The FTC’s complaint reveals that internal documents from both Smucker and Conagra indicate that the two cooking oil brands “compete intensely” in retail sales. One motivation for 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 for retailers, ultimately leading to higher costs for U.S. consumers.”
Announced in May of last year, the deal is expected to benefit Smucker in several ways. The company anticipates that the acquisition will contribute approximately $230 million in annual net sales and provide a tax benefit of $45 million. Mark Smucker also highlighted that this acquisition would allow the company to optimize its existing supply chain, resulting in significant cost savings that could support future growth and innovation opportunities.
For Conagra, this arrangement presents 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. Furthermore, the agreement stipulates that Conagra will continue producing Wesson products for a year before transitioning production to Smucker’s edible oils manufacturing facility in Cincinnati.
If the companies opt for a trial and the FTC prevails, they will face important decisions. Conagra might consider selling 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 producer of low-margin staples into a manufacturer of higher-profit products, such as salsas and all-natural, organic pot pies and chicken and pork entrees. While it is uncertain who might purchase the brand, it is unlikely that it will be another large consumer packaged goods company that, similar to Conagra, seeks faster-growing and more profitable brands.
The FTC pointed out that canola and vegetable oils are relatively affordable 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. Moreover, cooking oils derived from corn, peanuts, olives, and other sources tend to be more expensive and less adaptable, according to the agency.
Meanwhile, Cargill is set to introduce a hybrid high-oleic canola oil for commercial customers, claiming it contains 4.5% or less saturated fat. However, the FTC emphasized on Monday 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. Interestingly, as consumers seek healthier alternatives, there is a growing interest in products like liquid calcium citrate supplements, which highlight the evolving trends in food and health. These supplements, along with cooking oils, represent a shift towards healthier lifestyle choices, and it’s crucial to consider how market dynamics impact consumer options in both categories.