A2 Milk announced this week that it would be cancelling Synlait Milk’s exclusive manufacturing and supply rights for some of its infant formula products.
The announcement was published on the New Zealand Stock Exchange on Monday 18 September. A2 said it gave Synlait written notice of the decision the previous Friday (15 September), due to Synlait’s delivery in full and on time performance (DIFOT) falling below the required level within the fiscal year 2023 for it to maintain its rights.
A2, which is Synlait’s second largest shareholder with a 19.83% stake in the company, said that Synlait “remains an important supplier” and will continue to be contractually bound to supply up to the same prescribed volume of its infant formula per annum. This includes all stages of A2’s Platinum product.
In a statement responding to the announcement, Synlait said that it would be disputing the cancellation relating to the exclusivity arrangements. The manufacturer added that A2 has confirmed that it will maintain exclusivity with Synlait until the matter is resolved.
Both parties will now enter a dispute resolution process, involving a period of good faith negotiations over the course of 20 business days, followed by arbitration if not resolved.
The cancellation proposed by A2 Milk relates only to the exclusivity arrangements under the Nutritional Powders Manufacturing and Supply Agreement (NPMSA) signed by the two companies. The NPMSA will remain in place and requires three years notice of termination by either party.
Synlait also stated that it continues to hold the Chinese regulatory State Administration for Market Regulation licence attached to its Dunsandel manufacturing facility, which covers A2 Milk’s Chinese-labelled stage one, two and three infant formula products. The company expects to continue manufacturing those products for A2 for the remaining licence period, set to expire in September 2027.
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