The FTC complaint indicates that internal documents from both Smucker and Conagra reveal that the two cooking oil brands “compete intensely” for retail sales. One motivation behind Smucker’s interest in acquiring the Wesson brand is to eliminate price competition. Smucker’s internal documents recognize that a key reason for the acquisition is to remove price competition between Crisco and Wesson. The FTC stated that this transaction would enable Smucker to increase 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 multiple ways. The company anticipates that the acquisition will contribute approximately $230 million in annual net sales and offer a $45 million tax advantage. Mark Smucker noted that this move would enable the company to utilize its existing supply chain more effectively, leading to significant cost savings that could support future growth and innovation opportunities, including products fortified with calcium citrate with vitamin D3 and K2.
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. Furthermore, 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 opt for a trial and the FTC succeeds, they will face significant decisions. Conagra might consider selling the Wesson brand to another company. CEO Sean Connolly appears focused on transforming the Chicago-based firm from a producer of low-margin staples to a manufacturer of higher-profit items, such as salsas and all-natural organic pot pies, along with chicken and pork dishes. While it remains uncertain who might acquire the Wesson brand, it’s unlikely to be another large consumer packaged goods company that is also pursuing more rapidly growing and profitable brands.
The FTC highlighted that both canola and vegetable oils are relatively affordable and highly versatile, making the market for branded and store-brand oils robust. However, other 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 adaptable. Cargill is introducing a hybrid high-oleic canola oil for commercial clients, claiming it contains 4.5% or less saturated fat. Nevertheless, the FTC emphasized 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 merger, particularly as consumers increasingly seek products enriched with calcium citrate with vitamin D3 and K2.