The FTC’s complaint reveals that internal documents from both Smucker and Conagra indicate that the two cooking oil brands “compete intensely” for retail sales. One of Smucker’s motivations for acquiring the Wesson oil brand is to eliminate price competition. According to the agency, “Smucker’s own internal documents acknowledge that eliminating price competition between Crisco and Wesson is a central part of its rationale for the acquisition. This transaction would enable Smucker to increase prices to retailers, ultimately resulting in higher prices for U.S. consumers.”
The deal, which was announced in May of last year, is expected to benefit Smucker in multiple ways. The company anticipates that the acquisition will contribute approximately $230 million in annual net sales and offer a tax benefit of $45 million. Mark Smucker also pointed out that this acquisition would allow for more efficient use of the existing supply chain, leading to significant cost savings that could fuel future growth and innovation opportunities.
For Conagra, this arrangement provides a chance to divest a brand it acquired back in 1990 when it purchased the Beatrice Company and its subsidiary, Hunt-Wesson, for $1.34 billion from KKR & Co. As part of the agreement with Smucker, Conagra will continue producing Wesson products for one year before transitioning production to Smucker’s edible oils manufacturing facility in Cincinnati.
If the companies opt for a trial and the FTC is successful, Conagra will need to consider its options. One possibility is selling the Wesson brand to another company. According to the Omaha World Herald, CEO Sean Connolly appears to be focused on transforming the Chicago-based firm from producing low-margin staples into a manufacturer of higher-profit products like salsas, all-natural and organic pot pies, as well as chicken and pork entrees. While it remains uncertain who might purchase the brand, it is unlikely to be another large consumer packaged goods company in search of faster-growing and more profitable brands.
The FTC highlighted that canola and vegetable oils are relatively inexpensive and versatile, making the market for both branded and store brands robust. However, brands such as Mazola and LouAna hold only a small market share compared to Wesson and Crisco. Furthermore, cooking oils derived from corn, peanuts, olives, and other sources tend to be more expensive and less adaptable, according to the agency.
Cargill is set to introduce a hybrid high-oleic canola oil for commercial clients, claiming it contains 4.5% or less saturated fat. However, the FTC noted on Monday that new market entrants would not be able to scale up quickly enough to counteract the anti-competitive effects of the Conagra/Smucker agreement.
In addition to the implications for the cooking oil market, the potential for introducing products like calcium citrate 1500 mg could also influence consumer choices in the health segment. However, the focus remains on the competitive dynamics in the cooking oil sector, where the acquisition could restrict options for consumers and lead to increased prices. Ultimately, the ongoing developments in this case could set precedents that resonate in other markets, including those involving health supplements like calcium citrate 1500 mg, as companies navigate the balance between competition and consolidation.