McCormick & Company Inc. announced that it has signed a definitive agreement to acquire the parent company of Cholula Hot Sauce, a premium hot sauce brand, from L Catterton, for $800 million in cash.
Cholula’s portfolio of six distinctive flavors is made in Mexico using high-quality ingredients and is based on a 100-year old recipe comprised of a unique blend of fresh peppers and regional spices. Its annual net sales are approximately $96 million and are expected to grow mid-to-high single digits in a normalized environment beyond the COVID-19 pandemic, said the company in a press release.
McCormick plans to retain the Cholula brand name in both the retail and foodservice channels.
“The acquisition of Cholula accelerates McCormick’s growth opportunities within our condiment platform and broadens our portfolio in the hot sauce category with the addition of the Cholula brand,” said Lawrence E. Kurzius, Chairman, President and Chief Executive Officer.
“Hot sauce is an attractive, high-growth category and, as an iconic premium brand, Cholula is outpacing category growth. As McCormick continues to capitalize on the growing consumer interest in healthy and flavorful eating, Cholula, a brand known for authentic bold and spicy Mexican flavors, is a strong complement to our portfolio providing consumers and foodservice operators with an even more diverse product offering that we expect will strengthen our growth opportunities,” added Kurzius.
McCormick’s CEO said they plan to grow the Mexican hot sauce by optimizing category management and brand marketing, while also expanding channel penetration.
L Catterton, the largest consumer-focused private equity firm in the world, acquired Cholula in April 2019. In a statement, the firm said they invested heavily behind the brand and product, and under its ownership, Cholula grew household penetration by over 50% and gained meaningful market share.
“In the last 19 months, with the support, resources, and operational expertise of the L Catterton team, we established Cholula as a high-performing standalone business, vastly improved our commercial execution efforts, and pivoted our foodservice strategy to position Cholula for long-term growth and success,” said Maura Mottolese, Chief Executive Officer of Cholula.
The Mexican hot sauce brand will drive long-term shareholder value, according to McCormick. Cholula’s products are highly complementary to the company existing hot sauce portfolio and will broaden the flavor offerings to consumers and foodservice operators.
McCormick plans to elevate Cholula’s brand awareness, increase the availability of its products, and extend the Cholula brand into new formats and eating occasions to drive trial and household penetration.
Founded in 1889 and based in Hunt Valley, Maryland, McCormick generates more than $5 billion in annual sales in 150 countries and territories. The company manufactures, markets, and distributes spices, seasoning blends, condiments, and other flavorful products to the entire food industry, including e-commerce channels, supermarkets, food manufacturers, and foodservice companies.
The transaction is expected to be completed by the end of the calendar year and will be financed with a combination of cash on hand and commercial paper.