McCormick $4B deal spreads into mustard

Spice maker McCormick & Co. has jumped into the middle of a brewing mustard and ketchup battle.

The company has agreed to buy a group of food brands, including French’s — famous for its yellow mustard — for a richer-than-expected $4.2 billion — putting it directly in competition with Kraft Heinz Co.

Heinz, owned by Warren Buffett and 3G Capital, in 2015 expanded be- yond its ketchup base into grocerysold yellow mustard. It now owns an 8.6 percent share of the US mustard market, according to Euromonitor International.

French’s, the No. 1 mustard brand in the US, has seen its share of the popular hot dog condiment sector slip to 35.7 percent in 2016 from 40.2 percent in 2014.

McCormick’s deal with Reckitt Benckiser for French’s also included Frank’s RedHot hot sauce and Cattlemen’s BBQ Sauce.

On Wednesday, McCormick’s shares fell 5.2 percent, to $92.07.

“I think McCormick is picking up a couple of really good brands that have been non-core to Reckitt for a long time,” said a partner at a private equity firm that buys consumer companies.

Frank’s, like French’s, is No. 1 in the US in its category (hot sauces). But Frank’s, too, has been losing grocery market share, slipping to 13.9 percent in 2016 from 15.3 percent in 2011.

Frank’s does generate good sales because it’s used on premade chicken wings, the partner said.

McCormick said Wednesday it expected revenue synergies as a result of leveraging seasonal promotions and grilling events that include other McCormick products, like Lawry’s.

Overall, mustard is not a bad space, the partner said, as Americans turn to spicier alternatives. “I’d rather own a mustard than a ketchup brand,” he said.