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‘Extraordinary’ letter sees Aramark demand suppliers cut prices

By Anne Bruce , 10-Jun-2011
Last updated on 10-Jun-2011 at 13:23 GMT

Aramark UK says that suppliers should view a letter it sent on June 1, demanding price reductions of 12% or more, as an “opportunity not a threat”, but a leading foodservice consultant has described the move as an ''extraordinary step".

The foodservice giant's chief operating officer, Mark Faulkner, told suppliers – in the letter seen by FoodManufacture.co.uk – that Aramark had too many lines and too many suppliers in the same category, in addition to a complicated and inefficient distribution solution.

Faulkner said the company wanted to select, fewer long-term suppliers providing higher volumes, and therefore required immediate proposals from suppliers to make price reductions on services and products, effective from July 1 2011.

‘Strong-arm tactics’

Savings of 12% or higher would be essential to secure a long-term relationship with Aramark, he added, instructing suppliers to respond via email by today (Friday June 10).

But foodservice consultant Jonathan Doughty told FoodManufacture.co.uk that he viewed the decision to send the letter as an “extraordinary step”, and said he thought such “strong-arm tactics” would backfire on Aramark.

He said:“This is not negotiation, it is shameful. A reduction of 12% will take away all of your margin in this day-and-age. I have now just signed a three-year exclusive contact with one of their [Aramark’s] competitors, and I feel sorry for anyone who goes along with their demands.”

Another supplier said: “It is unusual for a company to be so blatant and so arrogant, and this has caused quite a stir in the industry.”

High-level resignation?

He added that Aramark purchasing director Debbie Walter had resigned in protest at the letter, which went over her head.

Aramark confirmed that Walter was leaving but FoodManufacture.co.uk could not contact Walter herself to confirm the news.

Queried about the letter itself, Aramark said in a statement that it was not sent to all suppliers, but a limited number of non-core suppliers.

“Early indications are that many of those approached have seen the letter as a positive ‘call to arms’ and are keen to explore how they can extend their relationship with Aramark in return for offering more favourable terms,” the company said.

Farnborough-based Aramark UK has a turnover of about £400m and is part of the US-based Aramark Corporation. The UK operation employs 12,500 staff and services industry sectors such as defence, healthcare and education.

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