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Why the Bega Cheese Ltd share price was on the nose this week

Shares in Bega Cheese Ltd (ASX: BGA) fell sharply in Thursday’s trade to close off at $6.87, down from $7.22.

Bega is a household name across Australia for its cheese, butter and nutritional products and its shares were back up 0.7% to $6.92 at the time of writing.

It is not clear what was behind the substantial slide in Bega’s share price, but investor sentiment may have been waning for some months after news New Zealand dairy company Fonterra, who is locked into contract with Bega until 2026, moved to sue the company for an alleged breach of agreement back in January.

Bega reported some solid half-year results in February and has seen positive results out of its Mondelez Grocery Business acquisition, with Mondelez contributing $136.6 million in net revenue to Bega as a key first-half driver.

Its Tatura Milk segment also saw some impressive growth, with statutory profit after tax up $19.4 million on the previous corresponding period due to market demand that also saw the likes of A2 Milk Company Ltd (ASX: A2M) soar.

Bega labelled cheese is still sold as a private label across supermarkets in the Woolworths Group Ltd (ASX: WOW) but lost its supply contract with Wesfarmers Ltd (ASX: WES) for Coles supermarkets over the last period, which may have knocked sentiment even further and could be behind share price volatility of late.

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Motley Fool contributor Carin Pickworth has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. 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 Scott Phillips.

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