Consumer

David Fickling is a Bloomberg Gadfly columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.

If you're looking for evidence that business is turning more nationalistic in 2017, check out what's just happened in Australia.

Vegemite, the salty, viscous sandwich spread feted by prime ministers and pop singers despite inspiring disgust and bewilderment in most foreigners, is being sold to the country's Bega Cheese Ltd. after more than nine decades under U.S. control. 

Vegemite is so bound up with Australian identity that the country's national museum once dedicated an exhibit to it , so it's always been slightly anomalous that the brand has been U.S.-owned almost since birth. Dick Smith, an electronics entrepreneur with Trump-style views on immigration, was inspired to create his own line of packaged foods by the discovery that Vegemite was a foreign interloper.

Given that priceless brand equity, Bega appears to have picked up the business pretty cheaply. With a price tag of A$460 million ($345 million), the deal values Vegemite and the associated Australian and New Zealand businesses it's buying from Mondelez International Inc. at about 10.2 to 11.5 times forecast Ebitda of A$40 million to A$45 million.

Cheese and Vegemite Sandwich
Mondelez's grocery business will significantly increase Bega Cheese's Ebitda
Source: Bloomberg, company presentation
Note: Figure for Mondelez Ebitda is a pro forma number taken from midpoint of forecast A$40 million to A$45 million range. No adjustment has been made for any change between 2017 and 2018 fiscal years.

That looks like decent value for Bega, whose pro-forma earnings would grow about two-thirds this year as a result. The median multiple in 24 packaged foods deals over the past three years has come in at about 11.4 times earnings, and iconic brands such as Vegemite might expect significantly more.

The 2015 merger between Kraft Foods Group Inc. and H.J. Heinz Co.  went for 24.4 times trailing 12-month Ebitda, according to data compiled by Bloomberg. Kettle chips maker Diamond Foods Inc. was valued at 18.1 times Ebitda when it was bought the same year by Snyder's-Lance Inc.

Two Flavors That Go Great Together
Bega Cheese isn't paying a lot for Vegemite
Source: Bloomberg, company reports
Note: All figures based on multiple to trailing 12-month Ebitda except for Mondelez Grocery/Bega, which is based on forecast Ebitda. Median is based on all completed or pending takeovers over the past three years of miscellaneous or diversified food businesses.

Bright Food Group Co. appears to be seeking more than 15 times historic Ebitda for another breakfast staple, Weetabix, according to a Reuters report last month. Even Gaban Co., which trades in the less branded area of spices and seasonings, attracted a 22.6 times multiple last year when a controlling stake was bought by House Foods Group Inc.

Whether the move will make much difference to the fortunes of Vegemite is another matter. Nine decades of U.S. ownership have failed to turn the rest of the world on to its delights -- even in the U.K., which is home to 116,000 Australians as well as Marmite (the spread which Vegemite was formulated to imitate, and whose relative merits are hotly debated).

Breakfast of Champions
Marmite has more protein and salt; vegemite has more sugar and fiber. Figures per 100g
Source: Company websites
Note: We're talking about proper British Marmite, not that weird stuff that appears in Australia and New Zealand under the Marmite name. All nutritional figures are grams per 100 grams except energy, which is megajoules per 100 grams. We haven't reweighted the numbers to account for portion size. Figures for fat are maximum levels. Vegemite's figure for sodium content has been converted to salt at a 4-10 ratio to reflect chemical content of sodium chloride.

Furthermore, some of Vegemite's recent missteps -- a version swirled with Kraft cheese which was ludicrously branded "iSnack 2.0", or a Vegemite-laced Dairy Milk chocolate bar which was compared to both salted caramel and licking a festering breakfast plate -- followed on from Mondelez Chief Executive Officer Irene Rosenfeld's drive to decentralize the company's decision-making. As a result, they can hardly be blamed on meddling Americans.

Under its new ownership, Vegemite should take a leaf from the book of Marmite's owner Unilever Plc. In contrast to Mondelez's attempts to seduce skeptical Vegemite consumers with low-salt, cheesy or chocolate variants, Unilever has tended to own up to Marmite's ambiguous charms by admitting that people either love it or hate it

In this era of hyper-partisanship, that approach has its merits: When you're dealing with perfection, don't mess with it.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
David Fickling in Sydney at dfickling@bloomberg.net

To contact the editor responsible for this story:
Matthew Brooker at mbrooker1@bloomberg.net