Supermarkets have held informal talks with Northern Foods and other suppliers about taking on Bakkavör's business amid concerns around the company's high levels of debt, The Grocer has learned.
Bakkavör, the UK's second-largest ready meal manufacturer, has more than £1.5bn in debt and other liabilities and made a £20.1m loss in Q3 after one-off losses.
The Icelandic company insisted it was not affected by the turmoil in its home country and said only 6.6% of its financial facilities come from Icelandic banks.
It continues to trade normally. But retailers have been making contingency plans in case the company became unable to deliver. "Retailers have been having informal discussions to make sure they can keep shelves stocked," said one senior industry source.
"It puts Northern especially in a good position. Because it closed the Fenland Foods plant, it is one of a few suppliers with obvious spare capacity, though it would take a bit of time and money to get it operational."
Northern Foods pulled out of a £45m supply deal with Marks & Spencer earlier this year, after refusing to take a cut in the price it received.
As a result, it closed down its Fenland Foods site, while M&S turned to Bakkavör and Premier to replace Northern as its Italian foods suppliers.
"It would be an irony for Northern Foods to regain some business this way, as it's perhaps the one situation where a supplier could name their price with a retailer," said one analyst.
But this would be an unlikely outcome, he added. "The most likely thing if a major supplier went into administration would be for it to continue trading and be sold off.
"Retailers are right to set contingencies, but that can be what finishes a business - not its financial situation, but nervousness from its main customers.
"The ready meal markehas now peaked and is in decline. Given the downturn, it's not going to be long until some companies start to run aground."
Bakkavör, the UK's second-largest ready meal manufacturer, has more than £1.5bn in debt and other liabilities and made a £20.1m loss in Q3 after one-off losses.
The Icelandic company insisted it was not affected by the turmoil in its home country and said only 6.6% of its financial facilities come from Icelandic banks.
It continues to trade normally. But retailers have been making contingency plans in case the company became unable to deliver. "Retailers have been having informal discussions to make sure they can keep shelves stocked," said one senior industry source.
"It puts Northern especially in a good position. Because it closed the Fenland Foods plant, it is one of a few suppliers with obvious spare capacity, though it would take a bit of time and money to get it operational."
Northern Foods pulled out of a £45m supply deal with Marks & Spencer earlier this year, after refusing to take a cut in the price it received.
As a result, it closed down its Fenland Foods site, while M&S turned to Bakkavör and Premier to replace Northern as its Italian foods suppliers.
"It would be an irony for Northern Foods to regain some business this way, as it's perhaps the one situation where a supplier could name their price with a retailer," said one analyst.
But this would be an unlikely outcome, he added. "The most likely thing if a major supplier went into administration would be for it to continue trading and be sold off.
"Retailers are right to set contingencies, but that can be what finishes a business - not its financial situation, but nervousness from its main customers.
"The ready meal markehas now peaked and is in decline. Given the downturn, it's not going to be long until some companies start to run aground."
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