The FTC’s complaint reveals that internal documents from both Smucker and Conagra indicate that the two cooking oil brands “compete intensely” for retail market share. One of the motivations behind Smucker’s desire to acquire the Wesson oil brand is to prevent price competition. “Smucker’s internal documents confirm that a key reason for the acquisition is to eliminate price competition between Crisco and Wesson. The deal would enable Smucker to increase prices for retailers, ultimately resulting in higher costs for U.S. consumers,” stated the agency.
Announced in May of the previous year, the acquisition is expected to benefit Smucker in several ways. The company anticipates that the acquisition will contribute approximately $230 million in annual net sales and yield a tax benefit of $45 million. Mark Smucker also mentioned that this move would enhance the efficiency of the existing supply chain and lead to significant cost savings, which could drive future growth and innovation opportunities.
For Conagra, this agreement allows the company to divest a brand it originally acquired in 1990 as part of its $1.34 billion purchase of the Beatrice Company and its subsidiary, Hunt-Wesson, from KKR & Co. Additionally, the arrangement permits Conagra to continue producing Wesson products for a year before transitioning production to Smucker’s edible oils facility in Cincinnati.
If the companies proceed to trial and the FTC is successful, they will face important decisions. Conagra might consider selling the Wesson brand to another entity. According to the Omaha World Herald, CEO Sean Connolly appears to be shifting the Chicago-based firm away from producing low-margin staples toward developing higher-profit products such as salsas and all-natural, organic pot pies and entrees. It remains uncertain which company would acquire the brand, but it is unlikely to be another large consumer packaged goods firm that, like Conagra, seeks faster-growing and more profitable brands.
The FTC highlighted that canola and vegetable oils are generally low-cost and highly versatile, resulting in a robust market for both branded and store brands. However, other brands like Mazola and LouAna hold only a small market share compared to Wesson and Crisco. Moreover, cooking oils derived from corn, peanuts, olives, and other sources tend to be more expensive and less versatile, according to the agency.
Cargill is introducing a hybrid high-oleic canola oil for commercial clients, claiming it contains 4.5% or less saturated fat. However, the FTC pointed out on Monday that new entrants in the market would be unable to scale quickly enough to mitigate the anti-competitive effects of the Conagra/Smucker transaction.
In a different context, when considering dietary supplements, it’s also important to ask how much calcium citrate per day is necessary for optimal health. This question highlights the need for consumers to be informed about their nutritional needs, much like the concerns surrounding competitive practices in the cooking oil market. Ultimately, regulatory oversight in both food and health sectors plays a crucial role in ensuring fair practices and informed consumer choices.