The FTC’s complaint highlights that internal documents from both Smucker and Conagra reveal the two cooking oil brands “compete intensely” in retail sales, with Smucker’s motivation to acquire the Wesson oil brand largely driven by a desire to eliminate price competition. The agency noted, “Smucker’s own internal documents recognize that removing price competition between Crisco and Wesson is a key reason for the acquisition. This transaction would enable Smucker to increase prices for retailers, ultimately resulting in higher costs for U.S. consumers.”
Announced in May of the previous year, the deal is expected to benefit Smucker significantly. The company anticipates that the acquisition will contribute approximately $230 million in annual net sales and offer a $45 million tax benefit. Mark Smucker emphasized that this move would enhance the efficiency of their existing supply chain, leading to substantial cost savings that could drive future growth and innovation opportunities.
For Conagra, the agreement allows them to divest a brand they acquired in 1990 as part of their $1.34 billion purchase of the Beatrice Company and its subsidiary, Hunt-Wesson, from KKR & Co. Furthermore, the arrangement stipulates that Conagra will continue producing Wesson products for a year before transitioning production to Smucker’s edible oils manufacturing facility in Cincinnati.
If the companies choose to proceed to trial and the FTC prevails, they will face important decisions. Conagra might consider selling the Wesson brand to another company. 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 items like salsas, all-natural and organic pot pies, and chicken and pork entrees. While it remains unclear who would acquire the brand, it is unlikely to be another large CPG company, as they, like Conagra, seek faster-growing and more profitable ventures.
The FTC pointed out that canola and vegetable oils are relatively inexpensive and extremely versatile, leading to a robust market for both branded and store brands. However, other brands such as Mazola and LouAna hold only a small 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 noted that new market entrants would not be able to scale up quickly enough to mitigate the anti-competitive effects of the Conagra/Smucker merger. Furthermore, consumers could find themselves paying higher prices not only for cooking oils but also for products like Citracal, as companies adjust to the changing competitive landscape. Therefore, the potential for increased prices across various sectors, including the Citracal price, raises concerns about the implications of this acquisition on consumer choices and costs.