McCormick expands in Europe

July 06, 1994|By Patricia Horn | Patricia Horn,Sun Staff Writer

McCormick & Co. Inc., the Sparks-based spice and flavorings company, announced yesterday that its British subsidiary had acquired the United Kingdom's leading supplier of specialty foods to the food service industry.

This is McCormick's second European acquisition announcement within a week. McCormick announced Thursday that it had bought Butty, a Swiss herb and spice operation, and Minipack Systems Ltd., a British packaging firm.

The company yesterday would not disclose the exact amount it paid for Noel Holdings Ltd., but Donald A. Palumbo, McCormick's vice president and treasurer, said the price was under $40 million.

Noel is 20 miles outside Manchester, England, and has more than 100 employees, Mr. Palumbo said.

For McCormick, the world's leading maker and marketer of spices and seasonings, these latest acquisitions are more pieces of its effort to expand its operations in the competitive European market.

"This acquisition is important for McCormick because it puts us into another part of the UK market -- the food service part -- and it completes McCormick's entrance into the UK," Mr. Palumbo said.

McCormick's United Kingdom operations had included strong players in the consumer, fast-food and food processor markets, but not in food service, he said.

Food service is one of the fastest growing industries, and McCormick wanted to gain a presence in that area in Europe, said Tony Vento, a food industry analyst at Edward D. Jones in St. Louis.

According to analysts, McCormick's current strategy is to piece together multiple smaller companies to gain European market share. Noel fits that strategy, they said.

"They are not just taking their own spices over there -- it would be very difficult to compete that way, because the McCormick name is not known. These small acquisitions are already successful and have brand awareness in Europe," Mr. Jones said.

"I think it is very positive," Kurt C. Funderberg, an equity analyst at Ferris, Baker Watts Inc., said about McCormick's acquisition of Noel. "They are still trying to advance in Europe, but they are doing it slowly, bit by bit."

Last year, McCormick suffered a significant setback in its efforts to expand in Europe, Mr. Funderberg said. Its proposed joint venture with CPC International to acquire Germany's leading spice company, Carl Ostmann GmbH & Co. KG, collapsed after the-then European Community, now the European Union, blocked it on antitrust grounds. It then lost its own bid for Ostmann to Burns-Philp & Co., one of its main competitors.

"One of the issues facing McCormick was, 'Could they become a major presence in Europe?' " Mr. Funderberg said. "I think they are following a prudent strategy to do it more slowly. There are some big players in Europe, and it would do them more harm than good to overpay to acquire bigger holdings."

Noel's food portfolio includes herbs, spices and seasonings, cherries, olives, gherkins (pickles), plus a range of sauces, condiments and drink mixes. It exports to Ireland, Finland, Sweden, Switzerland and the Far East.

McCormick's annual sales exceed $1.5 billion, with sales of about $150 million in the United Kingdom.

Its international holdings and joint ventures operate on every continent. McCormick's share price closed today at $20.625 cents, up 12.5 cents.

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