Sir Stuart Rose has defended Project Genesis, M&S's controversial initiative to improve supplier terms, saying action was necessary to address a number of systemic issues in the food business.
In the week that M&S profits exceeded £1bn for the first time in a decade, the poor performance of food stood out. Taking into account new Simply Food openings, food sales were up 6.8%, but on a like-for-like basis sales fell by 0.4%.
As well as introducing ingredients in February, Rose confirmed M&S would stock brands for the first time, including Marmite, Weetabix, Stella Artois and Lemsip. And the rollout of Simply Food would continue, with 70 new stores planned for this year. But it was also necessary, he said, to look at supplier arrangements, including terms.
"We can't stand still and we can't force it on suppliers and they can't make us take the goods, and if it doesn't work commercially then we have to take another route. "
Project Genesis has seen renegotiation of supplier contracts, with across-the-board price cuts of 2%, a 1.5% marketing charge and further potential cuts of up to 3.5% depending on sales growth with the retailer.
But amid widespread criticism of the initiative - dubbed "Project Genocide" by one supplier - Rose said the negotiations were not just about price, but reflected the need to secure a supply base "fit for purpose":
"Some suppliers are too light for heavy work and too heavy for light work, so what we are doing under Steven Esom [M&S head of food] is rationalising what we do and saying are you fit for purpose for the next 20 years and do you want to be here? There will be painful conversations and equally there will be some positive ones."
Commenting on the failure to agree a deal with Northern Foods, which led the supplier to announce last week it would mothball its Fenland Foods plant rather than accept a discount that The Grocer understands amounted to 15%, Rose said: "It was not a unilateral decision. It was a joint decision Esom has been involved in for some months.
"No-one likes to see a situation where there is a potential threat to a workforce but we are working hard to see what we can do. We have been very open about it, as indeed has Northern," Rose added.
Unions have warned the 738 workers at Fenland Foods will lose their jobs. However, Esom said M&S would be looking to give more business to other Northern sites. "We have a great supply base but some factories have been in production for 25, 30 years and we need to make sure we have the most modern facilities with new suppliers and existing suppliers. We are inviting new suppliers as well, because our business is changing and we need to reflect new skills and competencies in that supply base."