Legal costs mount in Bega’s two-front peanut butter war with Kraft and Fonterra

Bega is fighting peanut butter wars on two fronts with Kraft and Fonterra, notching up a multi-million dollar legal bill.

Bega is locked in a legal battle with Kraft Heinz over peanut butter labelling.

Bega Cheese has added an extra $15.2m to its legal bill for its peanut butter wars with US food giant Kraft and the world’s biggest dairy exporter Fonterra, taking total costs $41.2 in the past two years.

Kraft has appealed against a Federal Court decision that allowed Bega to continue to use the branding, colours and style of the classic jar of Kraft Peanut Butter, lining lawyers’ pockets in the process.

At the same time, Bega is fighting 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.

“We were pleased to receive a favourable decision in our legal dispute with Kraft from the full court of the Federal Court of Australia in April,” Bega executive chairman said.

“Kraft has now sought leave to appeal to the High Court. The High Court has set a date in mid-November 2020 to hear the application.

“The dispute with Fonterra regarding the Bega brand continues. The trial in the Supreme Court of Victoria completed in July 2020 and we are now awaiting judgment.”

Bega acquired most of Kraft’s Australian food operations, including Vegemite, for $460m in 2017, but Kraft said that did not include their peanut butter trademarks and branding, despite the company withdrawing their own branded spread from supermarket shelves at the time of the sale.

The legal battles come as Bega’s net profit firmed 3 per cent to $31.9m on an underlying basis. If the cost of the lactoferrin factory at Koroit in Victoria’s southwest which Bega acquired in 2019 is removed, profit surged $384 per cent to $21.3m. Meanwhile revenue firmed 5 per cent to $1.49bn.

Mr Irving said he was “particularly proud of this year’s business performance” given the challenges Bega faced.

“It has been a year like no other,” he said.

“We began the year in the grips of drought which contributed to a very competitive milk procurement environment and then managed never before seen bushfires.

“While still managing the impacts of those difficult circumstances COVID-19 was upon us, resulting in a major correction in global dairy commodity prices, a collapse in Australian and international food service demand and an increase in Australian retail demand”.

Despite these challenges, Mr Irvin expected further earnings growth in the year ahead, although he did not reveal an exact figure.

“Continued growth will be underpinned by ongoing innovation in our product range and branded foods portfolio,” he said.

“With the completion of the new lactoferrin plant at Koroit, the execution of the organisational review in the first half of 2021 and the continued optimisation planned for our secondary

processing plants, Bega Cheese is well placed for EBITDA growth in FY2021.”

Bega will pay a final dividend of 5c a share on October 7. This compares with a final payout of 5.5c in 2019.