houston and San Francisco within the next few years. However, the stock market crash and the Great Depression placed the company in serious peril by 1930. Willoughby McCormick's initial response to plummeting sales was to drastically reduce wages. Within two years, he was forced to seek outside capital from New York investors to sustain the company's operations. McCormick died of a heart attack before accomplishing his mission, and it was left to his nephew, 36-year-old Charles P. McCormick, to turn the business around.

As the new president and chair of a floundering company, the potential for expansion of which was still enormous, Charles instituted a new business philosophy, which he termed "Multiple Management." McCormick's guiding belief was that a company, whatever its products or services, was nothing without its workforce, and an empowered workforce made for an empowered, efficient, and successful company. He established junior boards of directors to implement this philosophy and to provide regular forums for the exchange of ideas which might ultimately lead the company to become more productive and to seek new directions for growth. A radical departure from established business practices at the time, McCormick's plan also included a ten percent increase in general wages and a reduction in weekly hours from 56 to 45, all steps which would seem to preclude the company's downfall.

McCormick's leadership and his emphasis on employee productivity enabled the company to return to profitability within a year. Pioneering programs in profit sharing and medical benefits were among the company's rewards to its dedicated employees. The Multiple Management system became ingrained in the McCormick corporate culture and soon found hundreds of adherents in businesses across the United States, Canada, and Great Britain. McCormick's unique views and experiences were published in book form in 1938 as Multiple Management (reprinted as The Power of People) and The McCormick System of Management. A corporate pamphlet commemorating 50 years of the McCormick system declared that: "C. P. McCormick understood human nature and respected people. That was one of the reasons he got good results. Those who knew him and worked with him testify that he valued the opinions of others, didn't feel threatened by contrary ideas and was willing to change when a better idea came along."

Within the first five years under the new McCormick system, some 2,000 separate ideas were generated and implemented by the junior boards. Among the company's most visible innovations were a spoon-sift top and new metal containers for its spice line. In 1938 a McCormick research team developed a spice fumigation process called "McCorization" that produced the highest grade spices available without any detectable flavor loss. The early 1940s were distinguished by McCormick's undisputed rebirth as the East Coast's largest seller of spices. It was at this time that the company also began consolidating its product line under the McCormick name and the big "Mc" trademark.

The Postwar Era

In 1947, McCormick gained coast-to-coast distribution with the acquisition of A. Schilling & Company of San Francisco. A spice, coffee, and extract concern with a history older than that of McCormick, Schilling's house brand was so popular that it was retained for domestic spice sales west of the Mississippi. "United to Serve the Nation's Good Taste" became the new corporate slogan, and sales surpassed $25 million during the first full year of consolidation. Because of McCormick's growing presence overseas, with exports to 44 countries, the company opened the 1950s with yet another slogan: "From All the World--Known the World Over." Acquisitions, joint ventures, and the formation of new subsidiaries have since become an area of concentration for McCormick. Highlights of the company's early acquisitions included the 1959 purchase of Canada's largest spice company, Gorman Eckert & Co. (whose name was later changed to Club House Foods); the 1961 purchase of California-based Gilroy Foods, a producer of dehydrated onions, garlic, and other vegetables; the 1962 purchase of Baker Extract Co., a venerable New England competitor; and the 1968 purchase of Tubed Chemicals Corporation, a packer and manufacturer of plastic tubes.

Diversification Within a Changing Marketplace

McCormick remained busy on other fronts as well. In 1959 it introduced its Gourmet line of spices. Four years later, it modified its spice tins with a plastic duo-flip top and also established the industrial products division to provide custom service for food processors. However, McCormick's most dynamic move occurred outside the food and spice industry. In 1962, while searching for a 50-acre plot near Baltimore to satisfy its needs for expansion, the company learned of a much larger piece of commercial property whose developers were in financial trouble. Guided by then President John Curlett and Chairperson C. P. McCormick, the company decided to form a real estate company, Maryland Properties, Inc. (later renamed McCormick Properties), to purchase and bring the Greater Baltimore Industrial Park project to completion. Through various leasing arrangements, the subsidiary made money during its first year, and soon it began acquiring and developing other properties in the Washington, D.C., and Baltimore areas. From 1973 until 1988, McCormick's real estate arm operated as an unconsolidated subsidiary. In one of its best years, 1983, it reported a strong profit of $13 million on revenues of $86 million. Three years later, a Financial World article recorded chairperson Harry Wells's plans to build the subsidiary, with operating assets of close to $300 million, into a $1 billion operation by 1991. Shortly after that, new leadership determined that the company's long-term health would be best served by a concentrated refocus on its food-and-spice businesses.

Despite the regular introduction of new products, new slogans, new subsidiaries, and new distribution arrangements, McCormick's core industry had suffered from slowing growth almost since the time of C. P. McCormick's death in 1970. Depressed stock values during the late 1970s enhanced the possibility of a takeover, and one company, Sandoz Ltd., appeared as though it might become the majority shareholder in McCormick. An immense Swiss chemical and pharmaceutical firm, Sandoz succeeded in acquiring almost five percent of McCormick's nonvoting stock in 1979 at $19 a share; it then offered to buy the remainder of the company for $37 a share. Nearly a year later, McCormick succeeded in buying its shares back, at $28 apiece, amidst wild rumors on Wall Street and rollercoaster speculative trading. Sandoz had made a profit, but McCormick, more importantly, had recovered its equilibrium, at least for a time.

Reorganization and Revitalization in the 1980s

In 1982 trouble reappeared within the company's grocery division. It was found that for a four-year period, from 1977 to 1980, expense accounting had been delayed in order to satisfy corporate profit goals. Stockholder suits quickly followed. Because of this dereliction, the heretofore exclusive board of directors now decided to open its doors to outside executives.

This change alone was not enough to deflect further setbacks related to profits. During the first half of the 1980s, domestic spice consumption dropped an alarming 20 percent. The company unveiled a new gourmet line of spices in 1985, supported by a massive consumer education campaign and the slogan: "McCormick/Schilling Gourmet. Quite simply, the best spices on earth." Two years later, the company planned another major rollout with the biggest marketing budget in its history. Saturation of this sort had been atypical of the venerable company, and, according to Janet Novack in an article in Forbes, "McCormick had always figured that in the spice business it was enough to woo retailers, and consumers would follow. After all, its full line of 103 gourmet and 107 regular spices takes so much space ... that once established, it leaves little room for competitors' products." By Wells's admission, the company was slow to react to changing consumer trends--so slow that, "for a while there," wrote Novack, "an alert and strong competitor, had there been one, could have knocked it right off its lofty perch." Despite its increased attention to marketing, however, McCormick's profits and market share were still crumbling at the end of 1986.

The spice company's modern rebirth came with the ascension of Charles P. McCormick, Jr., grandnephew of the founder, to the positions of president and CEO in 1987. Assisted by then COO Bailey A. Thomas (elected chairperson and CEO in 1993), McCormick sold off the real estate and underperforming food divisions and sunk some $200 million into consumer marketing and product development. The revitalization campaign, known as Project One, involved shelving the traditional red-and-white spice tins in favor of elegantly labeled clear plastic bottles, produced by a corporate subsidiary. Other product rollouts included a line of dehydrated sauce mixes. The company also began fortifying its relations with the industrial and foodservice businesses and by the early 1990s counted at least 80 of the 100 largest U.S. food processors as its clients.

The 1990s and Beyond

McCormick's strategy for future growth included increasing its domestic market share to around 50 percent. The most important step toward meeting this goal involved the implementation of a comprehensive and aggressive acquisitions strategy, including the 1991 purchase of Mojave Foods Corporation and the 1993 acquisition of the Golden Dipt Division of DCA Food Industries. More importantly, however, the company's other primary strategy was to increase its international presence, which it hoped to do through a series of joint ventures and through expansion of its foreign subsidiaries. Without wasting any time, management formed a joint venture with KG of Heidelberg, Germany, in 1990; and acquired Glentham International Ltd. of Northhampton, United Kingdom, in 1992; Grupo Pesa, a Mexican seasoning company; Tuko Oy, a spice company in Finland; Butty of Switzerland, an affiliate of Unilever; and Minipack, a packaging company in Southampton, United Kingdom, all in 1994. In 1995, the company continued its acquisition strategy in Europe, Asia, and India, but also announced a restructuring of the entire company, including staff reductions, plant and departmental consolidations, and a streamlined yet more aggressive marketing campaign. Unfortunately, Bailey Thomas was not able to see the fruits of his labor--he died unexpectedly of a heart attack in 1994 and was replaced by H. Eugene Blattman as CEO.

As the spice supplier for such expanding global chains as McDonald's and Burger King, McCormick was also growing in this area. During the late 1990s, the company's U.S. Consumer Business and Food Service Group reported record revenues, and the formation of a Global Industrial Group signalled management's commitment to expand its packaging operations around the world.

After a long and complex history, the new McCormick remained much the same as the McCormick of early Multiple Management days in its commitment to employees, innovations, and product excellence worldwide. Yet the company had even developed a whimsical sense of its place within the industry. In 1998, as part of a special printing process, management contracted a printing press company to include the scent of vanilla on its annual report.

Principal Subsidiaries: Festin Foods Corp. (50%); Gilroy Foods, Inc.; Glentham International, Ltd. (U.K.); Golden Dipt Co.; Grupo Pesa, S.A. (Mexico); Kancor Flavours and Extracts Limited (40%); Lukcor, S.A. (50%); McCormick & Wild, Inc. (50%); McCormick Canada, Inc.; McCormick de Centro America, S.A.; McCormick de Mexico, S.A. de C.V. (50%); McCormick de Venezuela, C.A.; McCormick Foods Australia Pty. Ltd.; McCormick Ingredients Southeast Asia Pte Ltd.; McCormick GmbH; McCormick-Lion Limited (49%); McCormick S.A. (France); McCormick U.K. plc; Mojave Foods Corporation; Sesaco Corporation (22.5%); Setco, Inc.; Shanghai McCormick Seasoning & Foodstuffs Co., Ltd. (35%); Stange (Japan) K.K. (50%); Tubed Products, Inc.; Tuko Oy (Finland).

Principal Divisions: Food Service Group; McCormick Flavor Division; McCormick Ingredients; McCormick Schilling Division.

McCormick & Company, Incorporated History

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Company History:

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