Posted by John, October 3rd, 2009 - under Kraft, Vegemite.

Tags: Capitalism

Vegemite is an iconic Australian spread; so iconic in fact that it has never really spread anywhere else.

It is a yeast extract and the best way I can describe it for non-Australian readers is to suggest you imagine salty axle grease.

Vegemite is made from left over brewer’s yeast and salt, celery and onion.

I am hooked. Every morning my toast gets lashings of salt and Vitamin B cleverly disguised as Vegemite.

The US based company Kraft has owned Vegemite since 1935.

Kraft is now a huge multinational food and beverage company. It has had an expansion program in place for a number of years.

Indeed the whole of the global food industry is undergoing rationalisation under the pressure of competition and the need to cut costs.

The global economic crisis, by devaluing the worth of many companies, has increased opportunities for the remaining predators to purchase others on the cheap.

So this tendency to monopoly is hot-wired into capitalism. What an irony. Competition leads to monopoly.

Kraft for example has just made a $20 billion takeover bid for one of its main competitors, Cadbury. It purchased the French Danone group two years ago.

Kraft is going through a renewal program under its CEO and Chair Irene Rosenfeld. She has sold off loss making holdings, purchased competitors, cut jobs and other ‘costs’ and increased prices.

Some of these price increases have been sneaky – repackaging Vegemite for example in smaller jars but with no price reduction.

Indeed, so successful has this rationalisation process been that forecasts for Kraft for this financial year are of a ten percent revenue increase despite a fall in sales.

Rosenfeld has been well rewarded for her cost cutting. Her remuneration package is worth about $20 million.

But not everything has gone well.

One cost cutting measure was to reduce the amount of cheese in Kraft’s Macaroni and Cheese meal. Consumers rebelled and the company relented.

But the search for cost cutting opportunities continues.

In Australia this has seen Kraft develop a ‘new Vegemite’. Let’s be frank – the new product just enables Kraft to mix its excess cream cheese with left over Vegemite.

Sales of the original spread were falling.

Kraft argues that Australian tastes are changing and that traditional Vegemite was losing its appeal to migrants. Since foreign born Australians make up nearly a quarter of the population this makes some sense.

The new unnamed version of Vegemite was successful – it has evidently sold 3 million jars since its release in July. Whether these are overall extra sales, and longer term consumers, is the real question for Kraft.

The controversy over the name of the new product could well be a ploy to bring it to the attention of the Australian market and boost sales.

The cream cheese-Vegemite concoction is, according to many reports, a taste disaster. Not only that; according to Kelly Burke in the Sydney Morning Herald it is a nutritional disaster too. In an article called Kraft spread saga gets iRonic Kelly writes:

IT HAS almost 12 times the amount of saturated fat and three times the kilojoules a serve. It has half the protein of the original and less than half the amount of vitamin B. Oh, and there’s more salt.

So it’s a crap product, driven by the need to rationalise production, with no thought about what consumers would like and dressed up as something new and hip.

The company thought that they could sell us dog shit sandwiches if they came up with a good name. So they had a competition to find a name for the new product.

A little history might help here. There was a competition too back in 1923 to find a name for the then new product. Vegemite won.

It didn’t take off. So much so that after a few years the owners changed the name to Parwill.

The logic of doing so was something only a management guru divorced from real life could come up with. You see, back in the 1920s Australia’s favourite spread was the British product Marmite.

The advertising slogan became ‘Marmite…Parwill’. Boom boom.

When Parwill didn’t catch on, the owners reverted to Vegemite. They devised schemes to basically give it away and advertised it massively.

We liked it; it was a good cheap Depression spread.

Indeed as sections of society radicalised during the Depression and many blamed British financiers like Otto Niemeyer for the problems of Australian capitalism, a switch away from a British product to an appealing ‘Australian’ one resonated with sections of the working class.

The owners also played up fears that with lower wages – the Arbitration Commission cut them by ten percent – women and their babies would get less Vitamin B unless they tried a cheap alternative, like Vegemite.

So, following on from the early days of Vegemite, a few months ago the geniuses in Kraft thought a competition for its cream cheese-Vegemite abomination would be a clever marketing exercise. It just shows what contempt they hold us in.

The winner was iSnack2.0. A better moniker might have been iShit2.0.

We vegemites rejected the new name so overwhelmingly that the company abandoned it after four days.

And now these geniuses – do they really run the economy? – are going to have a new competition!

Isn’t capitalism wonderful? A rubbish product, and a rubbish name, and the CEO pockets $20 million a year.