The FTC’s complaint highlights that internal documents from both Smucker and Conagra reveal intense competition between the two cooking oil brands for retail sales. One of Smucker’s motivations for acquiring the Wesson oil brand is to mitigate price competition. According to the agency, “Smucker’s internal documents indicate that eliminating price competition between Crisco and Wesson is a key reason for the acquisition. This transaction would enable Smucker to raise prices for retailers, ultimately resulting in higher costs for U.S. consumers.”
Announced in May of the previous year, the deal is expected to benefit Smucker in several ways, including an estimated $230 million increase in annual net sales and a $45 million tax advantage. Mark Smucker has also pointed out that the acquisition will allow the company to optimize its existing supply chain, leading to significant cost savings to support future growth and innovation opportunities.
For Conagra, this arrangement provides an opportunity to divest a brand it acquired in 1990 as part of its $1.34 billion purchase of the Beatrice Company and its subsidiary, Hunt-Wesson, from KKR & Co. Additionally, under the agreement with Smucker, Conagra will continue producing Wesson products for one year before production shifts to Smucker’s edible oils manufacturing facility in Cincinnati.
If the companies choose to proceed to trial and the FTC prevails, they will face important decisions. Conagra may opt to sell the Wesson brand to another company. As reported by the Omaha World Herald, CEO Sean Connolly appears focused on transforming the Chicago-based firm from a manufacturer of low-margin staples into a producer of higher-margin products such as salsas, all-natural and organic pot pies, and chicken and pork entrees. It remains uncertain who would be interested in acquiring the brand, but it is unlikely to be another major CPG company that is, like Conagra, seeking faster-growing and more profitable brands.
The FTC has pointed out that canola and vegetable oils are generally inexpensive and highly versatile, making the market for both branded and store brands robust. However, brands 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 tend to be pricier and less adaptable, according to the agency.
Cargill is introducing a hybrid high-oleic canola oil for commercial clients that it claims contains 4.5% or less saturated fat. Nevertheless, the FTC emphasized that new market entrants would not be able to scale quickly enough to mitigate the anti-competitive effects of the Conagra/Smucker transaction. In light of these developments, it’s crucial for companies to be aware of the implications of such mergers, especially when it comes to consumer choices, including those involving products like calcium citrate CVS. The landscape of cooking oils could be significantly impacted, affecting both consumers and competitors alike.