A tongue-in-cheek reference to the digital and mobile age, the name was announced on national television on Saturday, ending a three-month contest which attracted 48,000 entries.
The new creamier spread will run alongside the original recipe.
Web designer Dean Robbins said he submitted the name in jest, but Kraft's decision to brand the cream cheese and Vegemite blend iSnack 2.0 has sparked a storm of online criticism.
Groups labelling it "unAustralian" and "the worst name ever" have sprung up on the Facebook social networking site, with thousands condemning it as "vegefail" on Twitter.
One punter said Robbins should be forced to run down the main street of Sydney "wearing nothing but a generous lathering of old-fashioned Vegemite as retribution for his cultural crime."
"Vegeshite," wrote another. "I hope Apple sues them just for stupidity."
Technology giant Apple designed the hugely popular iPod and iPhone, seemingly the inspiration behind the name iSnack 2.0.
A blog was even set up to document the fallout from Kraft's decision, "Names That Are Better Than iSnack 2.0" and some questioned whether it was all just a publicity stunt.
Kraft spokesman Simon Talbot denied it was a marketing ploy to elevate the product's profile.
"It's definitely not a stunt, you have my word on that," said Talbot, admitting that the public reaction had been "stronger" than they had anticipated.
"I can't say that we are not changing (the name). All I can say is that we are listening to consumers, and yes, there are some strong feelings towards it," he added.
"It has taken us by surprise."
Similar to, but more salty and stickier than British cousin Marmite, Vegemite can be found in 70 percent of Australian homes, according to Kraft.
The spread was invented by chemist Cyril Callister in 1922, who was ordered to find a use for the used yeast being dumped by breweries after Marmite imports from New Zealand dried up during WWI.
His employer, Fred Walker and Co, ran a nationwide contest in 1923 to find a name for the spread, offering a prize of 50 pounds.
Kraft, which later took over the trademark, did not offer a prize for its winning entry.
The many thousands of suggestions ranged from the obscure to the political, with offerings including Cheesewax, Frank, Goo-dy, Brownie, Wow Chow and Ruddymite, a tribute to Prime Minister Kevin Rudd.
Source: AFP
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