Brian Stein, chief executive of Samworth Brothers, said that while retailers strived to keep food affordable for hard-pressed consumers, they also needed to ensure that suppliers earned decent returns, if they were to survive.
Privately-owned Samworth Brothers has seen a meteoric rise under Stein's leadership, growing at 10–12% a year, and expects to turnover £770M this year. It employs 7,000 staff across 13 businesses in Leicestershire and Cornwall.
Stein added: "Particularly at this time, raw material prices are rocketing and it's not easy to get a price increase. So we are all having to take quite a deep breath and hope that we come out the other side."
While Samworth Brothers works with all the major multiples, it has had long and close relationships with Waitrose and Tesco for 20 years. That business has never been retendered, said Stein.
"The one thing that destroys value in a business is when your business is tendered and lost," he remarked. "There is an obligation on the retailers to manage their supply base carefully." He recognised that retailers needed to get competitive prices, but added: "If they want to get the best suppliers long-term, they have got to manage that tendering process very, very carefully."
He argued that Samworth was better positioned than some of its competitors, which were saddled with pension fund deficits and high levels of debt, while Samworth had none. Samworth had also invested heavily in high quality production facilities, which enabled it to ensure production efficiencies, he added. "Retailers also have to strike a balance with their supply base in terms of technical competence and the fabric of the busines," he said.
Although Samworth had recently won significant new business from its competitors, this had not been by offering low prices, he said. It was more about managing relationships well with retailers and understanding what they wanted from their suppliers.
Last month Samworth's Tamar Foods business won a £32M hot pie contract with Marks & Spencer from Premier Foods' R F Brookes/ Avana Bakeries.
"But the truth is over a period of time the retailers and consumers will get what they pay for," warned Stein. "We can continue investing very heavily in our business and we cross our fingers and hope that will be rewarded. But if it's not, and it's the same in any business, you stop spending money."
Stein reported that overcapacity still existed in the own-label chilled foods sector particularly in desserts even following a number of high profile closures over the past year or so.
"I hope and pray that what gets squeezed out of the market place will be the poorer suppliers and the least well invested," he said.