The Corporation: EXECUTIVE SUITE
A FULL PLATE FOR BUZZ McCORMICK
When Charles P. "Buzz" McCormick Jr. gave up the chief executive officer's post at McCormick & Co. nearly three years ago, he figured he would be filling his days by hitting golf balls and counting dividends. His company was churning out sales and profit gains and seemed to have a lock on much of the world's flavorings market. Then, 15 months ago, McCormick's first successor, Bailey A. Thomas, died of a heart attack. And now his replacement, CEO H. Eugene Blattman, 59, is unexpectedly planning to step down, citing his own heart problems. At 67, McCormick is back in the top job.
Buzz, the grand-nephew of Willoughby McCormick, who founded the company 106 years ago, is taking over at a time when the outfit needs some spicing up. Growth has slowed. Some planned foreign acquisitions have foundered, while others helped drive debt to an onerous level. Then there's the possibility of a takeover bid--even though Buzz McCormick, his family, and employees together are believed to own more than half of the company's voting stock. "We have always been an attractive takeover candidate," Buzz says. "I don't dismiss it out of hand."
OUTBID. During McCormick's first tenure, results were anything but plain vanilla. He took the CEO's post in 1987, after three decades in marketing and administration. He and Thomas, his second-in-command, shook up a sleepy company, repackaging the consumer spice line, selling off a real estate division, and streamlining domestic and foreign operations. From 1987 to 1992, the pair more than tripled annual net income, to $95.2 million, and expanded annual sales by more than one-third, to $1.5 billion. "What they did was nothing short of phenomenal," says analyst Kurt Funderburg of Ferris, Baker, Watts Inc., a Baltimore broker.
Since January, 1993, when McCormick retired, the Sparks (Md.) company hasn't done so well. A European expansion faltered when German regulators denied a bid by McCormick and CPC International Inc. to acquire Ostman, Germany's biggest spice company, and McCormick was outbid for a French spicemaker. Earnings were slipping when CEO Thomas, 63, died in July, 1994, and Chief Operating Officer Blattman was elevated to the top job. Restructuring charges of $46 million, after taxes, clobbered results that year (chart). This year, analysts figure a strong fourth quarter will give the company earnings of $105 million, on sales that will jump 10%, to $1.9 billion.
But McCormick faces some unappetizing prospects. Australia's Burns Philp & Co. has been offering deep discounts for more than two years to lure retailers into giving more shelf space to its Durkee French brand. And outside forces, such as the weak peso (McCormick is Mexico's biggest mayonnaise producer) and higher interest costs, are weighing heavily. The company has boosted its debt to $700 million, 52% of capital. That was partly for spending to match rivals' discounts, but also for some $82.5 million worth of acquisitions of offshore food and spice companies. Now, Standard & Poor's Corp. is considering a possible downgrade of its bonds.
Buzz McCormick chalks up some setbacks to bad luck, and says brisk growth couldn't go on forever. Would he sell if such rumored acquirers as Sandoz, CPC, Nestle, or Unilever made an offer? "If they offered us 10 times what the price is today, we would have to take a look," he jokes. But analysts think a hostile bid may be in the offing. Despite poor results, McCormick's stock is up five points, to about 26, since mid-year, mainly on takeover talk.
Meanwhile, McCormick has plans to get the spice company back in shape. To build brand recognition, he'll spend some $24 million during the next three years on advertising, mostly on the radio, running ads year-round instead of intermittently. Analysts also speculate that he'll come out with a long-promised line of sauces. After perhaps a year, Buzz McCormick says he'll give up the CEO's post, making way for a younger executive. Analysts see Executive Vice-President Robert J. Lawless, 48, who becomes president on Jan. 1, as a likely successor. Says McCormick: "We are going through some competitive times, and when I feel these guys are ready to run the business I'll get out of here, and the sooner the better." If potential acquirers get hungry, though, McCormick may retire again--sooner than he'd like.By Roy Furchgott in Baltimore