Scottish potato specialist Taypack has ended a £32m-a-year contract with Asda after a decade supplying the retailer in the hope of brokering better terms and a more sustainable price for its produce.
The company, which supplied the supermarket with 34% of its UK fresh potatoes last year, said it had made the move to "protect the long-term sustainability of the company and its growers".
Taypack, which cancelled the contract at the beginning of this month, is responsible for 9% of the UK's 1.5 million annual potato production.
Taypack has now put forward a new two-year proposal to Asda, which chief executive George Taylor said was "based on the true cost of production and will deliver sustainability and stability to all parties". It added that it would wait for Asda's response and that its "door remains open".
"We play a significant role in managing the best interests of our growers and the UK's potato industry," he said. "We are in a strong financial position and will take time in coming months to provide new customers with a competitive offer that safeguards the long-term sustainability of the entire potato supply chain."
The company said it was also entering into a consultation period in which it would review its current business structure and consider the possibility of redundancies.
The company has supplied Asda for 10 years. It invested £15m in its Moncur Farm facility to supply the supermarket some 750,000 tonnes of fresh potatoes. Apart from Asda, Taypack supplies Aldi and a number of wholesale outlets and exporters.
An Asda spokesman confirmed that Taypack terminated the supply agreement on 1 May, but added: "I can reassure customers there will be no potato shortages in-store thanks to new arrangements made with existing suppliers."