Talks over move to cut number of Northern suppliers

Mr Boparan, who paid £342m for the Leeds-based maker of ready meals, pizzas and biscuits, is holding talks with the firm’s suppliers as he begins cutting costs.

He is merging Northern with 2 Sisters Food Group, and aims to roughly halve the 4,500 companies which supply them.

“We need to try and consolidate that,” said a Northern spokesman. “We are aiming to grow 2 Sisters and Northern Foods to £3bn by 2015. To do that we will need a smaller number of suppliers.”

The West Midlands-based tycoon, who also owns the Harry Ramsden’s fish and chip shop chain, is under pressure to cut costs after financing the takeover with debt.

He has already announced plans to close Northern’s Leeds headquarters, moving central functions to a site in Wakefield.

Key suppliers will be offered the chance to gain ‘partner status’, added the spokesman, meaning they can grow their business with the group as it expands.

However, suppliers will be asked to offer better deals and ‘loyalty overriders’ – where they agree not to pass on price increases to the group even if their costs go up. Suppliers will also be asked to use ‘value engineering’ to help cut the group’s costs.

2 Sisters, the biggest poultry supplier to supermarket giant Tesco, procures a relatively narrow range of goods, such as chickens, fish and coatings. Its number of suppliers is dwarfed by Northern’s, which requires a complex range of ingredients.

At least 100 large suppliers will be called to Thorpe Park in Leeds for the first round of talks, which are described as “high-level”. The spokesman said the talks pose opportunities as well as challenges for suppliers.

Mr Boparan’s takeover scuppered merger plans between Northern and Irish rival Greencore. Their planned union had aimed to create supply chain synergies of at least £20m, by far the biggest proportion of £40m of mooted savings.

No figure was put on the savings Mr Boparan hopes to make from consolidating its supply chain, which could take at least a year.

Ernie Newell, food ingredients general manager at edible fats firm AarhusKarlshamn’s (AAK), a major supplier to Northern, said the changes were not unexpected.

Hull-based AAK says it is Northern’s sole supplier of fat products, including palm oil, margarine and shortening, a position it has held for about six years. Mr Newell added AAK’s deal is itself a consolidated agreement, which would otherwise be done by about six suppliers.

“We’ve enjoyed a long and fruitful relationship with Northern and we look forward to that continuing,” he said.

“We see no reason why that should not happen.”