McCormick picks up Cholula for $800M as Americans turn up heat
With millions dining at home for safety and a swing to the spicier side in the U.S. in recent years, Cholula, the hot sauce with the distinctive wooden cap and a cult following, has become a very valuable brand.
McCormick & Co., the spice-maker that dominates U.S. grocery shelves, said Tuesday that itwas buying Cholula for $800 million from L Catteron, a private equity firm.
McCormick made a notable tilt toward the hot sauce shelf three years ago when it acquired Frank’s RedHot, the preferred fuel in Buffalowing recipes, as part of its $4.2 billion acquisition of Reckitt Benckiser’s food business.
“The sauce with the little wooden cap is, like Frank’s RedHot, wellknown to ‘chilli-heads’ around the globe, but its appeal is much wider,” said Dean Best, food editor of Global Data.
The acquisition arrives with the pandemic warping how America and the rest of the world eats, meaning largely at home. There was evidence of that trend in recent regulatory filings from McCormick, which is based in Hunt Valley, Md., and has a valuation of close to $25 billion.
McCormick said in September that revenue surged 8 percent during the third quarter, as people replaced the contents of outdated spice racks or started one for the first time.
And hot sauce is increasingly part of the pantry mix.
The volume of hot sauce produced for North America has risen in each of the past five years by an average of 4.7 percent, to more than 127,000 tons in 2020, according to Euromonitor, a data service. That production is expected to rise by16 percent within the next five years, according to Euromonitor.
“Hot sauce is an attractive, highgrowth category and, as an iconic premium brand, Cholula is outpacing category growth,” McCormick Chairman and CEO Lawrence Kurzius said in prepared remarks Tuesday.
Cholula has made its own adaptations during the pandemic to get the sauce to its cult followers.
This month, the company teamed up with simplehuman to create a touch-free Cholula dispenser for restaurants or other places that serve the hot sauce, allowing those eating out to bring the heat in relative safety.
Shares of McCormick, which have hit an all-time high this year, rose more than 2 percent Tuesday.