A2 Milk (ASX:A2M) share price falling despite trademark settlement

A sour start to the day for the dairy company’s share price despite a legal truce.

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The A2 Milk Company Ltd (ASX: A2M) share price has dropped this morning despite the settlement of a legal stoush. At the time of writing, A2 Milk’s share price is down 1.49% to $6.63.

The fall comes despite The Australian reporting the dairy company has settled its trademark dispute with Oklahoma family-owned ice cream chain Braum’s.

Let’s have a closer look at the details.

A2 Milk brand protection

Brand recognition and protection are incredibly important in a competitive industry. A2 Milk has fought fiercely to fend off other companies from using the ‘A2 milk’ definition. Previously, the milk company has won bouts against Lion and the ABC.

In its recent trademark dispute, A2 Milk issued Braum’s a cease and desist for its range of dairy products in May 2020.

These products are sold exclusively through the company’s 280 restaurants throughout Oklahoma, Kansas, Texas, Missouri, and Arkansas. A2 Milk took issue with the use of ‘A2 milk’ branding on Braum’s products.

Reportedly, the dispute has now been settled with the specific terms of the settlement confidential. However, sources are reporting that Braum will be given a grace period to make changes on its website and labels so they can advertise themselves as “A1 free”, rather than “A2 milk”.

A2 Milk Company US Chief Executive Blake Waltrip said:

We will always vigorously protect our trademark rights in the A2 Milk trademarks and are happy we have been able to reach a mutual agreement with Braum’s.

Curdling as competition heats up

ASX-listed A2M is not the only milk-maker attempting to trample competition over trademark infringements.

Similarly, US-listed oat milk producer Oatly Group AB (NASDAQ: OTLY) has been caught in a stoush with Glebe Farm Foods over a similar deal. Oatly suggests the smaller Glebe is infringing on its trademark with its name and packaging too similar.

The case is being heard in the High Court in London and is ongoing.

Past year for A2M on the ASX

A2 Milk’s share price has taken a hit over the past year. The closure of international borders brought the company’s daigou channel to a halt. As a result of the excess supply, the dairy company’s products were severely marked down in value.

Over the year, the A2 Milk share price eroded by 65.7% to $6.73 a share. Consequently, the market capitalisation of A2M is now $4.85 billion.

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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 recommended A2 Milk. 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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