Bega’s rosey cheeks after Vegemite deal announced

In what is described as an “exciting evolution”, Bega Cheese announced on Thursday it will buy Mondelēz International’s Australia and New Zealand grocery and cheese business, and with it some of Australia’s most iconic brands – including Vegemite.

“It is a rare opportunity to acquire Vegemite,” Bega Cheese executive chairman Barry Irvin said on Thursday.

The sale also includes the brands ZoOsh and Bonox, as well as products using the Kraft brand under licence for items such as peanut butter and nut spreads.

It also includes the 6.3ha Port Melbourne site and a licence to the Dairylea brand for use in Australia and New Zealand.

Following the $460million acquisition announcement, Bega’s shares jumped 50c, or more than 11 per cent, to $4.98 by 10.30am on Thursday.

Following questioning, Mr Irvin said the dairy industry still remains at the company’s core and although interested, acquisitions in dairy are rare and must be of a high quality.  

“Our record with how we deal with our farmers is very strong,” he said.

Originally developed by Percy Callister from used brewer’s yeast after Marmite imports were disrupted by World War 1, Vegemite now sits in “90 per cent of Australian pantries” with over 300,000 jars produced each day, Mr Irvin said.

Mr Irvin said despite a recent change in the breakfast habits of Australians, the company will market the eating of Vegemite at other times of the day.

Mr Irvin said Bega will take on significant debt to pay for the deal, but it’s lenders Rabobank and Westpac fully support the move and the company hopes cash flows will repay debt as quickly as possible.

Bega said the acquisition will give it a strong presence in the domestic spreads business.

The link with Kraft began in 2009, when Bega began producing some of the US company's processed cheese products.

Mr Irvin said Thursday’s announcement opened up opportunities for the company to grow into peanut butter and salad dressing markets, without shying away from its core business of dairy.

“These iconic brands alongside the Bega brand are strong building blocks to enable Bega Cheese to become a great consumer goods business,” he said.

"We are buying an iconic brand in Vegemite and some growth opportunities into the future."

YUM: Lachlan, Eli, Poppy, Tadhg and Heath at Bega's Sunny Kids Early Learning Centre after news Bega Cheese had bought Vegemite on Thursday. Picture: Alasdair McDonald

YUM: Lachlan, Eli, Poppy, Tadhg and Heath at Bega's Sunny Kids Early Learning Centre after news Bega Cheese had bought Vegemite on Thursday. Picture: Alasdair McDonald

Along with the spreads businesses, Bega is acquiring salad dressings and other products such as parmesan cheese, but it does not include the Philadelphia cheese business.

Ownership of the Kraft brands transfers back to the US-controlled group at the end of the year, with transitional arrangements to be undertaken, Bega said.

Mr Irwin said it it was important to try to hold onto the Kraft brand for peanut butter and cheese products, but it was unclear whether it would be possible.  

"We've got lots of options in that area," he said. "We expect and need to transition the brand and we expect Kraft will look to use its brands.We're really proud of the Bega brand, we'll obviously own Vegemite, we think there's so nice opportunities around how we might market and build I suppose what's two iconic Australian brands in Bega Cheese and Vegemite."

Mr Irwin said all staff at the Port Melbourne site it is buying from Kraft will be retained, including administration staff, at least initially, as Bega intends to operate the new business "as a separate platform".

Bega's outgoing chief executive, Mr Aidan Coleman said the purchase was not a sign of it diverting from Bega's dairy heritage.

"At the heart and the core of the business we are a dairy company, unquestionably. We own the number one cheese brand in Australia, we're the biggest cream cheese producers in Australia,we're a big infant formula company, so dairy is at our heart and operationally and the way we look at both the domestic market and Asia is certainly through very much a dairy focus.

"Dairy assets are hard to come by in Australia  and we are a growth-focused company, but with spreads, whether it's Vegemite or peanut butter and cheese, there's a lot of commonality in the consumer base that actually purchases and consumes those products, so we see it as a development of the business rather than a transformation of the business."

- with Sydney Morning Herald