McCormick is adding a bit more spice to its portfolio with hot sauce Cholula.
The company is acquiring the brand from L Catterton, the private equity firm, in an $800 million cash deal, it said Tuesday. It expects to close the deal this year.
The hot sauce market has been growing steadily. US sales of hot sauce grew an average of 9.7% every year for the past four years, according to Nielsen. The category got a boost during the pandemic: In the twelve months ending on November 7, sales surged by 24.6%.
With the purchase of Cholula, McCormick (MKC) is building something of a hot sauce empire. The company bought the category leader, Frank’s RedHot, in 2017. With Cholula, the two brands make up about 30% of the US hot sauce market, according to Euromonitor International and Nielsen data provided by Cholula. Together, that puts the pair far ahead of competitors like Tabasco and Huy Fong Foods, the maker of sriracha sauce.
Frank’s and Cholula are popular in different markets and attract different consumers, McCormick said.
Cholula, the hot sauce typically sold in a slender bottle with a wooden cap and an image of a smiling, dark-haired woman on its label, is made in Mexico and has been available in the United States for about 30 years. There are six flavors, including the original.
L Catterton, whose portfolio includes restaurant chain Noodles & Company and fitness upstart ClassPass, bought Cholula for an undisclosed amount in April 2019. Soon after, industry veteran Maura Mottolese became Cholula’s CEO. Prior to this position, Mottolese led Tate’s Bake Shop, helping triple the size of the business before it was sold to packaged food maker Mondelez (MDLZ).
Under Mottolese’s guidance, the brand gained market share. The company’s net sales are roughly $96 million per year, according to McCormick’s release about the deal. The company expects Cholula’s sales to keep growing.
McCormick could help accelerate that growth. The spice company plans to help expand Cholula’s e-commerce sales and expand its distribution, and to enhance its restaurant business — a crucial growth engine for the company. About 40% of consumers discover Cholula at restaurants, according to McCormick.