It's good news for Leeds-based Northern Foods which is so confident about our festive shopping habits that it has already made over 20 million Christmas puddings – the same number as last year and chief executive Stefan Barden is confident he'll sell them all.

Leeds-based Asda believes Christmas will be tougher for customers this year and they will manage their budgets carefully, but finance chief Judith McKenna says that strong sales over Hallowe'en indicates that people are prepared to spend money on the big events during the year with Christmas being the most important.

It's a sentiment that's echoed by Barden. "I think food and drink sales will probably be good this Christmas," he says. "In a recession, people satiate themselves with food and drink to forget. Who is going to upset Christmas? Christmas puddings and tins of biscuits are part of the ritual. People want to give their kids what they remember having."

Barden is in the process of transforming Northern Foods from an underperforming general foods company to a specialist, hi-tech, low cost producer that's not scared to step away from a deal if it doesn't make commercial sense.

Northern Foods hit the headlines earlier this year when it announced plans to axe 700 jobs and temporarily close one of its factories after failing to agree a new contract with Marks & Spencer.

The Fenland Foods factory in Grantham, which made Italian ready meals for M&S, has been mothballed but Northern hopes to sign a deal with another retailer and re-open it in 2010 once it has been modernised.

Northern Foods is getting tough with retailers, insisting that it will only take on contracts that make a profit.

"We are telling all our customers that we don't do business on a loss-making basis," said Northern chief executive Stefan Barden. "We are sending a clear message to other retailers that we don't give M&S preferential treatment."

It's a far cry from the old days when Northern Foods and M&S were virtually joined at the hip. Just 15 years ago, M&S had a relationship where nothing was ever signed, they just worked well together and both sides benefited from the arrangement.

But when Lord Chris Haskins left Northern, the relationship didn't continue and the two have struggled ever since.

Barden is keen to return to the days when the relationship worked well. He rejects my suggestion that Northern showed its teeth over Fenland but, whatever you want to call it, it seems to have worked.

M&S chairman Sir Stuart Rose has admitted that M&S dithered over its contracts instead of getting on with the job.

"We had a strained relationship with our food suppliers, we were talking about terms and conditions, we should have been asking what can excite our customers' palettes?" he says.

It is a sentiment closely in tune with Barden's thinking.

"We understand the science of recipes and technology better than our competitors. That's why our food is not a commodity. Retailers want to sell more and we can improve retailer's shopper loyalty. We have a higher repeat purchase than anyone else.

"We need to go back to what we're good at – creating completely new food markets. We should create the next generation of ready meals," he says.

Northern announced a 16 per cent fall in pre-tax profits to £16.9m for the six months to September 27, an improvement on the £16.5m figure expected by the City.

Underlying profits actually rose 23 per cent, but this was cancelled out by a £3.3m investment in brands and a £2.5m hit from adverse currency movements.

The group is hoping to tackle the recession with a number of value ranges targeted at cash-strapped customers and it has already introduced some budget lines for Tesco including the 99p sandwich and a £1.30 pasta salad.

It is also working with discount supermarkets as consumers trade down in the face of higher food and fuel bills and is enjoying strong demand for its new 99p frozen 12in San Marco pizza which is being rolled out across most retailers.

At the other end of the market, Northern has been working closely with Marks & Spencer on its highly publicised "Dine in for £10" campaign.

The popularity of the promotion means that Northern increased sales to M&S by 7 per cent in the first half of its financial year, despite M&S's overall food sales falling 5.3 per cent. Northern is working on more "Dine in for £10" promotions which will appear in the next few months.

But it isn't focusing solely on promotions and the value end of the market in a bid to lure customers. During a recession, people need treats to cheer themselves up and with this in mind Northern is about to launch a new range of sponge puddings under the "Scrummie" brandname. "We have developed the technology to make a top quality sponge pudding that has a 12-week life with no added preservatives," says Barden. "It will go to all our customers and will replace Christmas puddings in the aisles in the New Year."

Barden was parachuted in to increase profit margins from Northern's "unacceptable" 4.3 per cent to the industry average of 7 per cent and he says this could take as long as five years.

It's a long-term target, but so far the market has been impressed with his strategy. If anyone can return Northern to its glory days, the City believes that Barden is the man to do it.

SECRET RECIPE FOR FINE FESTIVE FARE

Northern Foods's Matthew Walker Christmas puddings are made to a recipe based on 100 years' experience.

The puddings are made using secret recipe number 13, which is based on the traditional 13 ingredients which are said to represent Jesus and his 12 apostles. They include French cherries, sultanas from Izmir in Turkey and the combination of Port and French cognac.

The slowly fermented and double distilled Cognac is mixed with the vine fruits, lemon and orange peel are then added and the special ingredient is a secret blend of spices including cinnamon, clove and nutmeg. The pudding is finished off with Derbyshire vintage stout.

All the ingredients are mixed before being steamed to give the traditional moist texture which characterises a Christmas pudding.

The pudding is available in four sizes from a 100g stocking filler to a 850g traditional ceramic pudding basin.