Vegemite factory to stay in local hands after Charter Hall swoops

Vegemite was first produced at the site in 1923, but the product took years to catch on with the public who were used to British Marmite. Now 22m jars are sold each year.

The home of Vegemite has sold with Bega Cheese offloading the factory in Port Melbourne where the famed yeast spread is made to local property funds house Charter Hall.

Bega unveiled a multimillion dollar restructure and simplification program after boosting its balance sheet with the $114.6m sale of the famed Port Melbourne manufacturing site.

The deal with Charter Hall keeps the Vegemite factory in local hands after it almost sold to US property group Hines last year ahead of a series of interest rate rises hitting the commercial property market.

Charter Hall chief executive David Harrison said the deal showed the company’s expertise in sale and leaseback transactions and Bega was an existing tenant elsewhere in Melbourne.

Bega said on Tuesday it would lease back the site for an initial term of 15 years, with two additional five year options.

“The Bega Group intends to continue the production of iconic brands including Vegemite and Bega Peanut Butter at the site. The funds from the sale will reduce debt and further support the Bega Group’s strategy and transition to a company focused on market leading brands,” the company said.

The Vegemite factory in Port Melbourne.

The earlier deal would have kept a number of options on the table, including an early exit for the foods group.

The facility went on the block in May last year when Bega launched an expression of interest campaign for the sale and leaseback of the Port Melbourne property via Colliers agents Gavin Bishop and Sean Thomson.

Bega boss Barry Irvin with staff in Melbourne. Picture: Stuart McEvoy for the Australian.

The factory, where Bega manufactures Vegemite and other products, is five kilometres from the Melbourne CBD, making it ideal for last-mile deliveries if it was redeveloped. But Bega is committed to the site.

The Vegemite factory is site where the product was first produced in 1923. It took some years to catch on with the public who were used to British product Marmite, but now more than 22 million jars of Vegemite spread are sold every year.

The site has a storeyed history. In 1943 hundreds of women were recruited to work at a new vegetable dehydration factory in Port Melbourne as part of the war effort. In 1952, the site was expanded to include a yeast factory.

The company said it would recognise a $21m organisational restructure program cost in its fiscal 2023 results.

The program is expected to deliver annual savings of an equivalent amount on an ongoing basis, with the first half of fiscal 2024 seeing at least $12m of that flowing through.

The program will include tax consolidation, incurring a one-off after tax cost of up to $15m, back office streamlining, refined customer engagement systems and a product range review.

Normalised earnings guidance for fiscal 2023 had already been set at the low end of $160m to $190m, but profit will now be impacted due to its restructure and other actions.

Bega cited the continued decline in Australian milk production as necessitating a review of the carrying value of the bulk dairy ingredient assets, which will likely lead to a non-cash impairment of these assets of $180m to $280m.

“The non-cash impairment will not impact the Bega Group’s financial strength or create any adverse issues with our current banking arrangements,” it assured shareholders.

Robust competition for farm gate milk supply and declining global traded dairy commodity prices have already impacted this financial year, and the trend is expected to continue into fiscal 2024 as it continues to look at its extensive property portfolio for potential sale “opportunities”.

Bega shares added 13c to $3.56 in a higher market on Tuesday, late morning.