Fonterra’s proposal to divest its consumer products business has been dealt a blow after a court said it could not rule out the chance the New Zealand dairy co-operative would have to renegotiate a long-running branding agreement with Bega Cheese if it proceeded with its plan.

The dispute about the future of the Bega Cheese brand, which Fonterra has licensed since 2001, has become a significant issue for the co-operative, which has been working on plans to sell its consumer division that owns Mainland and Perfect Italiano cheese and Western Star butter.