Bega Cheese’s peanut butter battle with Kraft heads to High Court

Bega Cheese savoured victory with a Federal Court win over peanut butter branding, but US giant Kraft Heinz isn’t giving up.

Bega boss Barry Irvin after the 2017 deal with Kraft which also handed his company control of Vegemite: Picture: Stuart McEvoy

Australia’s High Court is being asked to preside over a sticky issue with peanut butter.

US food giant Kraft Heinz has filed an 11th hour application to the High Court, seeking leave to appeal against a Federal Court decision that allowed Bega Cheese to continue to use the branding, colours and style of the classic jar of Kraft Peanut Butter.

“On May 19 Bega Cheese received notice that Kraft Heinz has filed an application in the High Court seeking special leave to appeal from the judgment of the Full Court of the Federal Court of Australia,” Bega said in an announcement to the ASX on Wednesday.

Millions of dollars have been spent in the nut fight, with Bega confirming in February the legal battles had wiped $9.5m off its earnings.

Bega is also fighting the world’s biggest milk exporter, Fonterra, after the New Zealand company claimed the use of Bega’s logo on that same peanut butter jar contravened a licensing deal the pair struck in 2002.

Bega acquired most of Kraft’s Australian food operations, including Vegemite and peanut butter, for $460m in 2017.

Kraft Heinz is understood to have been exploring a sale of its remaining Australian and New Zealand operations that some estimate could be worth about $1bn, and therefore is attracting keen interest over what it hopes to get out of its court battle with Bega.

If Kraft Heinz wins the case and can sell its classic jars of peanut butter again, it will have to obtain the prime supermarket shelf space that Bega has secured in the past three years and also will struggle obtaining Australian-grown peanuts.

Bega peanut butter. Picture: Peter Ristevski

Bega controls most of Australia’s peanut supply after it acquired the Australian Peanut Company for $11.9m early last year. This leaves Kraft Heinz, if its appeal is successful, having to import nuts, with China, India and Nigeria rounding out the world’s top three peanut producers.

Bega has also been busy extending its peanut butter range with new products, including Simply Nuts and a no added sugar or salt variety in the classic range.

“We didn’t expect Vegemite to grow substantially but knew it would be very stable. But with peanut butter we did see genuine growth opportunities,” Bega CEO Barry Irvin told The Australian in February.

“We knew that this spread business that we were buying had a link back to dairy as well, was a very stable product at its core and a natural product that was good for you.”