Australian dairy firm a2 Milk Company has reaffirmed its partnership with New Zealand milk processing company Synlait, signing a new supply agreement for the production of a2 Platinum infant formula milk.
The agreement strengthens the current business relationship between a2 and Synlait by providing certainty around medium-term growth plans. Current production volumes will remain the same, but provisions have been made to allow for increased scale to meet market demand in the medium-term.
“We are very pleased to have concluded negotiations in relation to our supply relationship with Synlait,” said Geoffrey Babidge, managing director and chief executive officer of a2 Milk Company. “We’ve maintained appropriate flexibility to assess new product and market opportunities as they arise.”
John Penno, managing director and CEO of Synlait, added: “We commenced working with a2 Milk Company in 2010 to manufacture the world’s first infant formula made from milk exclusively containing the A2 beta-casein protein. Our businesses have grown significantly since then and this agreement deepens an already strong relationship.”
The new supply agreement for a2 Platinum infant formula production is for a minimum of five years, and provides for a rolling three-year term after the first two-year period.
Synlait has agreed to a committed supply up to prescribed volume and will enjoy exclusive supply rights and a right of first offer for certain additional volumes – in both cases in respect of the infant formula stages 1-3 already supplied by Synlait, and for sale by a2 Milk in China, Australia and New Zealand.
In return, a2 will be Synlait’s preferred customer, with committed production capacity and access to new technologies, and continued favourable and competitive pricing terms.
Both companies will continue to work closely to forecast demand and supply for a2 Platinum, particularly in relation to the evolving regulatory environment, the companies said.
The contract also includes a steering committee structure to help the parties manage the contract and their business relationship.
“The new agreement is positive for both a2 Milk Company and Synlait as it clarifies our medium-term manufacturing and supply arrangements for a2 Platinum infant nutrition products,” Babidge added.
Penno continued: “We’ve assessed our production commitments to all of our customers, including a2 Milk Company, and confirmed our ability to continue meeting all production needs into the foreseeable future.
“Our a2 milk suppliers will be pleased with this agreement as they’ve adapted their farm businesses to supply a2 Milk. They create value by differentiating milk behind the farm gate and receive a premium payment to recognise the value they create. The term of this agreement with a2 Milk Company gives them increased certainty in an uncertain time for the dairy industry.”
© FoodBev Media Ltd 2022
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