New Zealand milk processor Synlait has ‘significantly extended’ its supply agreement with the a2 Milk Company, which it signed in 2016.
The agreement, which covers a2 Platinum infant formula as well as other nutritional products, originally provided for a minimum term of five years plus a rolling three-year term beginning this August.
But Synlait and a2 Milk have agreed to a two-year extension, effectively providing for a new minimum term of five years that extends the agreement to at least the end of July 2023.
Both companies have also committed to increasing the volume of infant formula over which Synlait already has exclusive supply rights; increasing production capacity from Synlait; and adopting pricing terms that reflect their commitment to competitive market prices.
For Synlait, which appointed a new CEO last week, the extended partnership reflects the success of its tie-in with a2 Milk.
John Penno, the company’s outgoing managing director and CEO, said: “The success of the a2 Platinum product has exceeded all expectations over the past two years. This step is about bringing Synlait and The a2 Milk Company closer together in anticipation of continued growth.
“It also puts both companies in a great position to further leverage the Chinese Food and Drug Agency (CFDA) registration of a2’s infant formula products, which was achieved in September 2017.”
The renewed relationship heralds an exciting period for Synlait, which, as well as announcing new management, has subscribed to an ambitious set of sustainability objectives.
a2 Platinum infant formula is made using a2’s dairy milk, where the A2 beta-casein protein is isolated to make the milk easier for some consumers to digest.
Clinical studies have confirmed the role that the A1 beta-casein plays in lactose intolerance. But in conventional dairies, the milk from A1-A1 producing cows, A1-A2 producing cows and A2-A2 producing cows is pooled together. A2 Milk, and companies like it, use only the A2 type.
It now has competition in the Asian market, following the news that TH Milk would begin producing its own A2 milk from a newly established herd in Vietnam.
Geoffrey Babidge, managing director and CEO of the a2 Milk Company, continued: “This new agreement has been carefully developed to provide the company with security for nutritionals supply to our key markets consistent with our overall strategic objective of maintaining high-quality supply with ongoing cost-competitiveness.”
And a2 Milk chairman David Hearn added: “This contract extension reflects [our] commitment to continue to build on the excellent relationship that both companies have enjoyed over recent years.”
Synlait and a2 Milk’s success reflects the strong demand among Asian consumers for Australian and New Zealand-made infant formula. In China, where the dairy industry has never fully recovered from the country’s damaging tainted milk scandal almost ten years ago, consumers see dairy products from Australia and New Zealand as superior and more trustworthy.
Organic products continue to drive the country’s infant formula category, underlining the importance of trust, according to research released in May 2017 by Mintel.
© FoodBev Media Ltd 2018