The FTC’s complaint indicates that internal documents from both Smucker and Conagra reveal that the two cooking oil brands engage in “intense competition” for retail sales. One of Smucker’s motivations for acquiring the Wesson oil brand is to mitigate price competition. “Smucker’s internal documents recognize that eliminating price competition between Crisco and Wesson is a key reason 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 agency stated.
The acquisition, announced in May of the previous year, is anticipated to benefit Smucker in multiple ways. The company projects the deal to add approximately $230 million in annual net sales and yield a $45 million tax benefit. Mark Smucker also highlighted that this move would enhance the efficiency of their existing supply chain, leading to significant cost savings that would support future growth and innovation opportunities.
For Conagra, this agreement allows them to divest a brand they acquired in 1990 during their $1.34 billion purchase of the Beatrice Company and its subsidiary, Hunt-Wesson, from KKR & Co. Additionally, the deal stipulates that Conagra will continue to produce Wesson products for one year before shifting production to Smucker’s edible oils manufacturing plant in Cincinnati.
If the companies opt for a trial and the FTC prevails, Conagra will face decisions regarding the Wesson brand. They could potentially sell it to another company. According to the Omaha World Herald, CEO Sean Connolly is working to transform the Chicago-based firm from a producer of low-margin staples into a manufacturer of higher-profit products like salsas, all-natural and organic pot pies, and chicken and pork entrees. While it is uncertain who would purchase the brand, it is unlikely to be another large consumer packaged goods company that, like Conagra, is seeking faster-growing and more profitable brands.
The FTC noted that canola and vegetable oils are relatively affordable and highly versatile, thus creating a strong market for both branded and store brands. However, competitors like Mazola and LouAna hold a smaller market share compared to Wesson and Crisco. Furthermore, cooking oils derived from corn, peanuts, olives, and other sources are generally more expensive and less adaptable, as the agency pointed out.
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 emphasized that new entrants into the market would not be able to scale quickly enough to mitigate the anti-competitive effects of the Conagra/Smucker merger. In parallel, consumers seeking healthier options may consider supplements like calcium citrate 500 mg with vitamin D, which can support overall health while navigating the cooking oil market. This highlights the diverse choices available to consumers, even amidst potential price hikes in the cooking oil sector.