Local brand Bega buys iconic Vegemite brand

by Nigel Hollis | February 01, 2017

Well how about that? Apparently local Australian brand Bega Cheese is going to buy the iconic Vegemite brand from Mondelez International, along with the rights to use the Kraft brand under license for specific products. This acquisition is notable because six years ago Bega was under threat from Kraft’s entry into the everyday cheese category, and it proves that local brands can fend off global competition.

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I wrote about Bega Cheese and its “Real Farmers” campaign in Brand Premium because it demonstrated how a local brand tapped into a cultural trend to defend the brand’s premium price and grow value market share in the face of aggressive price discounting. In the Australian Effie Awards entry Bega’s agency, Clemenger BBDO Melbourne, states,

“In this campaign, we leveraged our biggest advantage over the US giant, Kraft. We had provenance and real people on our side. Bega was Australian, local and proud of it, and our farmers could express this better than any script we could ever write.”

As it turns out Bega’s success was something of a precursor to a resurgence of local brands around the world. Particularly in developing markets local brands have put the multinational brands on the back foot. In 2016 Kantar Worldpanel found that local brands were growing value at nearly twice the rate of global brands for the third year running.

As noted in this coverage of Bega’s acquisition of the Kraft portfolio after the division of Kraft Foods in 2012, Mondelez International was focused on the snack food business but kept a manufacturing license for Vegemite, Kraft peanut butter, Kraft cheese slices, and Philadelphia cream cheese in Australia. As is the case with so many big companies, Mondelez is now clearly focusing its resources on its core brands.

I understand the basic rationale that led Mondelez to sell Vegemite and P&G to sell brands like Escudo in Mexico among many others. The basic strategy is to offload the brands that are peripheral to the company’s core expertise and which undermine overall financial performance, in theory allowing more resource to be put against flagship brands. However, I cannot help but wonder if this strategy is not one born of weakness rather than strength, and could prove counterproductive in the long run if consumers continue to turn to local brands rather than global giants.

But what do you think? Is the trend toward local brands going to continue? Is the focus on big, global brands going to prove successful in the long run? Please share your thoughts.

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