A heated legal battle over the yellow lids on peanut butter jars might seem a little crazy to outsiders. But in 2019, two peanut butter manufacturers engaged in a multi-million dollar legal conflict, which had them heading to court over the yellow lids on the jars.

The Chicago-based food giant Kraft Heinz was battling Australian company Bega Cheese for the right to place yellow lids and certain images on peanut butter jars. It was a legal conflagration that flamed its way from New York to the Australian Federal Court.

How does a yellow lid on a peanut butter jar spark a lawsuit?

In 2019, peanut butter was a $110 million a year market in Australia, so there is big money involved. The yellow lid and yellow label with the red or blue peanut design are very well known. And, for decades, these jars graced our supermarket shelves bearing the Kraft label.

However, in 2012 Kraft transferred its Australian operations to a new firm called Mondelez. Later, in 2017 Bega paid $460 million for the peanut butter division, which included the acquisition of the Kraft manufacturing plant in Melbourne. The Kraft labels on the jars were replaced by Bega labels. All else stayed much the same, including the yellow lids.

In 2018, Kraft wanted to get back into the Australian peanut butter market. The company believed it had the legal right to use the yellow lids and labels, since it had developed the brand.

So, Kraft began selling peanut butter in almost exactly the same jars as before. But Bega argued against this move, saying that its acquisition of the business had included the branding - lids, labels and all.

Bega granted exclusive right to use yellow lids and labels

In a lengthy judgement delivered in May 2019, the judge ruled Bega Cheese had bought the brand and product from Kraft and therefore had exclusive rights to the yellow lids and labels on Bega peanut butter jars. (See Kraft Foods Group Brands LLC v Bega Cheese Limited (No 8) [2019] FCA 593.)

Court criticises both companies for making false claims in their advertising

During the case, the judge criticised Kraft for using the slogan "Loved since 1935" on its new peanut butter brand. He found the claim behind the slogan was a breach of Australian consumer law.

Although Kraft had started making its product in Australia in 1935, the judge ruled it could not use the slogan, as it had sold out of Australia in 2017 and the new brand had only launched in 2018.

Bega was also rapped over the knuckles for claiming in an advertisement that its peanut butter was "Now Australian owned and made". The judge said that even though Kraft was US-owned, its product had been made in Australia.

Branding cannot be reclaimed after a change of mind

This judgement confirms that goodwill can be bought along with a business.

However, branding cannot be claimed back if the original owner changes their mind and wants to get back into the market.

Tony Mitchell
Intellectual property
Stacks Law Firm

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.