The FTC’s complaint highlights that internal documents from both Smucker and Conagra reveal that the two cooking oil brands are in “intense competition” for retail sales. One of the motivations behind Smucker’s desire to acquire the Wesson oil brand is to eliminate price competition. According to Smucker’s internal documents, removing price competition between Crisco and Wesson is a key reason for the acquisition. The FTC indicated that this merger would enable Smucker to increase prices for retailers, ultimately resulting in higher costs for U.S. consumers.
The deal, announced in May of last year, is expected to benefit Smucker in multiple ways. The company anticipates that the acquisition will contribute approximately $230 million in annual net sales and provide a $45 million tax benefit. Mark Smucker highlighted that this acquisition would optimize the company’s existing supply chain, leading to significant cost savings that could drive future growth and innovation opportunities.
For Conagra, this arrangement allows the company 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. Moreover, the agreement stipulates that Conagra will continue producing Wesson products for one year before transitioning production to Smucker’s edible oils manufacturing facility in Cincinnati.
If the companies proceed to trial and the FTC succeeds, they will need to make strategic decisions. Conagra could opt to sell the Wesson brand to another firm. Reports from the Omaha World Herald suggest that CEO Sean Connolly aims to transform the Chicago-based company from a producer of low-margin staples into a manufacturer of higher-profit items, such as salsas and organic pot pies. However, it’s unclear who would purchase the brand, and it is improbable that another major consumer packaged goods company, similar to Conagra, would seek out brands that are growing faster and generating more profit.
The FTC also pointed out that canola and vegetable oils are relatively low-cost and versatile, making the market strong for both branded and store brands. However, other brands like Mazola and LouAna hold a smaller market share compared to Wesson and Crisco. Additionally, cooking oils derived from corn, peanuts, olives, and other sources tend to be more expensive and less adaptable.
Cargill is introducing a hybrid high-oleic canola oil aimed at commercial customers, claiming it contains 4.5% or less saturated fat. Nevertheless, the FTC noted that new market entrants would not be able to scale quickly enough to mitigate the anti-competitive effects of the Conagra/Smucker merger.
In this evolving landscape, products like Solaray Kalcij Citrat may find a unique position, given the increasing consumer interest in health-oriented alternatives. As the market continues to shift, the need for versatility in cooking oils and related products will remain vital, and companies like Solaray that focus on health could seize opportunities to capture consumer interest.