McCormick sees its new life in selling spice to the world

BALTIMORE -- Long known for spicing up American food, McCormick & Co. is taking its food flavorings abroad, with plans to peddle masala powder in the open-air markets of India and borscht seasoning in the stores of Eastern Europe.

Looking for ways to beef up sales in the face of a weak economy and a mature domestic market, the Sparks, Md.-based spice maker is increasing its push into emerging nations. McCormick, like other food companies, sees potential for growth in regions where American brands are becoming more commonplace - and gaining market share by expanding their lines to include products demanded by local consumers.

Since 2010, McCormick has committed more than $440 million to acquire and form joint ventures with companies in India, Poland, Turkey and other emerging markets. It expects those regions to contribute 12 percent of sales by 2012. Emerging-market sales last year contributed 9 percent of sales.

"We believe we have the opportunity to bring different types of food and innovation in areas where we don't have a large presence," McCormick CEO Alan D. Wilson said. "The places that are most attractive to us are countries where there is rapid economic growth and the populations are moving up the value chain. One of the first things they do when they get more money is upgrade their food choices."

American companies have long sold food overseas, but the weak U.S. economy has spurred increasing interest in countries such as India, where a growing middle class is amassing greater disposable income.

Analysts say such countries are attractive to U.S. businesses that find that opportunities to increase domestic profits are limited to a few options: raising prices, challenging competitors for market share and increasing sales volume through population growth.

"If you look at the sum of those things, that is not a lot of growth potential," said Matt Arnold, an analyst with Edward Jones & Co.

Emerging markets, in contrast, give companies access to millions of untapped consumers whose rising incomes fuel increasing demand for products made in the United States.

"The companies who are going into these markets are seeing a customer base that is more sophisticated," said Charles E. Cerankosky, managing director of Northcoast Research in Ohio. "They're getting wealthier. They're getting more educated. As they add more expensive foods to their diet, they will add a lot of condiments and Western-style beverages."

Still, there remain challenges to translating domestic experience into international profits. U.S. companies have a long history of going global, but with varying success.

KFC Corp. has found wild popularity in China, where it offers a menu that combines American fried chicken with Chinese staples such as shrimp burgers and the rice porridge congee. The company hires local managers at its more than 3,700 stores.

But Campbell Soup announced last month that it would be pulling out of Russia after four years. The company had high hopes for the temperate country, where soup already is a key component of the national diet. And it had a plan: A focus on selling broths, because so many families made soup from scratch.

Campbell's executives said sales in Russia never reached what they expected and announced plans to redirect its international focus on China.

The challenges confronting U.S. companies overseas are many. They must deal with different currencies and regulations. And cultural differences can affect business.

In India, for example, people buy their spices and foods from local open-air markets and small food stores, Wilson and analysts said. In the United States, McCormick sells its products at 30,000 to 35,000 distribution points. It recently entered into a joint venture in India with 350,000.

"In India, the retail environment is still very much fragmented," Wilson said. "It is very much about being able to reach consumers where they shop."