Design

Marks & Spencer has antagonised food suppliers by demanding bigger price discounts as sales dip, according to press reports.

It is understood that the retailer met its top 10 suppliers last week and demanded a 2% discount on all bills in order to reduce its purchasing costs.

M&S also asked for additional discounts of up to 3.5%, depending on how much it sells.

The Daily Mail also said the retailer would increase the contribution made by suppliers towards marketing and advertising costs from 0.5% to 1.5%.

M&S said it had "updated" its supplier terms, but denied that the changes were a reaction to poor trading.

In January, the retailer reported its worst quarterly performance in more than two years as like-for-like trading over the Christmas period fell by 2.2%.

"We have had significant growth in food with a 23% rise in volumes over the last three years and our suppliers have benefited from increased sales," said an M&S spokeswoman.

"The key change is that we have updated our food supplier terms to make them more transparent and closely aligned to growth as we continue to invest in the business. We are not changing our payment terms, which remain the best in the industry."

Reaction from the packaging industry was that a 2% discount was "not exactly the end of the world" and would "just have to be absorbed by the food companies".

Nicholas Mockett from Europa Partners said: "The packaging industry is already being squeezed by rising input costs, particularly for resin, and wouldn't benefit from giving anything away to food manufacturers."

"If packaging's customers are being squeezed, they will seek to make recoveries elsewhere. Packaging can be an insignificant part of the cost of a product but can make a huge difference to the integrity of the product when it gets to the consumer."

He added that some suppliers, particularly in the dairy sector, would be on fixed contracts and, therefore, would not be greatly affected.

Packaging Federation chief Dick Searle said M&S's action was all part of the "cut and thrust" of the supply chain.

"There's nothing new about retailers seeking to get the best possible price from suppliers – it's a tough world out there."