McCormick Adds Cholula Hot Sauce to Their Portfolio in a Deal Worth $800 Million

In a bid to grow their condiment portfolio, McCormick & Company announced that they have signed a definitive agreement to acquire Cholula Hot Sauce for $800 million. Cholula’s annual net sales are approximately $96 million and are expected to grow mid-to-high single digits in a normal environment beyond the COVID-19 pandemic.

“The acquisition of Cholula accelerates McCormick’s growth opportunities within our condiment platform and broadens our portfolio in the hot sauce category with the addition of the Cholula brand,” said Lawrence E. Kurzius, chairman, president and CEO of McCormick, in a press release. “Hot sauce is an attractive, high-growth category and, as an iconic premium brand, Cholula is outpacing category growth. As McCormick continues to capitalize on the growing consumer interest in healthy and flavorful eating, Cholula, a brand known for authentic bold and spicy Mexican flavors, is a strong complement to our portfolio providing consumers and foodservice operators with an even more diverse product offering that we expect will strengthen our growth opportunities.”

Cholula has a portfolio of six distinct flavors, all of which are made in Mexico. The product uses high-quality ingredients and is based on a 100-year-old recipe that is made of a unique blend of fresh peppers and regional spices. McCormick plans on keeping the Cholula brand intact in both the retail and foodservice channels.

McCormick hopes that the acquisition of Cholula will bring in long-term shareholder value. This includes increasing the breadth and reach of the product and expanding the consumer base. They also plan on increasing brand awareness among consumers and expanding availability of its products. McCormick’s presence in various foodservice channels is expected to strengthen Cholula’s go-to-market model.

Mr. Kurzius continued, “McCormick has a history of creating value through acquisitions. We have a proven track record for achieving our plans and accelerating the performance of acquired brands. We plan to grow Cholula by optimizing category management and brand marketing, while also expanding channel penetration, making McCormick the perfect home for the Cholula brand. As we remain focused on growth and creating long-term shareholder value, we are confident Cholula is a great strategic addition to the McCormick portfolio.”

McCormick’s sales rose eight percent in the third quarter from the year-ago period. More specifically, their operating income was $273 million in the third quarter compared to $254 million in the year-ago period. According to the statement, “McCormick’s Board of Directors approved a 2-for-1 stock split of the company’s common and common non-voting shares for shareholders of record on November 20, 2020.”

McCormick is best known for spices, seasoning mixes and other flavorings, but it is moving more aggressively towards the condiments market. In 2017, they purchased Reckitt Benckiser’s Food Division for $4.2 billion, adding the famous French’s mustard and Frank’s RedHot brands to the portfolio. According to Statista, by 2022, the total sales of hot sauce in the US are projected to reach $1.65 billion.

Maura Mottolese, CEO of Cholula, said, “With McCormick’s extensive experience and unique insight into the hot sauce category and unmatched global flavor leadership, we look forward to capitalizing on new opportunities and reaching even greater heights together.”