McCormick & Co. spent more on advertising and promotion in the first quarter, using coupons and recipes to entice consumers to buy its spices and condiments.
The strategy paid off as consumers who have been cooking at home more often because of the weak economy spent a little more to buy the company's brand-name products and less on cheaper, private-label brands.
That helped the Sparks company's earnings rise during the first quarter, which ended Feb. 28. McCormick reported net income of $67.9 million, or 51 cents per share, compared with $57.7 million, or 44 cents per share, in the same period a year ago. Analysts were expecting earnings of 48 cents per share, according to Thomson Reuters.
But the company also said it lost $5 million because of a product recall. McCormick recalled several products this month because of possible salmonella contamination. The products recalled included French onion dip mix, vegetable dip, onion gravy and corn bread stuffing that contained the flavor enhancer hydrolyzed vegetable protein.
The recall, which affected dozens of products from a variety of manufacturers, stemmed from a problem with hydrolyzed vegetable protein manufactured by Basic Food Flavors of Las Vegas.
McCormick officials do not expect the recall to hurt second-quarter profits.
"This was a very broad recall across the whole food industry," Alan D. Wilson, McCormick's chairman and chief executive, said in a telephone interview. "We didn't want to take any chances, but no one reported any illnesses from this incident. There was a potential for there to be an issue, and we didn't want to create any problems."
The company spent $8 million on advertising and promotion, a 28 percent increase from last year. Volumes of its McCormick brand spices and Zatarain's line increased 10 percent each. Sales were $764.5 million for the quarter.
But as people continued to eat out less, McCormick's industrial businesses suffered because of weakness in the restaurant industry.
The company plans to continue to increase ad spending but does not expect the same effect on earnings in the second quarter. Promotions will focus on new products, which takes longer to show up in sales.
McCormick expects a second-quarter earnings per share in the range of 42 cents to 45 cents. For the year, the company said it expects earnings of $2.49 to $2.54 per share.