M&S was surely asking for trouble when it entitled a supplier review Project Genesis. The danger was always that it could turn into Project Exodus. And that is exactly what appears to be happening.

M&S has been losing food sales in its large stores for some time, which it attributed to cannibalisation from the Simply Food rollout (ignoring improved offers from rivals, but that's not important right now).

Northern Foods' decision to mothball a factory, rather than concede to the demands of M&S, suggests the retailer's public and aggressive attempt to command supplier discounts has backfired.

Everyone knows food at M&S is expensive. I wince every time I buy a fresh fruit salad. For £4.15. In a supermarket.

Some know, also, that M&S has enjoyed far higher margins on food than rival retailers. As one CEO told me, responding to rumours re-ermerging this week that M&S will start selling brands: "I can't wait. It will show customers how expensive M&S really is."

But the success of M&S was also built on its relations with a select band of own-label food manufacturers. These were not just symbiotic relationships - the best retailer/supplier relationships usually are - these were M&S symbiotic relationships, with suppliers investing heavily in R&D in return for exclusive and guaranteed utilisation at a far higher level than would normally be considered prudent.

M&S appears ready to break with that tradition, not only by demanding price reductions, but in some cases by removing large chunks of business to keep suppliers keen. Backed into a corner, Northern Foods has stood its ground, dignified but stern. The howls of protest and the anger expressed by other suppliers (see p4) suggests more may follow.

Topics