The FTC complaint highlights that internal documents from both Smucker and Conagra reveal that the two cooking oil brands “compete intensely” for retail market share, and one of Smucker’s motivations for acquiring the Wesson oil brand is to mitigate price competition. “Smucker’s internal records acknowledge that a key reason for the acquisition is to eliminate price competition between Crisco and Wesson. This merger would enable Smucker to increase prices to retailers, ultimately resulting in higher costs for U.S. consumers,” stated the agency.
The acquisition, which was announced in May of last year, is expected to benefit Smucker in various ways. The company anticipates that the deal will contribute approximately $230 million in annual net sales and provide a $45 million tax advantage. Mark Smucker also mentioned that the acquisition would enhance the efficiency of the existing supply chain and yield significant cost savings to support future growth and innovation opportunities.
For Conagra, this agreement would allow it to divest a brand it acquired in 1990 during its $1.34 billion purchase of the Beatrice Company and its subsidiary, Hunt-Wesson, from KKR & Co. Furthermore, under the terms of this arrangement, Conagra will continue to produce Wesson products for one year before transitioning production to Smucker’s edible oils manufacturing facility in Cincinnati.
Should the companies proceed to trial and the FTC wins, they will face critical decisions. Conagra might opt to sell the Wesson brand to another entity. According to the Omaha World Herald, CEO Sean Connolly appears focused on transforming the Chicago-based firm from a low-margin staple manufacturer to a producer of higher-profit items, such as salsas and all-natural or organic pot pies, as well as chicken and pork entrees. While it remains uncertain who would acquire the brand, it is unlikely to be another large consumer packaged goods (CPG) company seeking faster-growing and more profitable brands, like Conagra.
The FTC emphasized that canola and vegetable oils are relatively affordable and versatile, creating a robust market for both branded and store-brand products. However, other brands, such as Mazola and LouAna, hold a small market share compared to Wesson and Crisco. Additionally, oils derived from corn, peanuts, olives, and other sources tend to be more expensive and less adaptable, according to the agency.
Cargill is introducing a hybrid high-oleic canola oil for commercial customers, claiming it contains 4.5% or less saturated fat. Nevertheless, the FTC pointed out that new entrants to the market would not be able to scale quickly enough to mitigate the anti-competitive consequences of the Conagra/Smucker merger. This situation highlights the need for vigilance in maintaining competition, particularly in light of products containing citrate D3 that may also be affected by these changes in the cooking oil market.