By Kelly Green
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Do you know what the No. 1 hot sauce in the U.S. is?
The answer varies depending on the source. But it’s always the same handful in the top spots: Tabasco, Cholula, Frank’s RedHot and Huy Fong Foods’ sriracha.
Out of the four, only two are owned by public companies … and, in fact, it’s only one public company. Both brands are a part of one company’s recent aggressive acquisitions.
McCormick & Co. (MKC) is a sacred brand in our house. I’m from Baltimore, and I believe that Old Bay makes almost everything better.
Seriously, have you tried Old Bay Caramel Popcorn?
I will always hold that shiny yellow can near and dear to my heart. And it’s been ingrained in my DNA to gravitate toward the red-capped section of the spice aisle before checking any other brands.
Until I stumbled across a recent article, I had no idea the company was gunning for the neighboring condiment aisle as well.
Willoughby M. McCormick started the business in Baltimore in 1889.
He was 25 years old and sold root beer, flavorings extracts, fruit syrups and juices door-to-door.
In 1896, McCormick bought the F.G. Emmett Spice Company and entered the spice business. Although Willoughby died by 1932 …
- The company continued expanding into a $26.9 billion business.
My beloved Old Bay seasoning was added to the company in 1990. But over the past 10 years, the company has been on the hunt for condiments and other grocery staples.
The company’s portfolio now holds Cattlemen's BBQ Sauce, Stubb’s Legendary Bar-B-Q Sauce, Thai Kitchen, Zatarain’s, French’s ... and, of course, Frank’s RedHot and Cholula.
It’s clear that McCormick is making a run outside the spice aisle, but is that paying off? And more importantly, will that pay off for investors?
So, I checked out the ratings history of the company.
McCormick has been no stranger to the “Buy” range. It’s held that status from March 2014 all the way until May 2021 when in was initially downgraded to a “C+.”
Just 15 days later, it popped back up to a “B-,” but in the end, a “Buy” status didn’t stick. It’s still hanging out in that “Hold” range.
- Last month, the company was upgraded from a “C” to a “C+.”
I’ve mentioned before that this kind of movement is a signal for me to add a company to my watch list.
It could indicate that the company will continue into the “Buy” range … which would be good news if we want to get it.
Shares are up 24% over the past 90 days, but only 11% compared to one year ago. And if you take a look at the daily chart, you’ll see the recent downtrend could mean we’re in for a future sideways trend:
The company does have a history of paying a reliable and increasing dividend, but right now the yield is only 1.4%.
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The 1.4% dividend yield on McCormick’s isn’t enough for me to want to ride a stock sideways … but that might change if we see another upgrade to “Buy.”
Searching for the King of Condiments
While I was on WeissRatings.com, I decided to see if I could find a king of condiments with a “Buy” rating.
And when it comes to condiments, The Kraft Heinz Company (KHC) might have more of that aisle than anyone else.
This grocery giant resulted from a merger between the Kraft and Heinz companies in 2015. Some of the notable cuisine toppers that it produces are A.1. Sauce, Grey Poupon, Heinz 57 Sauce, Kraft Barbecue Sauce, Heinz Ketchup, Lea & Perrins Worcestershire Sauce and Miracle Whip.
Not to mention the company owns many other pantry staples like Velveeta, Jell-O, Ore-Ida, Oscar Mayer, Classico, Philadelphia Cream Cheese and Maxwell House Coffee. And that’s by no means an exhaustive list.
Plus, in January, the company announced that it completed its acquisition of an 85% stake in Germany-based Just Spices GmbH. (Maybe it’s going to try to give McCormick a run for its money in the spice aisle.)
Since the 2015 merger, the company has only been in the “Buy” range from November 2016 to October 2017.
The rest of the time, it’s fluctuated between the “Hold” and “Sell” range.
Most recently, the company was upgraded to a “C” as earnings per share increased from -0.0221 cents to 59 cents.
Shares are down 7% over the past 90 days and 2% over the past year. The company has paid a dividend since the merger but is not consistent about increasing its payout to shareholders.
- That being said, its current yield of 4.6% isn’t too shabby.
Kraft has recently announced changes to both its leadership team and board of directors, so this one is worth adding to your watchlist. That’s an attractive dividend, and management changes might make the difference.
I did, in the end, find one condiment parent company with a “Buy” rating.
Conagra Brands (CAG) is behind Hunt’s, La Choy, Vlasic and Wish-Bone.
But, of course, that’s just the beginning of its vast portfolio. Bertolli, Banquet, Chef Boyardee, Reddi-wip, Hebrew National, Snack Pack, Slim Jim, Log Cabin, PAM, Parkay and Duncan Hines are just a few others.
In January, the company was upgraded to a “B-.” That’s out of the “Hold” range it seems to have been stuck in since last April.
A quick look at the ratings history shows the company hasn’t really been able to keep a “Buy” status since 2014. And in 2019, it spent three months labeled a “Sell.”
Even looking at a share price chart, I only have one word to sum it up: sideways.
But this most recent upgrade comes with shares moving upward … up 10% in the past 60 days.
So, I’ll definitely keep an eye on this one as well.
When I’m looking for investments, I frequently look in industries and product areas that people can’t live without.
Condiments are just that.
I can’t live without my Old Bay … and I would bet there is a sauce or two that’s your go-to as well.
A quick Google search will help you find the parent company. Then, WeissRatings.com will tell you everything you need to know if it’s investible.
Best,
Kelly Green
