Etherington joined P&H in June 2006 as chief executive with more than 30 years' experience in wholesale and retail distribution. He became the FWD's first deputy chair in May.
"Chris has been a strong advocate of the value of the FWD, having brought P&H back into the Federation last year, and we are all delighted he has agreed to be chairman," said FWD chief executive James Bielby. The FWD will appoint a new deputy chair at its next council meeting in January.
Smith was appointed chairman of the FWD in May this year, replacing Francis Ball. However, he resigned from the role last week when he stepped down as MD at Musgrave GB following a reshuffle of the board at its parent group Musgrave Group.
He has been replaced at Musgrave GB by Donal Horgan, previously MD of SuperValu and Centra in the Republic of Ireland, who becomes MD of Budgens and Londis with immediate effect.
Smith was MD for three-and-a-half years and had also worked for Kraft Foods, Kwik Save, Somerfield and Camelot.
A senior industry source said: "For Musgrave GB this will be a good move. It will be interesting to see how Donal adapts to being a much smaller player in the more sophisticated GB retail environment."