Spice and flavorings maker McCormick & Co. (NYSE: MKC) announced Tuesday will acquire the Cholula hot sauce brand. Known for its signature wooden bottle cap, Cholula has been owned by private equity firm L Catterton since April 2019.
McCormick said it will buy the parent of the Mexican-made hot sauce for $800 million in cash, adding to its lineup of well-known sauce brands. The company bought Frank’s RedHot with its acquisition of Reckitt Benckiser‘s (OTC: RBGLY) food division in August 2017. It also turned its Old Bay seasoning into a limited-edition hot sauce earlier this year.
Cholula is made in Jalisco, Mexico, and was introduced into the U.S. in 1989. It is now a global brand that comes in six varieties. The sauce has a relatively mild flavor with a heat rating of between 1,000 and 2,000 Scoville units — a “Scoville heat unit” is a measure of the chemical in peppers responsible for their heat. By comparison, the well-known Tabasco brand delivers between 2,500 and 5,000 Scoville units.
McCormick said Cholula is projected to have sales of $96 million in 2020. McCormick chairman, president, and CEO Lawrence Kurzius said in a statement that “hot sauce is an attractive, high-growth category” that will add to the company’s growth opportunities. He added that he expects Cholula sales to grow in the mid- to high single digits, which outpaces the overall category’s growth rate.
The company said it expects the purchase will be accretive to earnings in 2021, while also bringing higher margins.
Howard Smith has no position in any of the stocks mentioned. The Motley Fool recommends McCormick. The Motley Fool has a disclosure policy.
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