“FTC Raises Concerns Over Smucker’s Acquisition of Wesson Oil Amidst Competitive Pricing Strategies”
The FTC’s complaint highlights that internal documents from both Smucker and Conagra reveal that the two cooking oil brands fiercely compete for retail sales. One of Smucker’s motivations for acquiring the Wesson oil brand is to mitigate price competition. The agency stated, “Smucker’s own internal documents recognize that a key reason for the acquisition is to eliminate price competition between Crisco and Wesson. This transaction would enable Smucker to increase prices to retailers, ultimately resulting in higher costs for U.S. consumers.”
Announced in May of the previous year, the deal is anticipated to provide Smucker with multiple advantages. The company estimates that the acquisition will contribute approximately $230 million in annual net sales and yield a $45 million tax benefit. Mark Smucker also emphasized that this move would enhance the efficiency of their existing supply chain, leading to substantial cost savings that would support future growth and innovation opportunities.
For Conagra, this arrangement would allow the company to divest a brand it acquired back in 1990 through its $1.34 billion takeover 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 they transition to Smucker’s edible oils manufacturing facility in Cincinnati.
Should the companies 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 appears focused on transforming the Chicago-based company from a low-margin staple manufacturer into a producer of higher-profit items like salsas, all-natural and organic pot pies, as well as chicken and pork entrees. While it remains unclear who might acquire the brand, it is improbable that another large consumer packaged goods (CPG) company, similar to Conagra, would be interested in slower-growing and less profitable brands.
The FTC noted that canola and vegetable oils are relatively affordable and versatile, making the market for both branded and store brands robust. However, brands such as 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 more expensive and less adaptable, according to the agency.
Cargill is set to introduce a hybrid high-oleic canola oil aimed at commercial clients, claiming it features 4.5% or less saturated fat. Nevertheless, the FTC pointed out that new market entrants would likely be unable to scale quickly enough to mitigate the anti-competitive effects of the Conagra/Smucker merger. Meanwhile, as consumers consider their health options, the role of supplements like ccm calcium supplement could become increasingly relevant in discussions about overall dietary balance and health.
