Aramark's strong-arm tactics could backfire

While the economy creeps away from recession, trading conditions remain challenging. And with an ever-changing operational landscape, businesses continue to employ a variety of methods to weather the storm.

Some choose to invest, like Darran Lingley of the Five Bells pub in Essex (page 38). When trade hit a rough patch he made a £20,000 commitment to a business coach that saw a return of £130,000 in the first year.

Others strive for growth. Tim Hall, founder of healthy eating chain Pod, explains his ambitious expansion plans following a fresh cash injection of £3.5m from a private equity firm, in the Caterer Interview (page 22).

And of course continued reassessment of costs is essential for any business. But when contract catering giant Aramark sent a blanket letter to suppliers demanding a 12% reduction in prices last week, it was met with outrage by many in the industry (page 7). Renegotiating pricing with the supply chain and consolidating procurement is not unheard of and given the fluctuating market conditions, it's generally considered to be a wise move but there is a real danger that Aramark has risked its reputation with this heavy-handed approach.

The short timescale that suppliers were given to respond, and the suggestion that a failure to give the caterer significant savings would result in the termination of future business could backfire if Aramark's preferred suppliers choose to walk.

It remains to be seen how the suppliers will respond to this strong-arm tactic generally only seen in the supermarket sector. Hopefully it will be a lesson in how not to negotiate with supply "partners" but worryingly, it might set a precedent for other business leaders to follow. Let's hope not.