Kraft to cough up $9.25m to Bega Cheese (ASX: BGA) over peanut label

Kraft doesn't want to go nuts from whipping a dead horse so hands over some cash instead.

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The Bega Cheese Ltd (ASX: BGA) share price has closed higher today after the company provided an update on its legal proceedings with US food and beverage giant Kraft Heinz Co (NASDAQ: KHC).

The dairy and food manufacturer's share price finished the day up by 0.86% at $5.85.

Going nuts over labelling

It's been a long road for Bega but it appears to be the end of Kraft's tantrum. It all began when ASX-listed Bega Cheese acquired the peanut butter business from Mondelez Australia in 2017.

While the acquisition itself posed no issues, the labelling of the peanut butter jars did – well, Kraft Heinz thought so. See, branding is everything and the iconic yellow label and lid of Kraft looked very similar to what Bega acquired.

Four years seems to have been enough for Kraft to concede. Judgements handed down during the past twelve months have all ruled in Bega's favour. These judgements confirmed the Aussie company had the right to use the current packaging for its smooth and crunchy peanut butter.

However, today's announcement says Kraft has entered a confidential settlement regarding the issues of monetary relief and legal costs payable in respect of the proceedings. As part of the settlement, the US giant will pay $9.25 million.

Furthermore, all legal proceedings will be discontinued once Bega receives the payment. Kraft shouldn't have any problems with coughing up $9.25 million. Over the last 12 months, the company has made US$541 million in earnings.

How has the Bega share price been doing?

Unfortunately for Bega shareholders, the cheesemaker has underperformed the S&P/ASX 200 Index (ASX: XJO) in the last year. While the benchmark returned a mighty 22.2%, Bega climbed 16.17%. Still, that's not a bad return, especially when dividends are factored in — taking it to around 18%.

However, the dairy food producer has had a rough couple of months. The Bega share price is down more than 10% since 21 April 2021. That's when the company disclosed that an agreement had been terminated, removing access to a spray dryer and finishing plant it had sold in 2017.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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