McCormick & Company, Incorporated MKC is nearing an $800 million deal to acquire hot-sauce maker Cholula from private-equity firm L Catterton, the Wall Street Journal reports. The acquisition talks could finalize by Tuesday if the deal doesn't fall apart.
What Happened: L Catterton had acquired Cholula more than two years ago in a bid to expand its global distribution. WSJ notes that L Catterton stands to make more than four times the money it paid to acquire Cholula if the deal goes through.
With its distinctive wooden cap, Cholula is one of the fastest-growing hot sauces and holds a special place in pop culture.
Why It Matters: The domestic retail sales of hot sauces have grown more than 40% since 2015 as millennials flock to spicy flavors and low-calorie seasonings, as per WSJ.
McCormick is looking to capitalize on this growing demand for spicy condiments by adding Cholula to its sauces portfolio. The seasonings company also owns Frank's RedHot sauce, which it acquired in 2017.
The coronavirus pandemic has also lifted demand for McCormick's products as consumers look to cook more at home.
As per WSJ, smaller brands account for more than 40% of hot-sauce sales, making them ripe for acquisition by established labels.
Price Action: MKC shares closed lower by 0.36% at $183 on Monday.
Image Courtesy: Wikimedia
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