Synlait Milk and a2 Milk are going to abitration over their contested exclusivity agreement. Photo / NZ Herald
Synlait Milk and a2 Milk are going to abitration over their contested exclusivity agreement. Photo / NZ Herald
Infant formula marketer a2 Milk and its closely-aligned Synlait Milk are heading to arbitration over their exclusive supply agreement.
Last month, a2 Milk sent Synlait a written notice cancelling the exclusive manufacturing and supply rights held by Synlait in respect of stages 1 to 3 of a2 Milk’s current infantmilk formula products for sale by a2 Milk in China, Australia and New Zealand.
Synlait disputed the notice and, in accordance with the dispute resolution provisions of the manufacturing and supply agreement, the parties entered into a 20-business day period of good faith negotiations, which has not resolved the dispute.
“The matter will now be submitted to confidential binding arbitration as provided for under the dispute resolution provisions of the manufacturing and supply agreement,” a2 Milk said in a statement to the NZX.
Synlait disputes that a2 Milk has the right to cancel exclusivity arrangements.
A2 is also looking to reduce its reliance on Synlait by investing more in its Mataura Valley Milk plant.
The company maintains that the Nutritional Powders Manufacturing and Supply Agreement (NPMSA) remains in place but may be terminated by either party on three years’ notice.
Synlait still holds the Chinese regulatory State Administration for Market Regulation (SAMR) licence which is attached to Synlait’s Dunsandel manufacturing facilities.
Synlait said it expects to manufacture those products for a2 Milk for products destined for the China market until that licence expires in September 2027.
Cash-strapped Synlait has put its Dairyworks business up for sale in order to pay down debt.
