McCormick & Company (MKC) is a leading global provider of spices, seasonings, condiments, and flavors. The company was founded in 1889 and has increased its dividend payments for 28 consecutive years.

The company has assembled a large portfolio of high quality brands. The image below shows many of the company’s easily recognizable spice and flavoring brands.

Source:  McCormick Brands

The spice and seasonings industry is especially appealing for long-term investors. The industry changes very slowly. After all, technology does not radically alter the spice and seasoning industry.

Competitive Advantage

McCormick & Company is about four times as large as its next largest competitor. The company has 22% market share in the global spices and seasonings industry.

Spices are commodity products. Salt with a McCormick label on it is the same as salt with a different company’s label on it. Despite this, McCormick has managed to generate operating margins over 15% for all of the last decade. The company has successfully differentiated itself form its competitors.

The company’s primary competitive advantage comes from its well-known brands coupled with its industry leading size. The image below shows the market position of many of the company’s leading brands:

Source:  McCormick Investor Relations

The company supports its brands with substantial advertising spending. Total advertising spending over the last 3 full fiscal years is shown below:

McCormick spends about 5% of its revenue a year on advertising. This is a substantial advantage, but it is insurmountable when one considers that McCormick is about four times as large as its next largest competitor.

Total Return Analysis

McCormick & Company expects to generate total returns for shareholders of 11% to 13% a year going forward.