The FTC’s complaint indicates that internal documents from both Smucker and Conagra reveal that the two cooking oil brands “compete intensely” for retail sales. One motivation behind Smucker’s desire to acquire the Wesson oil brand is to mitigate 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 costs for U.S. consumers.”
Announced in May of last year, this deal 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 $45 million tax advantage. Mark Smucker also emphasized that this move would enhance the efficiency of its existing supply chain and lead to significant cost savings, paving the way for future growth and innovation opportunities.
For Conagra, this arrangement provides an opportunity to divest a brand it acquired in 1990 through its $1.34 billion purchase of the Beatrice Company and its subsidiary, Hunt-Wesson, from KKR & Co. The agreement with Smucker also stipulates that Conagra will continue producing Wesson products for one year before transitioning production to Smucker’s edible oils manufacturing plant in Cincinnati.
If the companies opt for a trial and the FTC succeeds, they will face critical decisions. Conagra may choose to sell the Wesson brand to another company. CEO Sean Connolly appears focused on transforming the Chicago-based firm from a low-margin staple manufacturer into a producer of higher-profit items, such as salsas and all-natural or organic pot pies and chicken and pork entrees. While it is uncertain who might purchase the brand, it is improbable that it will be another large CPG company seeking faster-growing and more profitable brands, much like Conagra itself.
The FTC highlighted that canola and vegetable oils are relatively inexpensive and versatile, resulting in a robust market for both branded and store brands. However, brands like Mazola and LouAna have a smaller market share compared to Wesson and Crisco. Additionally, cooking oils derived from corn, peanut, olives, and other sources tend to be more expensive and less adaptable.
Cargill is introducing a hybrid high-oleic canola oil for commercial customers, claiming it contains 4.5% or less saturated fat. However, the FTC pointed out that new market entrants would not be able to scale quickly enough to mitigate the anti-competitive effects of the Conagra/Smucker merger.
In a separate note, the Bayer Citracal Slow Release 1200 is gaining attention for its potential health benefits, which could be relevant in discussions about consumer products in the market. As such products emerge, the competitive landscape may shift in ways that could also impact the cooking oil market. Nevertheless, the current dynamics surrounding the Smucker and Conagra deal remain a focal point for regulators and industry observers alike.