If you were to go to the spice and seasoning section in the kitchen of the Bro household, you would notice that there is a plethora of different spices. Everything from Italian seasoning to peppercorns to paprika to crushed red pepper. Almost every meal we cook has some sort of spice mixed into the dish. The vast majority of these spices all have McCormick & Co.’s (MKC) red top. That makes sense, given that McCormick has cornered one-fifth of the very fractured spice and seasoning market. McCormick also enjoys economy of scale that its nearest competitors just can’t touch. McCormick is four times as large as its next biggest competitor. Even so, management is still trying to find ways to improve the company. On 7/20/2017, McCormick purchased RB Foods, which includes Frank’s Red Hot, French’s mustard and a variety of other condiments, for $4.2 billion. The day of the announcement saw the stock drop more than 6%. Investors thought that the company paid way too much for just a portfolio of condiments. This was a shortsighted view, as you’ll see in a second.
We first bought McCormick for the March to Freedom Fund after we sold our stake in General Electric (NYSE:GE). I consider the company a core holding as it is the top stock in its sector and because of its dedication to dividend growth, which we will also talk about later. I last discussed McCormick after it released third-quarter earnings. Now that it has released fourth quarter and full-year 2017 results, I think it is a good time to once again examine the company as I hope to buy more of the name during 2018. All specific earnings information provided comes from the company’s fourth-quarter earnings report.
