Media Updates, page-7688

MVM does not have the required China licence, which is now absolutely mandatory considering that the daigou channel has been dramatically reduced. Relying on direct export channel and subsequent distribution through numerous mom and baby stores mean that the licence is exceedingly more important than ever. If my memory serves me right, Fonterra also doesn't have the required licence. So as you can see, only Synlait possesses the licence currently, and most likely far into the future. Look at Bubs for example, the company has applied for the licence years ago and it still hasn't got it thus far.

A2 is solely reliant on Synlait to supply it with every single tin of the A2 platinum it requires for direct export to China. If Synlait decides one day to suddenly renege on its contract, the supply to A2 would literally cut to 0, which is akin to flicking the switch to the whole China operation, off. This is similar to what had happened to Bellamy at one stage. We know that China can and will withheld licence issuance at a whim. Additionally, like you have said, we don't know what stipulations there are in the agreement. It is possible that Synlait can increase their price on the products they are sending to A2, especially when it's tied legitimately to global milk price. Maybe in order for A2M to get a certain price for the products, there is a minimum order requirement, that if not met, would allow Synlait to increase the price.