A2 Milk has cancelled the exclusive manufacturing supply arrangement it has with infant formula maker Synlait Milk, citing a decline in delivery standards.

Synlait's shares fell 10 percent following the cancellation of the deal.

Dairy Insights Consultant Stuart Davison says this isn't good for the company, but they will be able to bounce back quickly.

"They're definitely in trouble- but let's be clear, they're not silly. They'll deal with it, they've dealt with something like this before, and they've got other situations going on."

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