Peanut capital cheesed off after Bega closes famed factory

Australia’s peanut capital of Kingaroy is reeling after a decision by food manufacturer Bega to close the close the town’s 101-year old peanut processing company.

Bega Cheese acquired the Peanut Company of Australia in 2017.

Australia’s peanut capital of Kingaroy is reeling after a decision by food manufacturer Bega to close the town’s 101-year old peanut processing company.

ASX-listed Bega, which also makes cheese, Vegemite and a range of other food products, said about 150 employees at its wholly owned Peanut Company of Australia will be offered redundancies following a decision to shut down operations at Kingaroy and Tolga in Queensland.

Kingaroy in the state’s fertile South Burnett region has long been synonymous with the tasty legumes, with the late former Queensland premier Joh Bjelke-Petersen starting out as a ­farmer from the region who designed a successful peanut thresher.

Bega said the phased shutdown of the processing plant would occur over the next 18 months as it revealed PCA had been under sustained financial pressure for several years prior to its acquisition by Bega Group in 2017.

“Despite investments into PCA’s operations, including significant upgrades to site safety and initiatives aimed at supporting local growers to boost production, the group has not been able to establish a sustainable business model,” the company said. The decision follows a 12-month review and after all options to sell the business failed.

The peanut industry in Australia is facing a combination of headwinds including increased competition from imports, stronger returns for growers from other crops, high input costs, and declining production, according to Bega. It said there would be no impact on its manufacturing of peanut butter, which will continue at the company’s operations in Port Melbourne.

Peanut harvesting in the South Burnett.

PCA has been incurring operating losses of between $5m and $10m a year. One-off cash shutdown costs, predominantly relating to redundancies, are expected to be $5m to $10m, and limited ­impairments are anticipated.

Bega Group said it continued to have a strong presence in Queensland, retaining two processing facilities in Crestmead and Malanda, which produce dairy products and drinks, as well as its distribution network.

PCA was established in 1924 as the Peanut Marketing Board, and became one of the world’s leading exclusive processors of Hi-Oleic peanuts – which are rich in oleic acid, a mono-unsaturated fat that resembles the health-promoting fats found in olive oil.

Bega Cheese in 2017 offered nearly $12m to take over PCA to give the dairy processor new supplies of Australian-grown peanuts for its own peanut butter operations. That came the same year it finalised the purchase of a suite of food products, including Vegemite and Kraft peanut butter from global food giant Mondelez.

A legal battle between Bega Cheese and Kraft-Heinz over who had rights to the design of the yellow-lidded-and-labelled jar used for Kraft peanut butter prior to the deal followed.

Kingaroy’s historic connection with peanuts is expected to survive the closure of the factory with other operators still having a strong presence in the town.

They include G Crumpton & Sons, a third generation family-owned business.