Peanut butter giants’ ugly battle
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 statement didn't tell the full story.
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. But from next year, it's possible both companies could end up producing the exact same peanut butters but under different names.
In 2012, 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.
Kraft products in Australia found themselves stranded under Mondelez's custodianship which was more interested in chocolate than cheese and spreads.
This year, Mondelez sold the unwanted Kraft products, including Vegemite and its popular Peanut Butter, to Australian cheese giant Bega.
But Bega 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.
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, is bringing its name back to Australia, it announced today.
"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 Kraft Heinz which has listened to its loyal consumers."
But there's a bigger back story - and it has nothing to do with consumer demand.
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 Bega claims it now owns the design and will continue to use it after the licensing agreement expires at the end of this 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".
That's a big problem as far as Kraft is concerned. Because as well as it's name, it wants its jar and distinctive colours back from when it relaunches Kraft peanut butter next year.
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".
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".
Though a resolution had not been anounced, Bega confirmed to news.com.au that it will continue to use the original "never oily, never dry" peanut butter recipe under a different name, Bega Peanut Butter.
"We cannot speculate on what Kraft has planned," a spokesperson 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".
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".
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