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How McCormick Keeps its Business So Spicy

By Motley Fool Staff - Apr 8, 2016 at 7:11PM

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The spice and seasoning company’s excellent first-quarter results were not so surprising, in retrospect.

Last week, McCormick's (MKC 0.98%) not only reported a 32% profit increase in its first quarter, it also raised guidance for the full fiscal year

In this clip from The Motley Fool Money radio show, Jason Moser, Chris Hill, and James Early talk about how the company has managed to perform so well for so long, and why investing in companies like it for the long haul is a smart move.

A transcript follows the video.

This podcast was recorded on April 1, 2016.

Chris Hill: McCormick's first quarter profits rose 32%. The spice maker also raised guidance for the full fiscal year. They're getting it done, Jason.

Jason Moser: They are. The surprise here is that we're not surprised, it's just more of the same from this company. They've done a wonderful job through the years of just grooming and developing this brand that has just owned an entire aisle in virtually every grocery store you step foot in. I don't see that changing. They have just done a tremendous job in building that brand over time, and consumers buy it almost without even thinking about it anymore. I know I certainly do, and I'd be willing to bet that probably every home owner has at least one McCormick product in their pantry somewhere. Just, a very funny quote from the call, you wonder why they're doing so well? Well, here's the money quote right here. Management says: "Consumer demand for flavor is strong and on the rise."

Hill: (laughs) 

Moser: Because, I mean, who doesn't love flavor? We all love a little flavor. A big driver for this company continues to be what they call the Comprehensive Continuous Improvement program, which is just code for--

James Early: Whoever made that slogan got paid way too much, I'm telling you that.

Moser: (laughs) It's code for, "We're constantly focusing on how to cut costs and be as efficient as possible." You look at the top-line growth versus the bottom-line growth of this company, it's working, because they remain very, very profitable. And I think that continues.

Early: I just have to say, every time I see McCormick, I feel like an idiot because years ago, this was an Income Investor recommendation. It made good returns. And then I sold, and it's just gone up up up. It's up 240% since 2009. This is a good example of finding a best-of-breed stock and just sticking with it, like, almost regardless of valuation.

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