Northern Foods' refusal to agree to new terms under Marks & Spencer's controversial Project Genesis has been applauded by suppliers enraged by the retailer's aggressive attitude, The Grocer has learnt.
The Fenland Foods plant in Grantham is the sole supplier of Italian ready meals for M&S but Northern Foods boss Stefan Barden refused to accept the proposed discounts demanded by the retailer.
The development was the latest setback for Project Genesis, M&S's new food and drink scheme, which included an across-the-board 2% cut in prices paid to suppliers, a 1.5% marketing charge and further potential cuts of up to 3.5% depending on sales growth with the retailer.
But The Grocer has spoken to several suppliers who are not only unhappy with the terms and conditions but also the nature of the negotiations. "M&S's approach has been shocking in its aggression," said one supplier. "It will have been surprised about Northern's refusal to budge on terms. M&S has backed itself into a corner and adopted an approach that could well come back to bite it. It risks losing market share and sales if it underplays the value of the quality of service, products and technical standards of suppliers. Ultimately, if suppliers are not getting their returns, innovation and inventiveness will suffer ."
The closure is expected to spark serious availability problems for M&S as its five million a year selling lasagne ready meals were supplied from the condemned plant. "M&S has under 90 days to find another manufacturer to make its top-selling pasta meals. The 700-strong workforce are hardly likely to wait around and work out of goodwill," added the supplier.
Another supplier could not see how it would benefit from M&S's demands for cheaper rates. "M&S has demanded discounts of between 1%-and 2%, which on the face of it makes us worse off," she said. "If it uses the additional funds to successfully support our range in store, fair enough. But we mostly fund our own promotions so there is no benefit."
The relationship between M&S and its suppliers was irrevocably damaged, said another frustrated supplier who dubbed the scheme 'Project Genocide'. "M&S is a third of my business but Project Genocide has set it back 10 to 15 years with suppliers and it's been extremely disruptive to our business," he said. "It first came to us with a discount rate of 7.5%, which is untenable for anyone. We will not support development with M&S . If I were a shareholder I'd say it was destroying long-term value."
However, Peter King of 2Sisters Food Group, which supplies poultry products to M&S, believed his company had been treated fairly . "Every negotiation should be challenging and this is part and parcel of everyday business life," said King. "At 2Sisters, we have made it our priority to understand why M&S wants to change its terms and conditions of trade and we consider its justifications reasonable."
A spokesman for M&S claimed most suppliers were happy with Project Genesis and the method of negotiation was part and parcel of business. "As we grow, supplier volumes grow," he said. "It is normal business practice to ask the suppliers to contribute as they are the beneficiaries."