Kraft takes Bega to court over classic peanut butter stand-off

EXCLUSIVE: MONTHS after Vegemite was sold, Kraft has gone to war with an Australian dairy over peanut butter.

EXCLUSIVE: American condiment king Kraft is at war with Australian rival Bega in a clash of classics.

On Monday, Kraft released an “exciting announcement”, confirming “two of Kraft’s traditional favourites are set to return to supermarket shelves with Kraft Singles appearing from this week and Kraft Peanut Butter making a comeback in early 2018”.

But its cheery statement masks an ugly pan Pacific peanut butter battle.

Last Friday, US giant Kraft and NSW dairy company Bega were quietly called to a New York federal court after Kraft urged a judge to mediate an ongoing dispute between the pair surrounding “Bega’s blatant violation of Kraft’s intellectual property rights”, according to court documents seen by news.com.au.

At the heart of the furious battle is the seemingly innocuous issue of the design of a jar of spread.

Currently, what was Kraft Peanut Butter is made by Bega. By next year, there could be the bizarre situation where customers keen on the original Kraft taste have to buy Bega Peanut Butter despite a product called Kraft Peanut Butter also being on the supermarket shelves.

Bega has gone as far to say that only it now owns the classic recipe and Kraft’s reborn spread will be “a different recipe, made in a different factory by different people”.

Bega: Look familiar?

Kraft: Wait a second ...

The origins of this breakfast time brouhaha go back to 2012 when, Kraft, which had graced Australian shelves for more than 90 years, split in two.

One company, still called Kraft, focused on North American grocery products; the other — called Mondelez — on global biscuits and confectionary, including Cadbury.

But Kraft products in Australia found themselves stranded under Mondelez’s custodianship — a company more interested in chocolate than cheese and spreads.

This year, Mondelez got rid of the unwanted Kraft products, including Vegemite and its popular peanut butter, to Australian cheese giant Bega.

However, there was a catch. While Bega got the factories and the recipe, it could only use the Kraft name until the end of 2017. So, subtly, Bega has been busy rebranding the classic Aussie favourite under its own name. Not that you’d know it, because everything else — including the jar and yellow lid — looks the same.

In May this year, it was announced Kraft Peanut Butter would become Bega The Good Nut peanut butter, although the packaging remained similar.

While the products themselves remained the same, the Kraft name was sidelined. Kraft Singles were also replaced by UK brand “Dairylea Slices”.

Now Kraft, which has since merged with Heinz, wants to bring its name back to Australia. To do so, it has to start from scratch as it sold its manufacturing facilities.

“Kraft, a brand steeped in the life, culture and history of Australia since 1926, is set to appear on Australian supermarket shelves again with the planned return of two locally-manufactured traditional favourites, cheese and peanut butter,” a statement read.

“The brand has been such an integral part of Australian families that its temporary absence has promptly been addressed by KraftHeinz which has listened to its loyal consumers.”

In the licensing agreement with Kraft, Bega was allowed the right to use the traditional peanut butter Kraft design, complete trademark and the combination design of a jar with a yellow lid and a yellow label with a red or blue “peanut device” — for a limited time.

But that’s not the way Bega sees it. The company, named after the south coast NSW town where it is based, claims it now owns the jar design and packaging and will continue to use them after the licensing agreement expires at the end of this year.

That’s a big problem as far as Kraft is concerned. Because as well as its name, it wants its jar and distinctive colours back for when it relaunches Kraft peanut butter next year.

Kraft claims the license is scheduled to expire on December 31, 2017 “at which time all rights in the Kraft trademark and the Peanut Butter Trade Dress will revert to Kraft”.

In court last week, Kraft alleged Bega’s designs were a “deliberate effort to trade off the goodwill of the Kraft brand, cause consumer confusion, and irreparably harm the value of Kraft’s intellectual property”.

When Kraft approached Bega with the issue, it “informed Kraft that it believes it is not obligated to comply with the dispute resolution provisions of the license agreement.”

Kraft described Bega’s actions as “a flagrant violation of the most fundamental tenet of contract law”.

Kraft urged the court that if Bega failed to comply with the agreement, “the Court enter an order declaring that Bega has repudiated the Agreement and therefore no longer has any rights under it”.

Kraft peanut butter packaging as it looked in 1996.

“The Good Nut” brand has started appearing on peanut butter jars while the Kraft logo disappeared soon after.

So where does that leave Peanut Butter?

Kraft’s hands are tied until 2018, which fits its announcement that the spread will “make a comeback in early 2018”.

In a statement to news.com.au, Bega confirmed that it will continue to produce the original Kraft “never oily, never dry” peanut butter recipe albeit under the new name, Bega Peanut Butter.

“We cannot speculate on what Kraft has planned,” a spokesman for Bega told news.com.au. “However, Australian-owned Bega Cheese Limited purchased the original never oily, never dry recipe, as well as the Victorian factory where the former Kraft Peanut Butter was made for 55 years.

“Bega is proud to own and manufacture the same great tasting peanut butter that Australians have loved for 55 years in the exact same factory. The only change to Australia’s favourite peanut butter is that it will be sold as Bega Peanut Butter.”

However, Bega said “what we do know is that it (Kraft’s new peanut butter) will be a different recipe, made in a different factory by different people”.

A view of the court documents regarding the case.

Kraft Singles in their new-look packaging.

Meanwhile, in a statement to news.com.au, Kraft said: “The future of the Kraft brand has never been in doubt. A series of historical corporate decisions saw the brand licensed to an external company for a limited period of time under strict conditions. It has always been

our intention to continue with Kraft products in Australia. Kraft Singles will appear on supermarket shelves shortly and Kraft Peanut Butter in the New Year; both of which will be manufactured locally.”

Court documents reveal that “all disputes arising out of or relating to the agreement must be resolved by mediation and arbitration in New York, and that all such disputes shall be governed by New York law”.

How unAustralian.

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Originally published as Kraft takes Bega to court over classic peanut butter stand-off