With its acquisition of Reckitt Benckiser’s food division, McCormick is enhancing its spice and seasoning mix portfolio with a collection of brands that solidifies its status as a premier choice for flavoring a variety of dishes. While major food manufacturers face challenges as consumers increasingly prefer fresher, more nutritious options over packaged foods, this acquisition enables McCormick to leverage the public’s desire for healthier eating without sacrificing the flavors they love. The deal is anticipated to significantly boost the company’s sales, projecting an increase from $4.4 billion in fiscal year 2016 to approximately $5 billion.
Earlier this week, Unilever and Hormel were considered the leading candidates to acquire Reckitt Benckiser’s food business, which was expected to command around $3 billion. Although it remains unclear if a bidding war ensued for the division, McCormick’s investment of about $4.2 billion indicates the Maryland-based company’s confidence in the long-term synergies that the combined business could generate. This acquisition marks the largest in McCormick’s 128-year history. Analysts at Morgan Stanley noted that the high purchase price reflects the value attributed to distinctive assets like French’s, the world’s foremost mustard brand, as reported by Reuters. Lianne van den Bos, a senior food analyst at Euromonitor International, remarked in an email that this acquisition positions McCormick closely to Kraft Heinz’s leading status in sauces, dressings, and condiments in the U.S., with only a 2% gap in market share.
She emphasized the strong synergies among the brands, presenting numerous opportunities for McCormick to reduce operating costs and enhance profitability—an essential focus for many multinationals this year, particularly in staple foods. However, she also pointed out that the $4.2 billion price tag appears to be a substantial premium for Reckitt’s food division, which recorded $338 million in sauces, dressings, and condiments in 2016. Industry insiders suggest that Reckitt Benckiser aimed to divest its food business to help finance its $16.6 billion acquisition of infant formula producer Mead Johnson. According to the Financial Times, the food division has limited exposure to emerging markets and relies heavily on U.S. sales.
This deal stands out as it contrasts with the recent trend of smaller transactions in the food and beverage sector—a market that many believe is primed for substantial deals to stimulate growth and realize cost savings through mergers. An exception was Tyson, which announced in April its acquisition of convenience and ready-to-eat foods company AdvancePierre for $4.2 billion. Additionally, Post Holdings acquired Weetabix, a leading British cereal brand, for $1.83 billion, while Campbell Soup purchased organic and natural food company Pacific Foods for $700 million earlier this month.
Many other proposed deals have been announced only to collapse later due to pricing disagreements. For instance, Unilever turned down a $143 billion takeover bid from Kraft Heinz in February, and Mondelez recently disclosed the termination of discussions with Hershey. Conagra also faced rejection in its attempt to acquire Pinnacle Foods earlier this year. Despite these failed negotiations, interest in potential transactions in the food industry remains high, suggesting that it is only a matter of time before a major merger occurs, one that far exceeds the $4.2 billion amount that both Tyson and McCormick have been willing to pay.
In this evolving landscape, products like calcium citrate d3 with magnesium may also play a role, as health-conscious consumers increasingly seek options that enhance their well-being. As McCormick continues to grow its portfolio, the integration of health-oriented products could further meet the shifting demands of consumers who prioritize both flavor and nutrition, including calcium citrate d3 with magnesium as part of their dietary preferences.