This excerpt taken from the MKC 10-K filed Jan 28, 2008.
Positioned for the future
The same growth strategy that has driven our success for a decade continues to set our future direction: improve margins, invest in the business, and increase sales and profits.
Margin improvement is a key element of our success. A restructuring program that includes consolidating our global manufacturing and eliminating administrative redundancies is on track to deliver at least $50 million in annual savings by the end of 2008. In addition, we are reducing complexity by selectively eliminating certain products and customers. These actions have increased average sales per customer for our U.S. industrial business by 51% in 2007 when compared to 2005. We see additional opportunities to improve efficiency and optimize our supply chain across our global operations.
Cost savings such as these were key to offsetting higher raw material costs in 2007. We are also using a portion of our margin improvement to invest in the growth of our business, funding marketing support, product innovation and other areas that offer the greatest potential to increase sales.
The same growth strategy that has driven our success for a decade continues to set our future direction.
Robert J. Lawless and Alan D. Wilson
To drive consumer demand, we are revitalizing our venerable brands in worldwide markets. The most significant of these efforts is under way in the United States the largest and most profitable market for our consumer business where a gravity-fed merchandising system is being installed in 12,000 to 14,000 supermarkets. The innovative product display is increasing purchases by consumers and reducing restocking time for the retailers. In Europe, we are driving sales of our Schwartz® brand in the U.K. and Ducros® brand in France with improved merchandising systems and increased advertising.
Product innovation is also driving sales as we build upon platforms such as health and wellness, convenience and ethnic flavors, and meet consumer desire for reduced fat and sodium with flavorful products in both our consumer and industrial businesses. And as time-pressed consumers turn more and more to grilling, slow cookers and seafood preparation, we are responding with additional flavor solutions. In North America, 2007 sales of seafood complements grew by 6%, grilling products by 7% and slow cooker seasonings by 17%. Across all businesses, new products launched in the last three years added 10% to 2007 sales.
Since 2002, the Company has achieved an average annual increase in net sales of 7%. One-fourth of this increase has been driven by acquisitions.
Emerging markets offer an opportunity for rapid sales growth, as evidenced by the 23% growth of our business in China in 2007. We are focused on additional markets with similar growth characteristics, such as India, as we strive to double our sales in the Asia Pacific region over the next five years.
Acquisitions are also an integral part of our growth strategy. We are particularly interested in acquiring leading brands in regions where we have low penetration, and niche products in more developed markets. Above all else, however, flavor is the defining factor in all of our targeting efforts. Altogether, acquisitions have added one-fourth of our sales increase in the past five years, and we are working to sustain this level of contribution. As evidence of our continued progress, in November 2007, we were pleased to sign an agreement to purchase the Lawrys business with annual sales of approximately $150 million.