It sounds as though just the exclusivity clause of the agreement has been affected by the failure to meet DIFOT performance targets, and all other aspects of the agreement are unaffected. In the absence of another manufacturing source, it continues as a de facto exclusive supply arrangement.
I take your point about the contract, I'm no expert but potentially there was also nothing Synalit could have done contractually? As I don't think any company in A2M's shoes would accept an arrangement where the supplier could continue to maintain exclusive rights if they were not meeting required targets.
What they do seem to have in place is a mandatory negotiation period in which the parties can seek to resolve the issue before going to arbitration.
I think what will be negotiated is how much longer Synlait will retain exclusive production rights for English label. A2M may seek a period that allows them to smoothly transition production to MVM. Depending on how much or how little Synlait is genuinely at fault, I guess Synlait may seek to push this period out or financial compensation from A2M to Synlait, but that's just speculation on my part.
Synlait does receive rolling demand forecasts from A2M periodically and can only react to this with a certain amount of notice, which may have put them on the back foot. At least, I suspect that's what they would use to argue that they aren't to blame for the delays and failures to meet their targets.
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- Ann: Notice of cancellation of Synlait's exclusive supply rights
Ann: Notice of cancellation of Synlait's exclusive supply rights, page-35
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