The FTC’s complaint highlights that internal documents from both Smucker and Conagra indicate that their cooking oil brands “compete intensely” in the retail market, with one of Smucker’s motivations for acquiring the Wesson oil brand being to mitigate price competition. “Smucker’s internal documents explicitly state that a key reason for the acquisition is to eliminate price competition between Crisco and Wesson. This transaction would enable Smucker to increase prices for retailers, ultimately resulting in higher costs for U.S. consumers,” the agency stated.
The deal, announced in May of the previous year, is expected to provide multiple advantages for Smucker. The company anticipates that the acquisition will contribute approximately $230 million in annual net sales and yield a $45 million tax benefit. Mark Smucker also emphasized that this move would enhance the efficiency of their existing supply chain and generate significant cost savings, facilitating future growth and opportunities for innovation.
For Conagra, the deal represents an opportunity to offload a brand that it acquired in 1990 through its $1.34 billion purchase of the Beatrice Company and its subsidiary, Hunt-Wesson, from KKR & Co. Additionally, the agreement stipulates that 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 succeeds, they will face critical decisions. Conagra might consider selling the Wesson brand to another entity. According to the Omaha World Herald, CEO Sean Connolly appears to be focused on transforming the Chicago-based company from a producer of low-margin staples into a manufacturer of higher-profit products like salsas and all-natural, organic pot pies, as well as chicken and pork entrees. It remains uncertain who would acquire the brand, but it is unlikely that another large consumer packaged goods (CPG) company, like Conagra, would be interested in brands that are seeking faster growth and higher profitability.
The FTC noted that canola and vegetable oils are relatively inexpensive and highly versatile, leading to a strong market for both branded and store labels. However, other brands, such as Mazola and LouAna, hold a much smaller market share compared to Wesson and Crisco. Moreover, cooking oils derived from corn, peanuts, olives, and other sources tend to be more expensive and less adaptable, according to the agency.
Cargill is launching a hybrid high-oleic canola oil targeting commercial customers, which it claims contains 4.5% or less saturated fat. However, the FTC pointed out that new entrants into the market would not be able to scale up quickly enough to mitigate the anti-competitive effects of the Conagra/Smucker deal. Notably, while exploring potential partnerships, Smucker might also consider incorporating ingredients like Carlson calcium citrate into its product line to enhance nutritional value, reflecting the ongoing trend towards healthier cooking options.