McCormick Canada, the Canadian arm of Baltimore-area condiment and spice maker McCormick and Co., on Monday announced it had completed a “multi-million dollar expansion” at its London, Ont. plant to blend, bottle and package French’s ketchup.

Bottling of French’s ketchup began at the London plant last month, the company said Monday, but added that “full production ramps up this week.” An exact dollar figure wasn’t given for the cost of the expansion.

McCormick said it would continue to source 100 per cent of its tomatoes for French’s ketchup in Canada from the Leamington, Ont. area and would continue to offer the product in four varieties: original, garlic, low-sodium, and no-sugar-added.

By bringing its ketchup line to London, McCormick said it would be “deepening its local roots” and transitioning away from a “third-party Canadian supplier.” The French’s line has been packed in Canada by Toronto-based Select Food Products since 2016.

McCormick has operated at London since 1959, when it bought the Club House brand of spices and extracts, a business founded there in 1883 by Gorman, Dyson and Co.

The French’s brand, along with Frank’s RedHot and others, came to McCormick in 2017 when it bought the food business of British consumer health and hygiene firm Reckitt Benckiser for US$4.2 billion.

Shortly before that sale, the French’s brand had made a splash in Canada by promoting its use of tomatoes grown in the Leamington area and by bringing the product’s bottling to Toronto.

Ketchup provenance by then had become a sore spot among some Canadian consumers, after Kraft Heinz shed its Leamington tomato processing plant in 2014 and began bottling its Heinz ketchup for the Canadian market at plants in the U.S.

Kraft Heinz sold the Leamington plant in 2015 to an Ontario consortium, Highbury Canco, and still sources some tomato products from the latter company. Kraft Heinz also announced last November it would resume packing Heinz ketchup in Canada for the Canadian market, this time at its plant in Montreal. –– Glacier FarmMedia Network

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The U.S.-based food processing giant and the Quebec government on Nov. 17 announced the expansion plan for the company’s Mont Royal plant, which today makes products such as KD Mac + Cheese, Philadelphia cream cheese, Renee’s dressings and Kraft peanut butter.

The new ketchup line is expected to start operating in late summer of 2021 and produce over 100 million pounds of Heinz ketchup for the Canadian market within its first two years, “as production ramps up.”

The expansion is expected to add about 30 jobs at Mont Royal and help maintain about 750 more, provincial Transport Minister Chantal Rouleau said in a release from investment agency Investissement Quebec International.

Heinz ketchup sold in Canada has been made at plants in the U.S. since 2014, shortly after the company said it would shut its processing plant at Leamington, Ont., southeast of Windsor. Kraft Heinz reached a deal the following summer to sell that plant to a consortium of Ontario investors operating as Highbury Canco.

Kraft Heinz today bills itself as Highbury Canco’s largest customer, using Leamington-grown tomatoes in Heinz tomato juice and canned beans and Classico pasta sauces, among other non-ketchup goods. Kraft Heinz also still runs a tomato seed operation out of Leamington, supplying most processing-grade Heinz tomato seeds used on farms in Eastern Canada and the eastern U.S.

But the provenance of Heinz ketchup sold in Canada since 2014 has been a sore spot for some consumers, who vowed on social media to seek out rival ketchups made at plants within Canada.

“Kraft Heinz Canada is pleased to partner with the Quebec government on this investment in bringing ketchup production back to Canada from the U.S.,” Bruno Keller, president for Kraft Heinz Canada, said Nov. 17 in the company’s release.

“Through our partnership with Quebec and increased efficiencies at our Mont Royal facility, it became possible to return this iconic product back to Canada for Canadians at this time.”

Other media outlets have quoted company representatives as saying the tomatoes feeding the Montreal plant will at first continue to come from U.S. farms with which the company has contracts, though more of those tomatoes may be sourced from Canada in the future.

The Montreal plant, Keller said, “has been an important part of the Quebec economy for over six decades, and we are delighted to be able to help feed more Canadians every day thanks to investments like this one.”

The Quebec government’s hand in the project is a $2 million loan from Investissement Quebec’s ESSOR program, which offers loans, loan guarantees or financial assistance to”substantial long-term development projects” carried out within Quebec involving eligible expenditures of at least $100,000.

“With this new production line, (Kraft Heinz) is taking concrete steps to ramp up local production and continue its growth here,” Stephane Paquet, CEO of Montreal economic development agency Montreal International, said in Investissement Quebec’s release.

“This decision is proof positive that foreign subsidies too have a role to play in promoting and expanding local sourcing.”

Heinz’s relationship with Canada dates back to 1909, when Henry Heinz picked Leamington as “the most suitable site” for a pickle packing plant, the first expansion of his company’s operations outside the U.S. — Glacier FarmMedia Network

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The sale of the food business is aimed at helping the British consumer goods company pay down debt from its planned US$16.6 billion purchase of U.S. infant nutrition firm Mead Johnson.

Parties that may be interested in the unit, home to French’s mustard and Frank’s RedHot sauce, include McCormick, Conagra Brands, Unilever, Hormel Foods, Pinnacle Foods and Campbell Soup, according to the sources, who declined to be identified as the matter is private.

Reckitt declined to comment, as did Morgan Stanley, which sources say is advising it.

Conagra, Unilever, Hormel, Pinnacle and Campbell Soup declined to comment. A spokeswoman for McCormick was not immediately available.

Reckitt, which also makes Scholl footcare products and Nurofen tablets, is not courting private equity firms, said the sources, given the strong initial interest from industry players, which are usually able to pay more due to synergies with their existing businesses.

Private equity firms are under pressure to spend the large piles of cash they have amassed, but the sources said they would be unlikely to match any bids from the other companies, which also sell packaged foods.

The business had 411 million pounds (C$715 million) of revenue last year, with like-for-like growth of five per cent, according to Reckitt’s annual report, which also said the unit’s operating margin shrank by 50 basis points last year to 28.7 per cent due to investments aimed at growing it and expanding internationally, most notably in Canada.

Reckitt’s French’s condiment business has recently made a splash in Canada promoting its use of Canadian-grown tomatoes and an Ontario bottling plant for all ketchup it sells in the Canadian market, followed by similar promotion for its use of Canadian-grown mustard.

Ketchup origin became an issue among some Canadian consumers after Kraft Heinz shed its Leamington, Ont. tomato processing plant in 2014.

Canadian burger and root beer chain A+W last year announced a supply deal with French’s for ketchup and mustard, citing the company’s use of “locally-sourced tomatoes from Leamington, Ont. and mustard seeds from Saskatchewan in all of its ketchup and mustard.”

First-round bids for the Reckitt Benckiser food business are expected in coming weeks, said one of the sources.

— Martinne Geller is a Reuters correspondent covering the EU consumer goods sector from London. Additional reporting for Reuters by Lauren Hirsch in New York and Pamela Barbaglia in London. Includes files from AGCanada.com Network staff.

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Shares of the company, which owns brands such as Velveeta cheese and Heinz ketchup, were down nearly three per cent at $86.75 in after-hours trading on Wednesday (all figures US$).

U.S. sales, which account for about 70 per cent of Kraft’s total revenue, fell 3.5 per cent, mainly due to weak demand for its cheese, meats and nut products.

Canada sales fell 12.2 per cent in the first quarter ended April 1.

A muted spending environment in the U.S. coupled with changing consumer tastes toward fresh, organic food over processed food has forced the packaged food maker to launch new products and revamp its ready-to-eat meals to remove synthetic colors and preservatives.

Kraft, in January, had partnered with Oprah Winfrey to launch a new healthy line of packaged food called Mealtime Stories.

The company’s net sales fell 3.1 per cent to $6.36 billion, missing analysts’ average estimate of $6.45 billion, according to Thomson Reuters I/B/E/S.

Net income attributable to shareholders was $893 million, or 73 cents per share, in the first quarter, compared with $896 million, or 73 cents per share, in the year-earlier period.

Excluding certain items, Kraft earned 84 cents per share, missing analysts’ average estimate of 86 cents per share.

— Reporting for Reuters by Gayathree Ganesan in Bangalore.

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