Milk row turns sour as A2 Milk fights US branding case

Australasian diary giant A2 Milk Company has locked horns with a small US fast-food chain over the branding rights to A2 milk.

The Braum's A2 Milk at the centre of the branding dispute.

Oklahomans are used to hot air from the south and, when it meets cold air from the north, the devastating tornadoes that come.

But on May 7, Drew Braum, the chief executive of fast-food chain Braum’s — which his parents Bill and Mary founded in 1968 — received a letter threatening to unleash a corporate storm. It came from trans-­Tasman dairy company A2 Milk, located more than 13,000km away across the Pacific Ocean.

A2 demanded Braum’s cease and desist using its registered trademarks “A2” and “A2 milk” on its new range of dairy products, which it sells exclusively in its 280 restaurants and “old-­fashioned” ice cream parlours in Oklahoma, Kansas, Texas, Missouri and Arkansas.

A2 has been aggressively expanding across the US since it launched there in 2015 and is on track to hit $US100m ($150m) in annual sales. In March this year, it signed a licensing deal with Canada’s Agrifoods Co-operative to tighten its grip on North America.

The last thing that the company — which has a market capitalisation twice as big as Qantas, at $13bn — expected was competition from a family-owned business based in Tuttle, Oklahoma (population 6019).

But as well as flipping burgers and serving ice cream, the Braums are also proud dairy farmers and for the past 12 years they have been building up their own herd of cows containing the A2 beta casein protein across two farms — one of them in Follett, Texas, and the other in Tuttle, Oklahoma.

Bill and Mary Braum of Braum’s

They now have the biggest A2-producing herd in the US, and in February launched their own range of fresh and flavoured A2 milk, which they sell alongside their crinkle-cut fries, hamburgers and fried chicken club sandwiches, saying it’s ­“easier on digestion”.

Immediately after Mr Braum received the letter from the A2 Milk Company, he filed a complaint with the US District Court in a move to protect Braum’s investment in its A2 herd. He stated A2 was a generic term used to describe a beta casein protein and therefore A2 Milk’s trademark was unenforceable. Further, Mr Braum “respectfully” requested a jury trial rule on the matter.

“Braum’s prays for the following relief: an order by the court declaring that the designations A2 and A2 Milk are generic when used in connection with milk and other dairy products, or, alternatively, are so highly descriptive that they are not protectable as trademarks when used to describe A2 milk and other dairy products,” Braum’s said in its complaint.

It was the opening salvo in a legal showdown akin to the ugg boot trademark dispute.

Ugg is a generic term in Australia and New Zealand, but UGG trademark owner, US giant Deckers Outdoor Corporation, has vigorously defended its intellectual property outside those countries. Only 12 months ago, a federal jury in Chicago sided with Deckers, ordering Australian Leather, a small Sydney-based footwear company, to pay $450,000 in statutory damages to Deckers for selling sheepskin boots that infringed its UGG trademark. But Braum’s believes it should be able to sell its A2 products without fear of being sued.

“Braum’s is entitled to promote and sell its A2 milk products using the designations A2 and A2 Milk in order to describe the nature of the milk to consumers without the ongoing threat of litigation by the A2 Milk Company.

“A2 Milk Company’s allegations of trademark infringement place a cloud over Braum’s ongoing investment in its A2 milk products and marketing thereof to consumers and may cause ­uncertainty among others in the marketplace, leading Braum’s to lose revenues and/or business ­opportunities.”

A2 Milk Co’s branding with its ‘feel the difference’ motto. Picture: Peter Hemphill

Most dairy cows contain two beta casein proteins called A1 and A2. But milk produced from cows carrying only the A2 protein is claimed to be easier to digest. The A2 Milk Company, founded in 2000, has successfully ridden the wellness trend but it has been far from easy. It initially struggled in its early years, with opposition from New Zealand dairy giant Fonterra, which had 98 per cent of dairy farms in New Zealand under contract, and by October 2004 had fallen into administration.

But A2 Milk persevered and has become a market darling, with its shares soaring from 47c in May 2015 to around $17.70.

A2 Milk’s success, particularly across its range of Platinum-branded infant formula, has sparked a series of copycats, with Nestle, Karicare, Cow & Gate, Junlebao and Mead Johnson and Bellamy’s Organic launching their own A2 infant formula brands.

Braum’s said another 24 companies around the world sell their own A2 milk dairy products, adding to its argument that the term A2 milk is used to describe a protein rather than a brand.

“The designations A2 and A2 Milk are not protectable trademarks and Braum’s has not and does not infringe … any legitimate trademark rights of the A2 Milk Company,” it said.

“Braum’s contends that the use of designations complained of by the A2 Milk Company, and the manner by which Braum’s uses A2 and A2 Milk, is not likely to cause confusion among the parties or their respective goods or services or otherwise violate any legitimate trademarks or service marks purportedly owned by the A2 Milk Company.”

But A2 Milk believes Braum’s has crossed the line with its tagline “the A2 difference”, which is similar to its own “feel the difference”.

It is not the first time the A2 Milk Company has moved to defend its trademark. It sued Japanese-owned food and beverage giant Lion after Lion rebranded its Pura milk products in 2014. Lion said Pura “naturally contains A2” after tests revealed it contained 50-70 per cent of its beta protein content, with the A1 protein comprising the remainder. The A2 Milk Company and Lion eventually settled out of court in 2017.

A2 Milk’s chief growth and brand officer, Susan Massasso, said the company had “invested considerably over the past two decades in building our brand and its intellectual property”.

“We take defending our brand and our rights seriously,” she told The Weekend Australian.

“We will continue to do what it takes to defend our brand and the integrity of our proposition.”