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Tuesday, January 19, 2021

Cholula is hot with $800M acquisition by McCormick and Golden Chick deal

Here’s some hot news.

McCormick & Company Inc. (NYSE: MKC) on Nov. 24 announced that it has signed a definitive agreement to acquire the parent company of Cholula Hot Sauce, a premium hot sauce brand that delivers authentic Mexican flavor, from L Catterton, for $800 million in cash.

McCormick made a notable tilt toward the hot sauce shelf three years ago when it acquired Frank’s RedHot, the preferred fuel in Buffalo wing recipes, as part of its $4.2 billion acquisition of Reckitt Benckiser’s food business.

“The sauce with the little wooden cap is, like Frank’s RedHot, well-known to ‘chilli-heads’ around the globe but its appeal is much wider,” said Dean Best, food editor of Global Data.

The acquisition arrives with the pandemic warping how America and the rest of the world eats, meaning largely at home. There was evidence of that trend in recent regulatory filings from McCormick, a company in Hunt Valley, Maryland with a valuation of close to $25 billion.

McCormick said in September that revenue surged 8% during the third quarter as people replaced the contents of outdated spice racks, or started one for the first time.

And hot sauce is increasingly part of the pantry mix.

The volume of hot sauce produced for North America has risen in each of the past five years by an average of 4.7%, to 127.5 million tons in 2020, according to the data service Euromonitor. That production is expected to rise by 16% within the next five years, according to the group.

“Hot sauce is an attractive, high-growth category and, as an iconic premium brand, Cholula is outpacing category growth,” said McCormick Chairman and CEO Lawrence Kurzius in prepared remarks Tuesday.

Cholula has made its own adaptations during the pandemic to get the sauce to its cult followers.

Earlier this month the company teamed up with simplehuman to create a touch-free Cholula dispenser for restaurants or other places that serve the hot sauce, allowing those eating out to bring the heat in relative safety.

Shares of McCormick, which have hit an all time high this year, rose more than 2% Tuesday.

If Cholula sounds like it has been in the news lately, it has. In October, Dallas-based Golden Chick announced its partnership with Cholula Hot Sauce, the two brands joining forces to bring Cholula Chicken to both chicken and hot sauce fanatics.

Now through Sunday, February 14, 2021 (Valentine’s Day), the rapidly growing quick-service chicken franchise will be serving Cholula Chicken Tenders and the Cholula Chicken Sandwich menu items at all of its 194 restaurants throughout Texas, Oklahoma, Louisiana, Florida and South Carolina.

“Even though this year was not quite what we expected, we are extremely proud of the new menu items and collaborations our team has brought to our loyal guests,” said Jim Stevens, president of Golden Chick. “It has been such a pleasure to work alongside the Cholula Hot Sauce team to add a kick to our best-selling Golden Tenders and Big & Golden Chicken™ Sandwich. We’ve had brand collaborations before, but none as hot as this!”

During the promotion, Golden Chick and Cholula Hot Sauce will be publishing co-branded AR filters on Instagram and Facebook allowing users to interact with the brands. Golden Chick will also be releasing Cholula Mac & Cheese at a later date during the partnership.

“Cholula is all about elevating flavor and making great food unforgettable,” said Cholula Food Company’s Chief Marketing Officer Miguel Leal. “We are excited to be partnering with Golden Chick to bring our exclusive spice to their fantastic menu items.”

This is the first time in Golden Chick’s 50+ years that it has partnered with a hot sauce brand to produce a limited-time offering as a new take on existing menu items. Throughout the partnership, Golden Chick plans to host community give-back initiatives. 

“The idea of collaborating with Cholula to produce unique offerings for our guests has always excited me,” said J Sullivan, Golden Chick’s executive chef. “Our team had a great time working on this development and experimenting with new flavor profiles. Our Cholula Chicken options feature the perfect balance of our one-of-a-kind marinades and batters with Cholula’s authentic original hot sauce. These menu items pack the perfect amount of heat.”

The Cholula Chicken Sandwich is available as an entree at a price of $4.99 and as a combo with a 30-ounce drink and one side for $6.99. The Cholula Chicken Tenders are available as a three-piece combo for $6.99 and a five-piece combo for $8.99, each is served with one side and a 30-ounce drink.

Associated Press contributed to this report

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