McCormick breaks ground on 2nd factory in China

January 26, 1995|By Kim Clark | Kim Clark,Sun Staff Writer

In a second step on its long journey into the Chinese market, McCormick & Co. Inc. announced yesterday that it has broken ground on a sauce, syrup and condiment plant in Guangzhou, its second factory in China.

And the company said it would increase its stake in its first plant, a spice factory in Shanghai, from 50 percent, to 90 percent.

James Albrecht, group vice president for the Asia Pacific zone, said the second plant initially will make ingredients for a U.S. fast-food chain opening restaurants in China. Eventually, it may be expanded to make spices and seasonings for the Chinese retail market.

He declined to name McCormick's fast-food customer, or disclose the size or cost of the new plant. He said the factory should start operations early next year.

Analysts noted yesterday that McCormick supplies spices and flavorings to many fast-food firms, including McDonald's Corp.

The analysts said that while the move was a smart one, it may take a long time to pay off.

"Strategically, China represents an important market for the long term," said Michael Branca who follows the food industry for Natwest Securities Corp. in New York.

And while McCormick has made a good early start in the Chinese market, he said that because China is so vast, "it is a wide open market" for competitors as well.

Mr. Albrecht said he expects McCormick to open one or two similar fast-food ingredient plants in China in the next few years.

And he said that he believes the demand for McCormick products in China will boom.

"This is the fastest-growing market in the world," he said.

And the area they've picked for their second plant, on China's southeastern coast, is one of the busiest. "They call Guangzhou the 'city of cranes.' Everywhere you look there are buildings going up," Mr. Albrecht said.

Mr. Albrecht said sales also have been strong in McCormick's 5-year-old plant in Shanghai, where peppers, five-spice blend and spicy batter mixes for fried foods have been among the most popular items. The Shanghai plant also processes spices for export to the United States and other countries.

McCormick, which started the plant in a joint venture with PepsiCo and a Chinese firm, will buy out PepsiCo and a share of the Chinese company's stake.

The Chinese partner, the Shanghai Foodstuffs and Grocery Co., will continue to own 10 percent of the plant, the company said.

The price of the buyout was not disclosed and awaits approval from the Chinese government.

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