It was a protracted - and expensive - legal battle between a giant US food company and a small, in comparison, New South Wales dairy over an Aussie grocery icon.

At one point the case went all the way to a Manhattan courtroom.

But against all the odds Australia's Bega Cheese has prevailed over Chicago-based Kraft Heinz in a bust up over peanut butter that has gone on for more than three years.

Last year, it was reported Bega's defence of this, and another trademark case, had cost $41 million with Kraft's costs likely to be just as high.

On Friday, the High Court of Australia confirmed Bega was indeed the rightful owner of the distinctive packaging, the yellow lid and label, of the product once known as Kraft peanut butter.

Since late 2017, Kraft had argued that despite Bega buying the recipe for the famous peanut butter and the Melbourne factory where it and Vegemite were produced, the company hadn't bought the so-called "trade dress".

For a time, both Bega and Kraft peanut butter were on supermarket shelves.
For a time, both Bega and Kraft peanut butter were on supermarket shelves.

Even before the court case was concluded, the US firm had launched a totally new product, not made in Victoria, called Kraft Peanut Butter which looked almost identical to the former Kraft spread that was by that time sold as Bega Peanut Butter.

"Today, like every day, we're a proud Aussie business, and we look forward to continuing to produce and supply Australia's favourite peanut butter to our loyal customers," Bega's executive general manager Adam McNamara said on Friday.

The spread saga dates back to 2012 when Kraft, currently worth $53 billion to Bega's $1 billion, somewhat absent-mindedly gave up ownership of one of its key Australian products.

That year, the vast firm split into two with its Australian operations - which also included Vegemite, Philadelphia cheese, Oreo biscuits and Cadbury chocolate - transferred to a new company called Mondelez.

By 2017, Mondelez was more interested in its chocolate and biscuit business and sold the Kraft products including the peanut butter to Bega for $460 million.

Bega purchased the former Kraft Vegemite and peanut butter bands in 2017. Picture Kym Smith
Bega purchased the former Kraft Vegemite and peanut butter bands in 2017. Picture Kym Smith

NOT KRAFT'S TO BRING 'BACK'

The Kraft brand was not part of the deal, so Bega replaced the name on the jars with its own.

Job done, Bega thought.

But then Kraft, which had since merged with Heinz, wanted back into the lucrative $110m domestic peanut butter market it once controlled two-thirds of.

It took Bega to court first in New York, then in Australia, and argued that it wasn't just the Kraft brand it still owned but also all the packaging as well.

If Kraft Heinz had won it could have meant Bega having to redesign all of its jars with a different label, pack shape and ditch the yellow colour even though the spread inside was the same product enjoyed on Australian breakfast tables since the 1930s

Wasting no time, Kraft then subcontracted Sanitarium to whip up a new peanut butter with a similar look to Bega's.

But it struggled to get traction of the old/new spread with Coles and Woolworths shunning the reboot leaving it only at IGA supermarkets.

The newfangled Kraft peanut butter has now vanished from supermarket shelves.

In 2019, the federal court threw out Kraft's case and said Bega had indeed bought the spread, lock, stock and yellow jar.

More than that, the judge criticised Kraft for ads that read "Kraft peanut butter will … be back".

"That peanut butter is surely the very peanut butter product that Bega acquired, along with all the other assets. It was thus not Kraft Heinz's to bring 'back'," said Justice David O'Callaghan at the time.

Kraft was criticised for saying the peanut butter was coming ‘back’ when it had never gone away and was now sold under the Bega brand. The Kraft spread was an entirely new product.
Kraft was criticised for saying the peanut butter was coming ‘back’ when it had never gone away and was now sold under the Bega brand. The Kraft spread was an entirely new product.

PLEASED WITH DECISION

Kraft tried the same argument in reverse. They asked the judge to rule Bega had misled consumers through a series of ads that stated "Kraft peanut butter is now Bega peanut butter". The judge dismissed the point, stating that was exactly what had occurred - Bega had replaced Kraft.

But the US goliath was in no mood to back down. In May of this year, it filed an application in the High Court seeking leave to appeal the Judgement of the Federal Court.

On Friday, the High Court dismissed Kraft Heinz's case leaving the firm with no other legal options to pursue and Bega free to package the peanut butter in the brand's classic colours and jar.

"Bega peanut butter has proudly been made at our Port Melbourne factory, located at One Vegemite Way, for over 55 years, using the recipe that became famous for being Never Oily, Never Dry," Mr McNamara said.

"We're extremely pleased with the decision - our main focus has always been on producing and supplying our much-loved peanut butter to peanut butter lovers across Australia."

Since its purchase of the Kraft spreads, Bega has expanded the brand with its Simply Nuts range and in 2018 bought one of Australia's largest peanut companies to ensure it has a steady supply of the ingredient.

Kraft Heinz continues to sell some cheese products in Australia under the Kraft brand.

benedict.brook@news.com.au

Originally published as Aussie icon's huge triumph over US giant


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