McCormick Spices Up Business With Hot Sauce Acquisition

Confirming a Wall Street Journal report, McCormick & Company MKC announced Tuesday it reached a deal to acquire the iconic hot sauce brand Cholula Hot Sauce for $800 million.

Cholula's History: Cholula first launched in the U.S. in Austin, Texas in 1989 and expanded across the U.S. the following year at grocery stores. Today, the hot sauce is readily available at most grocery stores nationwide and generates around $96 million in annual sales.

Cholula is licensed by tequila brand Jose Cuervo and was sold to private equity buyout firm L Catterton in 2018. On Tuesday, McCormick acquired the hot sauce company and plans to retain the Cholula brand name in both the retail and foodservice categories.

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McCormick's Plans: McCormick's highlighted four reasons to justify its acquisition of Cholula, including:

• Cholula's products are highly complementary to McCormick's existing hot sauce lineup.
• McCormick will leverage its size to increase the elevate Cholula's brand awareness and expand distribution.
• McCormick will market its new hot sauce brand to existing foodservice customers.
• Cholula's attractive margin profile implies the deal will be accretive to McCormick's Consumer and Flavor Solutions segment.

"Hot sauce is an attractive, high-growth category and, as an iconic premium brand, Cholula is outpacing category growth," McCormick President and CEO Lawrence Kurzius said in the press release. "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."