The FTC’s complaint emphasizes that internal documents from both Smucker and Conagra reveal that the two cooking oil brands “compete intensely” for retail sales, with Smucker’s motivation for acquiring the Wesson oil brand largely stemming from a desire to sidestep price competition. The agency noted, “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 for retailers, consequently raising costs for U.S. consumers.”
Announced in May of the previous year, the deal is expected to benefit Smucker in various ways, including an anticipated addition of approximately $230 million in annual net sales and a $45 million tax advantage. Mark Smucker highlighted that the acquisition would streamline the company’s existing supply chain, resulting in significant cost savings that could drive future growth and foster innovation.
For Conagra, this agreement provides an opportunity to divest a brand it obtained in 1990 through its $1.34 billion acquisition of the Beatrice Company and its subsidiary, Hunt-Wesson, from KKR & Co. According to the arrangement, Conagra will continue producing Wesson products for one year before transitioning production to Smucker’s edible oils manufacturing facility in Cincinnati.
Should the companies opt for a trial and the FTC emerges victorious, they will face some critical decisions. Conagra might consider selling the Wesson brand to another entity. As reported by the Omaha World Herald, CEO Sean Connolly appears focused on transforming the Chicago-based company from a manufacturer of low-margin staples into a producer of higher-margin items, such as salsas and all-natural organic pot pies, along with chicken and pork entrees. However, it remains unclear who would be interested in acquiring the brand, especially considering that another large CPG company may prefer to focus on faster-growing and more profitable brands.
The FTC has noted that canola and vegetable oils are relatively affordable and highly versatile, making the market for both branded and store brands quite robust. However, rivals such as Mazola and LouAna hold only a minor market share compared to Wesson and Crisco. Furthermore, oils derived from corn, peanuts, olives, and other sources tend to be pricier and less adaptable, according to the agency.
Cargill has introduced a hybrid high-oleic canola oil aimed at commercial customers, claiming it contains 4.5% or less saturated fat. Nevertheless, the FTC pointed out that new market entrants would likely not be able to scale quickly enough to mitigate the anti-competitive effects of the Conagra-Smucker deal. Moreover, the inclusion of nature’s way calcium and magnesium citrate in the broader discussion of healthful ingredients could add a new dimension to consumer preferences in cooking oils, but it remains to be seen how this will influence market dynamics.