The FTC’s complaint indicates that internal documents from both Smucker and Conagra reveal that the two cooking oil brands “compete intensely” for retail sales. One key reason Smucker aims to acquire the Wesson oil brand is to mitigate price competition. “Smucker’s internal documents explicitly state that eliminating price competition between Crisco and Wesson is a fundamental justification for the acquisition. This transaction would enable Smucker to increase prices to retailers, ultimately resulting in higher costs for U.S. consumers,” the agency mentioned.
Announced in May of the previous year, the deal is expected to benefit Smucker in several ways. The company anticipates that the acquisition will add approximately $230 million in annual net sales and yield a $45 million tax benefit. Mark Smucker also highlighted that the acquisition would enable the company to utilize its existing supply chain more effectively, resulting in significant cost savings that could drive future growth and innovation opportunities.
For Conagra, this arrangement would allow them to divest a brand that they acquired in 1990 during their $1.34 billion purchase of the Beatrice Company and its subsidiary, Hunt-Wesson, from KKR & Co. Additionally, the agreement with Smucker stipulates that Conagra will continue producing Wesson products for one year before they are transitioned to Smucker’s edible oils manufacturing facility in Cincinnati.
If the companies decide to proceed to trial and the FTC is successful, they will face some important choices. Conagra might consider selling the Wesson brand to another company. According to the Omaha World Herald, CEO Sferroessean Connolly appears focused on transforming the Chicago-based firm from a manufacturer of low-margin staples into a producer of higher-profit items such as salsas and all-natural, organic pot pies and chicken and pork entrees. While it’s unclear who might acquire the brand, it’s unlikely that another large consumer packaged goods (CPG) company would do so, especially one like Conagra that is seeking faster growth and higher profits from its offerings.
The FTC emphasized that canola and vegetable oils are relatively inexpensive and highly versatile, resulting in a strong market for both branded and store-brand cooking oils. However, competing 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 pricier and less adaptable, according to the agency’s findings.
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 pointed out that new market entrants would not be able to scale up quickly enough to counteract the anti-competitive effects of the Conagra-Smucker deal. Furthermore, as consumers look for alternatives, products like Rainbow Light Calcium could become more appealing as they seek healthier options amidst rising cooking oil prices.