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The a2 Milk Company Ltd (Australia) resolves Lion legal dispute

The a2 Milk Company Ltd (Australia) (ASX: A2M) has announced that it has settled its milk dispute with Lion Group.

The two companies were engaged in a legal dispute that centred on the use of the term ‘A2’ on milk products.

The a2 Milk Company accused Lion Group of misleading consumers by claiming its milk contained the A2 protein.

The a2 Milk Company stated that Lion’s milk brands had not clearly specified that its milk also contained the A1 protein as the true nature of Lion’s milk was only made clear on the back of its containers.

The a2 Milk Company has enjoyed success with its product branded as a healthier alternative to regular milk that offers consumers a range of benefits by eliminating the A1 protein.

In one such example, the company announced last month that it had conducted a trial in China involving 600 adult Han Chinese with self-reported lactose intolerance and found that consumption of a2 Milk resulted in “improvements in gastrointestinal symptoms when they consumed milk containing only A2 beta”.

The a2 Company’s product has been a hit with consumers and has gained a reported 10 per cent of the Australian market share to the detriment of its rivals as it continues to make inroads in China and elsewhere.

The a2 Company’s success is reflected in its share price which has gone up by more than 200 per cent over the past year and is expected by some analysts to keep further with one broker recently targeting its share price to hit $8.85.

Shares in the milk company are now trading at around $7.36, up from $2.23 a year ago, while other ASX listed dairy companies like Australian Dairy Farms Group (ASX: AHF) and China Dairy Corp Ltd (ASX: CDC) have watched their share prices plunge.

The Lion Group (apparently threatened by a2 which has likely seized a chunk of their market share) has launched a cross-claim arguing that the health benefits of A2 were, at best, exaggerated.

The conflicting nature of Lion’s claim did not go unnoticed by the court when the companies met to lay out their claims in September.

But all that is in the past.

The parties have mutually agreed not to proceed with their cases against each other, according to a2.

“The terms of the settlement are confidential,” a2 announced.

“The parties are very satisfied with the outcome and will remain focused on building and maintaining the strength of their individual brands.”

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Motley Fool contributor Steve Holland has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.