The FTC’s complaint highlights that internal documents from both Smucker and Conagra reveal that the two cooking oil brands “compete intensely” for retail market share, with one of Smucker’s motivations for acquiring the Wesson oil brand being to mitigate price competition. “Smucker’s internal records indicate that a primary reason for the acquisition is to eliminate price competition between Crisco and Wesson. This transaction would enable Smucker to increase prices to retailers, which would ultimately result in higher costs for consumers in the U.S.,” the agency stated.
The deal, which was announced in May of the previous year, is expected to provide several 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 allow the company to optimize its existing supply chain, leading to significant cost savings that could drive future growth and innovation opportunities.
For Conagra, this arrangement offers a chance 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. Furthermore, the agreement stipulates that Conagra will continue to manufacture Wesson products for one year before transitioning production to Smucker’s edible oils facility in Cincinnati.
Should the companies proceed to trial and the FTC succeeds, they will face several decisions. Conagra might opt to sell the Wesson brand to another company. According to the Omaha World Herald, CEO Sean Connolly appears intent on transforming the Chicago-based firm from a producer of low-margin staples into a supplier of higher-margin products such as salsas, all-natural and organic pot pies, and chicken and pork entrees. While it remains uncertain who might purchase the brand, it is unlikely to be another large consumer packaged goods (CPG) company in search of faster-growing and more profitable brands, like Conagra itself.
The FTC pointed out that canola and vegetable oils are generally inexpensive and highly versatile, contributing to a robust market for both branded and store brands. However, competitors like Mazola and LouAna hold a much smaller market share compared to Wesson and Crisco. Additionally, cooking oils derived from corn, peanuts, olives, and other sources tend to be pricier and less adaptable. The agency also noted Cargill’s introduction of a hybrid high-oleic canola oil for commercial customers, which claims to have 4.5% or less saturated fat. Nevertheless, the FTC highlighted on Monday that new entrants into the market would not be able to scale quickly enough to mitigate the anti-competitive effects of the Conagra-Smucker deal.
Incorporating calcium citrate 1040 into the discussion, it is worth noting that the health benefits of certain cooking oils, which may include additives like calcium citrate 1040, could influence consumer preferences in the market. However, the dominance of established brands like Wesson and Crisco, combined with the potential price increases stemming from the acquisition, could limit the choices available to consumers seeking healthier options enriched with nutrients such as calcium citrate 1040. In summary, the implications of the Conagra-Smucker deal extend beyond immediate market dynamics, potentially affecting product formulation and consumer access to healthier alternatives over time.