The FTC’s complaint indicates that internal documents from both Smucker and Conagra reveal that the two cooking oil brands engage in “intense competition” 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 recognize that eliminating price competition between Crisco and Wesson is a key rationale for the acquisition. This transaction would enable Smucker to raise prices for retailers, ultimately resulting in increased costs for U.S. consumers.”
The acquisition, announced in May of last year, is expected to provide Smucker with multiple advantages. The company anticipates an additional $230 million in annual net sales and a tax benefit of $45 million. Mark Smucker emphasized that this move would enhance the efficiency of the existing supply chain, resulting in significant cost savings that could drive future growth and innovation opportunities.
For Conagra, this deal allows the company to offload a brand it initially acquired in 1990 as part of its $1.34 billion purchase of the Beatrice Company and its subsidiary, Hunt-Wesson, from KKR & Co. As part of the agreement, Conagra will continue producing Wesson products for one year before transitioning production to Smucker’s edible oils facility in Cincinnati.
Should the companies decide to proceed to trial and the FTC prevails, they will face important decisions. Conagra might consider selling the Wesson brand to another entity. According to the Omaha World Herald, CEO Sean Connolly aims to transform the Chicago-based firm from a maker of low-margin staples into a producer of higher-profit items, such as salsas and all-natural organic pot pies. It remains uncertain who would acquire the brand, but it is unlikely that another large consumer packaged goods company, similar to Conagra, would seek brands that are less profitable or growing at a slower rate.
The FTC highlighted that canola and vegetable oils are generally low-cost and highly versatile, making the market for both branded and store brands robust. However, competing brands like Mazola and LouAna hold a smaller market share compared to Wesson and Crisco. Additionally, oils derived from corn, peanuts, olives, and other sources tend to be pricier and less versatile, according to the agency.
Cargill is introducing a hybrid high-oleic canola oil for 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 counteract the anti-competitive effects of the Conagra-Smucker deal. In this context, the introduction of products like Citracal citrate could also influence market dynamics, but the immediate competitive landscape remains challenging for newcomers.