Kraft Sues Cracker Barrel Over John Morrell Deal, Defends Brand

Feb 02, 2013 10:58 PM EST

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Cracker Barrel Old Country Stores
(Photo : Cracker Barrel Old Country Stores Inc.)

Kraft Foods Group has filed a lawsuit to preserve its iconic "Cracker Barrel" brand of grocery products and cheese against an encroachment by Cracker Barrel Old Country Store Inc. The latter recently signed an agreement with John Morrell Food Group to license the "Cracker Barrel" name in stores.

"Due to the public acceptance, fame and great recognition of the Cracker Barrel mark, the mark has come to represent an enormous amount of goodwill for Kraft," stated the filing.

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Branch Encroachment

Kraft, based in Northfield, Ill., has sold cheese under the "Cracker Barrel" name since 1954, whereas the Cracker Barrel Old Country Store began in 1969. No previous lawsuit was filed by Kraft against the Cracker Barrel store chain, which runs restaurants attached to gift shops with a southern country theme. This was because the chain sold only a limited catalogue of products in its shops and online.

However, the deal with John Morrell includes a wider selection of products, such as lunch meats, glazes, jerky and summer sausage. These would be sold under the Cracker Barrel store name to supermarkets and big retailers. Kraft is concerned that these will compete against the cheeses and products licensed under its own "Cracker Barrel" brand name, and the potential for consumer confusion over what the brand name represents.

"The parties' market separation that has existed for decades will be eliminated," Kraft wrote.

Cracker Barrel's situation is unique in that two well-recognized yet unrelated brands have existed without conflict for so long.

Possible Outcomes

Kraft has many options at the moment, including the potential to settle with Cracker Barrel stores and possibly license the brand for retail. But with a reported $100 million in annual revenue for the brand alone, it is certainly a valuable asset to protect.

It does not help that John Morrell Foods is related to Kraft rival Smithfield Foods Inc. Still, Kraft has expressed a desire to strike a deal outside of court if possible:

"Kraft hopes that this matter can be resolved without having to proceed with the litigation and has invited Cracker Barrel to propose a settlement," said spokesperson Sydney Lindner. "If settlement talks do not go forward, the litigation will."

The maker of iconic brands such as Maxwell House, Oscar Mayer and Jello generates $19 billion a year in revenue, and has not typically pursued litigation over its brands. Cracker Barrel Country Stores earned $2.58 billion in its most recent year.

Undoubtedly, Cracker Barrel stores were expanding their product offerings as part of a long-term strategic growth plan. If Kraft prevails, and no deal can be made, it will be a hard setback to the country store chain. 

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