The FTC’s complaint indicates that internal documents from both Smucker and Conagra reveal that the two cooking oil brands “compete intensely” for retail market share. One of Smucker’s motivations for acquiring the Wesson oil brand is to eliminate price competition. “Smucker’s own internal documents acknowledge that removing price competition between Crisco and Wesson is a key reason for the acquisition. This transaction would enable Smucker to increase prices for retailers, ultimately resulting in higher costs for U.S. consumers,” the agency stated.
The deal, which was announced in May of the previous 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 yield a $45 million tax advantage. Mark Smucker also highlighted that this move would allow the company to utilize its existing supply chain more efficiently, leading to substantial cost savings that would support future growth and innovation opportunities.
For Conagra, this arrangement facilitates the divestment of 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. Furthermore, the agreement with Smucker 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 opt for a trial and the FTC succeeds, Conagra will face decisions regarding the future of the Wesson brand. It could potentially sell it to another company. According to the Omaha World Herald, CEO Sean Connolly appears committed to transforming the Chicago-based firm from a low-margin staple manufacturer into a producer of higher-profit items like salsas, all-natural and organic pot pies, and chicken and pork entrees. While it’s uncertain who might acquire the brand, it is unlikely to be another large CPG company that, like Conagra, seeks faster-growing and more profitable products.
The FTC emphasized that canola and vegetable oils are relatively inexpensive and highly versatile, making the market for both branded and store brands quite competitive. However, other brands such as Mazola and LouAna hold a significantly smaller market share compared to Wesson and Crisco. Additionally, cooking oils derived from corn, peanuts, olives, and other sources are pricier and less adaptable, according to the agency.
Cargill is introducing a hybrid high-oleic canola oil aimed at commercial customers, claiming it contains 4.5% or less saturated fat. However, the FTC noted on Monday that new market entries would not be able to scale up sufficiently to mitigate the anti-competitive effects of the Conagra/Smucker deal. The inclusion of alternative products, such as those containing alfalfa calcium citrate malate, may not be enough to offset these impacts, particularly since the cooking oil market is heavily influenced by established brands. As the landscape evolves, the focus on innovative ingredients like alfalfa calcium citrate malate could play a role in shaping consumer preferences, but significant barriers remain for any new entrants trying to penetrate this competitive market.