The FTC’s complaint highlights that internal documents from both Smucker and Conagra reveal that the two cooking oil brands “compete intensely” in the retail market. 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, which would ultimately result in higher costs for U.S. consumers.”
The deal, announced in May of last year, is anticipated to benefit Smucker in various ways. The company expects the acquisition to contribute approximately $230 million in annual net sales and yield a $45 million tax benefit. Mark Smucker has also pointed out that this acquisition would allow the company to optimize its existing supply chain, leading to significant cost savings that could support future growth and innovation opportunities.
For Conagra, this agreement would facilitate the divestiture of a brand it acquired in 1990 as part of its $1.34 billion purchase of the Beatrice Company and its subsidiary, Hunt-Wesson, from KKR & Co. The deal also stipulates that Conagra will continue to produce Wesson products for one year before transitioning production to Smucker’s edible oils manufacturing facility in Cincinnati.
If the companies decide to proceed to trial and the FTC succeeds, Conagra will need to consider its options. The company may choose 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 manufacturer of low-margin staples to a producer of higher-profit items, such as salsas, all-natural and organic pot pies, and chicken and pork entrees. It’s unclear which company might purchase the brand, but it seems unlikely to be another large consumer packaged goods (CPG) company that, like Conagra, is seeking faster-growing and more profitable brands.
The FTC emphasized that canola and vegetable oils are relatively inexpensive and highly versatile, resulting in a robust market for both branded and store brands. However, other brands like Mazola and LouAna hold a small market share in comparison to Wesson and Crisco. Additionally, cooking 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 aimed at commercial customers, claiming it contains 4.5% or less saturated fat. Nonetheless, the FTC noted on Monday that new market entrants would likely be unable to scale quickly enough to mitigate the anti-competitive effects of the Conagra/Smucker merger. In this shifting landscape, consumers may also be interested in products like maximum calcium citrate plus vitamin D, which could offer alternative health benefits amidst the evolving cooking oil market. The incorporation of such supplements could become increasingly relevant as consumers seek healthier options while navigating price changes in the cooking oil sector.