A2 Milk has announced its intention to cancel Synlait Milk’s exclusive manufacturing and supply rights for some of its infant milk formula products. The decision comes as Synlait failed to meet key targets during the 2023 fiscal year.
The notification was provided to Synlait in writing after the market closed on Friday. As the exclusive supplier of various a2 Milk products, including the popular a2 Platinum brand, sold in China, Australia, and New Zealand, Synlait’s shares in New Zealand were placed in a trading halt on Monday as the company considers the implications of this decision.
According to a regulatory filing by a2 Milk, the cancellation of Synlait’s exclusive manufacturing and supply rights is due to their delivery in full and on time performance (DIFOT) during FY 2023 falling below the required level. However, a2 Milk also stated that Synlait will continue to be an important supplier even after these exclusive rights are removed, with pricing and other key terms still applying.
It is worth noting that Synlait has the option to dispute the notice of rights cancellation, which would then initiate negotiations between the two companies and potentially lead to arbitration proceedings.