McCormick continues restructuring with DPI acquisition
percent of Dessert Products International (DPI) as the company
continues its efforts to simplify its business and focus on areas
with strong growth potential.
The acquisition will be made in exchange for McCormick's 50 percent share in joint venture Signature Brands, which manufactures cake decorating products under the Betty Crocker and Cake Mate brands.
Leading spice, seasoning and flavor company McCormick had acquired a 51 percent stake in DPI as part of its acquisition of condiments firm Ducros almost six years ago. Since that time, the company claims to have increased sales and net income by over 50 percent, through innovation in new products and expanded distribution.
The acquisition of Ducros, which markets the Vahine brand of dessert toppings in France and other European countries, marked the start of McCormick's expansion into the European market in 2000.
The latest acquisition, which is expected to be completed in March, will result in McCormick having 100 percent ownership of DPI. The company said it does not expect the exchange to have an effect on its ongoing sales and net income.
McCormick, which last month announced a 3 percent increase in sales for the fiscal year ended November 30 2005, recently announced that it is to embark on a three year restructuring plan in an effort to improve sales and profit margins.
This involves reducing its number of business customers in the US by around 25 percent, while also eliminating one quarter of its products. However, McCormick said sales related to these customers and products represent only 2 to 5 percent of industrial business sales in the US, and claims the reduction will ultimately lead to higher margins.
"We have realized that we can better create value by rationalizing our business and driving our products through fewer customers, which will generate better margins," said chairman, president and chief executive officer Robert Lawless in a statement.
"During the next three years, we will eliminate underperforming products and customers, reallocate resources to strategic customers, lower costs and leverage our systems and capabilities. These steps will lead to more consistent sales growth and profit contribution from our industrial business," he added.
By 2008, the company said it aims to consolidate its global manufacturing, rationalize its distribution facilities, improve its go-to-market strategy and eliminate administrative redundancies.
It will also increase prices on lower-volume products to meet new margin targets.
The restructuring plan, which is expected to carry costs of around $130-$150 million, will also result in the loss of 800- 1,000 jobs globally.
McCormick said it expects the restructuring plan will "reduce complexity and increase the organizational focus on growth opportunities" in both its consumer and industrial businesses.
It also aims to achieve $50 million of cost savings by 2008, which it says will drive margin expansion and fund initiatives to grow sales.
