McCormick Demonstrates a Path Forward

As of late, you get the sense that a deep wariness pervades the management teams of consumer-packaged goods (CPG) companies. Throughout most of the industry, corporations are booking stable profits, but reporting flat revenue. Even organic revenue expansion -- that is, top-line growth stripped of currency, acquisition, and divestment effects -- has dwindled. In some cases, it's fallen to just above the rate of inflation.

In a near-stagnant profits environment, the promise of steady and growing cash flow, coupled with productivity improvements, doesn't satisfy every shareholder. Executives find themselves looking over their shoulders, wary of agitation from hedge funds and institutional investors who want higher profit margins today versus two to three years in the future.

Peers may pose a greater threat. Leading consumer-goods multinationals are on the alert lest merger-minded Kraft Heinz Foods Co (NASDAQ: KHC) comes knocking to discuss a possible takeover. No company is safe from Warren Buffett and 3G Capital-backed Kraft Heinz. Even mammoth consumer-goods leader Unilever plc (NYSE: UL) found itself brushing off a merger entreaty from Kraft Heinz in February of this year.

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Source: Fool.com