Kraft Wins Appeal Barring Cracker Barrel Restaurant Sales

Kraft Foods Group Inc., the maker of Cracker Barrel-brand cheeses, won a U.S. appeals court ruling provisionally keeping products sold by the Cracker Barrel Old Country Store Inc. restaurant chain off grocers’ shelves.

“Familiarity is likely to have made the name Cracker Barrel salient to grocery shoppers, and so any product bearing that name might be attributed to Kraft, even if close scrutiny of the label would suggest that the product might well have a different origin,” a three-judge panel in Chicago said today.

Upholding a preliminary injunction issued this year by a lower court, the appellate judges said Kraft could be injured if consumers were dissatisfied with the restaurant chain’s products.

“If a consumer has a bad experience with a CBOCS product and blames Kraft, thinking it is the producer, Kraft’s sales of Cracker Barrel cheeses are likely to decline,” U.S. Circuit Judge Richard A. Posner wrote for the court.

Kraft Foods, based in Northfield, Illinois, has made Cracker Barrel-brand cheese since 1954 and has derived more than $100 million in revenue from it, according to its website.

It sued the Lebanon, Tennessee-based Cracker Barrel restaurant company for trademark infringement this year after learning of its plan to sell packaged ham and other products in grocery stores. The restaurant chain has more than 600 locations in 42 states, according to its website.

The Cracker Barrel Old Country Stores media relations department didn’t immediately reply to a voice-mail message seeking comment on today’s decision.

Confusion Likely

“The likelihood of confusion seems substantial and the risk to Kraft of the loss of valuable goodwill and control therefore palpable,” the panel said, upholding a July 1 order by U.S. District Judge Robert Gettleman in Chicago.

The order blocks Cracker Barrel from selling of its self-branded food items outside its restaurants, adjoining stores, catalogs and Internet site.

The judge required Kraft to post a $5 million bond in case Cracker Barrel turns out to have been wrongfully blocked from selling its products.

The average Cracker Barrel restaurant generated more than $3.3 million in sales in fiscal 2012, while the typical adjacent retail store produced more than $800,000 in sales, according to the company’s website fact sheet.

“We have always known we had a very strong trademark infringement case against CBOCS and are happy with this ruling,” Lynne Galia, a Kraft spokeswoman, said by e-mail.

Company Spinoff

Kraft Foods Group was created last year when the company formerly known as Kraft Foods Inc. changed its name to Mondelez International Inc., a snack foods purveyor, and spun off its grocery business.

On Nov. 13, Starbucks Corp. said it would pay Mondelez $2.79 billion to settle a dispute dating to 2010 over retail distribution of the coffee house chain’s bagged coffee, in accordance with an arbitrator’s order.

The case is Kraft Food Group Brands LLC v. Cracker Barrel Old Country Store Inc., 13-2559, U.S. Court of Appeals for the Seventh Circuit (Chicago).

Before it's here, it's on the Bloomberg Terminal.