A2 Milk has failed to reach agreement with Synlait, which had its exclusive supply rights cancelled last month.
The contractual dispute between speciality dairy company A2 Milk and South Island dairy company Synlait will now move to binding arbitration, after the parties failed to agree through negotiation.
Last month, A2 milk cancelled Synlait's exclusive supply rights for stages one to three infant formula, saying the company's delivery levels fell below the required standard.
Synlait disputed that A2 had the right to cancel the exclusivity arrangement and the two entered into negotiation talks.
This morning, both companies said the matter would now go through confidential binding arbitration.
Synlait said any cancellation would only apply to exclusivity arrangements with A2 Milk. The company would continue to make infant formula for A2, under its three-year rolling-term contract.
The company said its plant in Dunsandel on the Canterbury Plains still held the Chinese regulatory manufacturing licence for A2 Milk's Chinese-labelled infant formula. That licence would expire in September 2027, Synlait said.