Amixture of admiration and puzzlement greeted last week's announcement by packer Taypack Potatoes that it had ended its £32m contract with Asda. Why would one of the UK's most significant packers make such a move after 10 years investing in and cultivating a solid relationship with a major retailer?

The UK's £1bn potato market is not an easy one to succeed in, with way too much capacity in the processing and packaging plants supplying the multiples.

Backed by 'overwhelming support' from its 26-strong dedicated grower network Taygrow Produce, chief executive George Taylor made the move in a bid to reclaim 'sustainable prices'.

According to Taypack, Asda has not yet responded to its revised proposals. Speaking on Tuesday, potato buyer Drew Kirk denied the situation was a stand-off. Asda insists that its "door is always open" for Taypack to work with it again, but it has moved swiftly to replace the 80,000 tonnes a year of potatoes with produce from other suppliers. And with growers such as Fenmarc, E Park & Sons and Albert Bartlett & Sons, among others, it is not short of alternatives.

If Taypack feels it is forging a new path for supplier-retailer relationships with its stance, this week's developments at Northern Foods have shown it is not alone in taking a stand. The manufacturing giant has preferred to sacrifice a £45m contract to supply Italian ready meals to M&S - shutting a factory and cutting up to 730 jobs into the bargain - rather than accept a deal that it felt did not offer adequate returns.

Taypack itself - despite putting forward a bullish stance - has admitted that redundancies are a possible upshot of the cancelled Asda contract, and with four fifths of its business tied up in the Leeds-based supermarket it has a considerable amount of work ahead of it to find new outlets for all of its produce.

Many in the supply industry have applauded Taypack's brinkmanship, but they don't expect it to spark a flood of similar rebellions. Pembrokeshire potato grower and vice chair of the NFU's board for horticulture, Walter Simon, describes the Scottish producer's move as "brave" after the years of investment the company had made servicing the supermarket's demands.

"Outside the potato sector companies have walked away from the big UK supermarkets," says Simon. "But I don't really see too many people following Taypack's lead in this way. But the message does need to get across to the multiples. As producers, we are just getting by, and we are not making the returns we need to re-invest. It needs a supplier like Taypack to say 'we're going to have to stop supplying you'."

A packer, who wishes to remain anonymous, says the sector is in "a hell of a mess". He agrees that the message needs to be driven home to supermarkets: "Costs are up and prices the same or down. We need to all stand up and tell it how it is."

Anna Davies of NFU Scotland hopes the move is a sign of increasing confidence brought about by the recent Competition Commission announcement of a new code of practice and an independent ombudsman, designed to police relationships within the food-supply chain.

"Traditionally the large retailers have wielded the power," she says. "But now those further down the supply chain will be able to speak out without fear of reprisal ."

On Monday Taypack stated it was in talks with potential new customers who, it said, had emerged since May 1, further stoking speculation that the company's relationship with Asda was at an end. George Taylor, who founded Taypack in 1986, said the business was marketing the remainder of this season's crop in storage, and that the talks had been very encouraging. "We remain in a strong position to assess all options that will safeguard the interests of the company and our grower base," he stressed.

A source close to Taypack described the talks as "solid negotiations" with "several" potential customers. Although he refused to confirm their identity, he stressed that all potential options were being considered and not just retail outlets.

After years in thrall to the supermarket's whims, might Taypack's principled stand herald a shift in the power balance? It is too early to say. If Taypack finds alternative markets of equal or better value it will go some way to proving suppliers have power over their own destinies. But one company will find it difficult to change the industry alone. nTAYPACK - THE FACTS

Employs 220 full-time staff

Has a 9% share of the UK's annual 1.5-million-tonne fresh potato market

Taypack supplied about 40% of Asda's UK fresh potato business - about 80,000 tonnes

Most of the supply, around 100,000-135,000 tonnes a year, comes from Taygrow Produce, a dedicated grower group 26-strong which provides 1,900ha of the 3,000ha required

Supplies supermarkets and wholesale customers in Europe and Scandinavia

It also has Aldi's Scottish fresh potato business which remains unaffected

Taypack recently acquired a 25% shareholding in a Ukraine-based farming company. 700ha of potatoes were planted in Ukraine in spring 2007

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