McCormick & Co. Inc. (MKC), a global leader in spices, herbs and flavorings industry, signed an agreement to become a minority player in India’s Eastern Condiments Pvt Ltd. (ECPL), a curry ingredient maker. The foray into one of the world’s biggest consumer markets for spices will be worth $35 million for a 26% stake.
 
The joint venture which is subject to regulatory approval and is expected to reach fruition in the fourth quarter of fiscal 2010 is a win-win deal for both the parties as the Eastern brand will be able to enhance its top-line in the double digit range and McCormick will get an opportunity to tap the fast-growing Indian food market.
 
This marks the second venture of McCormick in India with the first being AVT McCormick Ingredients Pvt. Ltd set up in 1994 and in which it holds a 50% stake. Such ventures help catalyze the Indian food market by introducing better technology in supply chain management and new innovative products.
 
Eastern Brand
 
Eastern Brand is one of the major spice manufacturers in India and is a subsidiary of Eastern Group. The spices are obtained from the plantations in Kerala, and processed and exported to 15 countries including the U.S. In fiscal 2010, the company recorded annual sales of $67 million. In the past three years, the company has achieved average annual sales growth rate of more than 25%.
 
The agreement will also boost the company’s international business as it will provide customers across the globe an opportunity to access a wide array of Indian spices.
 
Indian Spice Market
 
India represents one of the major manufacturers and distributors of Indian spices, its derivatives and also culinary herbs. Indian spice manufacturers’ continuous efforts to augment their international presence have resulted in growth of exports of spices and herbs. India’s spice exports account for about 48% of the total exports in terms of volume and around 44% in terms of value. India fulfils 65% of the global demand for derivatives like spice oils and oleoresins.
 
Investment in the Indian market is increasing as India represents one of the most attractive and fastest growing consumer markets in the world attributable to its population size.
 
Our Take
 
We believe that McCormick’s investment in the Indian spice company is a strategic fit, which consolidates McCormick’s presence in one of the largest spice producing and consuming country in the world.
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