BGA Bega Cheese Ltd

By Robb M. Stewart 

SYDNEY -- Vegemite, Australia's best-known condiment, is about to have something relatively unusual in its nearly 100-year history: an Australian owner.

The salty spread is among a basket of brands being sold by U.S. foods producer Mondelez International Inc. to Bega Cheese Ltd. for 460 million Australian dollars (US$348 million). They include peanut butter, processed cheese slices, Kraft Mac & Cheese and a license to the Dairylea brand in Australia and New Zealand.

Vegemite was created in 1923 as a way of using yeast extract that is a byproduct of beer brewing -- in the U.S. the castoffs are more likely to become animal feed -- by Melbourne food maker Fred Walker but the recipe was sold less than a decade later to Kraft Foods Inc. Mondelez is the product of a 2012 separation from Kraft Foods.

Despite its long U.S. ownership, Vegemite is as much a part of Australian culture as beer and the barbie. Former Prime Minister Kevin Rudd regularly described his mood by using an advertising jingle for the product from the 1950s: "I'm a happy little Vegemite." Generations of Australians have spread Vegemite on bread as avidly as Americans spread peanut butter and jelly.

Its allure has long puzzled many overseas consumers, unused to its pungent flavor. Among them, President Barack Obama who once described Vegemite as "horrible."

In Australia, however, celebrating Vegemite's acquired taste is a national pastime. In a tongue-in-cheek marketing campaign in 2008 by Kraft Foods, Vegemite fans were ranked in a "Vegemite Census" into categories like Slapper -- someone who spreads Vegemite thickly on bread as a bricklayer would do with a trowel; Edger -- one who is very particular about the Vegemite and likes to spread it right to the edge of the slice; or Streaker -- a person who "doesn't like having much on" and prefers just a few light streaks of Vegemite on buttered toast.

Amanda Banfield, vice president of Mondelez's operations in Australia, New Zealand and Japan, said selling Vegemite was consistent with the company's strategy of focusing on brands with global appeal.

"It's been a privilege stewarding this brand, which is found in almost every Australian household and is part of the fabric of the nation," she said.

A yeasty smell often hangs over the manufacturing plant on 1 Vegemite Way in Port Melbourne, a suburb of Australia's second-largest city. More than 20 million jars of spread annually roll off the production line at the plant, which together with its around 200 workers will transfer to Bega as part of the deal.

Bega said it plans to fund the acquisition using bank debt. It forecast the MDLZ Grocery Business would offer a strong boost to earnings per share, generate pro forma revenue of about A$310 million and earnings before interest, tax, depreciation and amortization of A$40 million-A$45 million in its first full year of operation.

The products being acquired will sit alongside Bega's portfolio of cheeses and cheese snacks. The company produced 280,000 metric tons of dairy products in the last fiscal year.

"The wonderful heritage and values that Vegemite represents and its importance to Australian culture makes its combination with Bega Cheese truly exciting," Bega Chairman Barry Irvin said.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

January 18, 2017 18:42 ET (23:42 GMT)

Bega Cheese (ASX:BGA)
Historical Stock Chart
From Mar 2024 to Apr 2024

Bega Cheese (ASX:BGA)
Historical Stock Chart
From Apr 2023 to Apr 2024