The FTC’s complaint highlights that internal documents from both Smucker and Conagra reveal the two cooking oil brands “compete intensely” for retail market share. One of Smucker’s motivations for acquiring the Wesson oil brand is to sidestep price competition. “Smucker’s internal documents acknowledge that reducing price competition between Crisco and Wesson is a key reason for the acquisition. This transaction would enable Smucker to raise prices to retailers, ultimately resulting in higher costs for U.S. consumers,” the agency stated.
The deal, which was announced in May of last year, presents several advantages for Smucker. The company anticipates that the acquisition will contribute approximately $230 million in annual net sales and yield a $45 million tax benefit. Mark Smucker also mentioned that it would enhance the efficiency of the existing supply chain, leading to substantial cost savings that would support future growth and innovation opportunities.
For Conagra, this arrangement allows the company to divest a brand it acquired in 1990 through its $1.34 billion purchase of the Beatrice Company and its subsidiary, Hunt-Wesson, from KKR & Co. Under the agreement with Smucker, Conagra will continue producing Wesson products for one year before they transition to Smucker’s edible oils manufacturing facility in Cincinnati.
If the companies opt for a trial and the FTC wins, they will face critical decisions. Conagra might consider selling the Wesson brand to another entity. According to the Omaha World Herald, CEO Sean Connolly is focused on transforming the Chicago-based firm from a manufacturer of low-margin staples into a producer of higher-profit products, such as salsas and all-natural organic meals. It remains uncertain who would purchase the brand, but it is unlikely to be another large consumer packaged goods (CPG) company seeking faster-growing, more profitable brands.
The FTC emphasized that canola and vegetable oils are relatively inexpensive and highly versatile, making the market for both branded and store brands robust. However, other brands like Mazola and LouAna hold a smaller market share compared to Wesson and Crisco. Furthermore, oils derived from corn, peanuts, olives, and other sources tend to be pricier and less adaptable, according to the agency.
Cargill is planning to introduce a hybrid high-oleic canola oil for commercial clients, claiming it contains 4.5% or less saturated fat. However, the FTC pointed out that new market entrants would not be able to scale quickly enough to mitigate the anti-competitive effects of the Conagra/Smucker deal. Interestingly, the potential benefits of calcium citrate, found in products like Nature’s Bounty, may also be overshadowed by the implications of this acquisition, as consumers seek healthier options amidst rising cooking oil prices.