A shopper reaches for an exhibit of McCormick spices and flavors in an associate supermarket in 2005.
Bloomberg | Bloomberg | Getty Images
Spice maker McCormick said Tuesday it would buy Cholula’s parent company from private equity firm L Catterton for $ 800 million to capitalize on robust demand for packaged food during the Covid-19 pandemic.
Several food manufacturers, from the plant-based patty maker Beyond Meat to breakfast cereal maker Kellogg, saw their sales to supermarkets spike as people cook more at home due to the health crisis.
McCormick, which already owns Frank’s RedHot and Old Bay Hot Sauce brands, saw sales jump 8% in the most recent quarter, as higher consumption of groceries at home outweighed weak sales to its restaurant partners.
Spicy sauces have become increasingly popular in recent years, thanks in part to the increasing popularity of spicier cuisines such as Thai and Szechwan, as well as the pop culture influence of YouTube shows such as Hot Ones.
Cholula’s annual net sales are $ 96 million and are expected to grow in the mid to high single digits in a normalized environment beyond the pandemic, McCormick said.
The transaction, which is expected to close by the end of this year, is expected to contribute to McCormick’s adjusted earnings per share in 2021, the company said.
The Wall Street Journal first reported Monday that McCormick was on the verge of buying Cholula.
Analysts said the fast-growing Cholula was a good fit for McCormick’s portfolio, but they remained cautious about whether the deal would get regulatory approval.