A deal fit for a future King? Waitrose pays princely sum for Duchy rights

Supermarket signs exclusive deal to make, license and sell Prince's luxury food range

the prince of Wales was accused of commercialising the Royal Family last night by agreeing a rescue deal with Waitrose that will hand the £4bn-a-year supermarket exclusive rights to make, license and sell his faltering Duchy Originals range.

Waitrose, the grocery arm of the John Lewis Partnership, has promised to pump "millions" into developing the Prince's products, which rival retailers Tesco, Asda and Sainsbury's will be banned from selling.

Britain's biggest organic food brand – which carried the Prince's Cornish coat of arms – will be renamed "Duchy Originals from Waitrose".

To promote the new venture, the Prince and the Duchess of Cornwall toured a Waitrose branch in Belgravia, close to his home in London yesterday, telling senior staff he was enormously grateful to their company. The couple even did a bit of shopping.

"When I think back to 19 years ago when we launched the first oaten biscuits there were large headlines saying 'Shop-soiled Royal'," he said. "So in an even more soiled capacity, I am here just to say this is a really proud moment, because Waitrose is one of the great British stores."

For the Prince, the commercial tie-up ends two turbulent years at Duchy Originals, which he had hoped would popularise premium organic food but which ran into trouble during the recession. The private company's profits sank by £1.3m in 2007 to £56,000 last year, and tipped into loss for the 12 months to March.

Under the terms of the partnership agreement, the Prince has signed over to Waitrose the "exclusive right to originate, manufacture, distribute and sell Duchy Originals products in the UK". Waitrose will pay an undisclosed royalty for each product sold, with a guaranteed annual minimum, to the Prince's 21 charities, which the firm supports.

From 1 October, Duchy Originals will in effect become Waitrose's premium brand and its headquarters in Twickenham, west London, will close, with all 15 staff moving to Waitrose's base in Bracknell, Berkshire.

Waitrose intends to expand its range from 200 to 500 products, with the first new lines – likely to be fresh fruit and vegetables and rare breed meat – appearing in the spring.

Graham Smith, campaign manager of Republic, the anti-monarchist pressure group, suggested the closeness between the heir to the throne and a commercial concern was unhealthy.

"It is the commercialisation of the Royal Family," he said. "It's typical of Charles to overstep the boundaries that his mother would never have overstepped. He's interfered in all manner of interests. It seems very odd that his Royal brand is being used for commercial gain by a profit-making company.

"We will be looking to see whether this breaches his constitutional role."

Hailing a brave new start for Duchy Originals, Sir Michael Peat, the Prince's private secretary, denied the deal moved the monarchy too close to big business.

"No – we like to think we run here the largest multi-course charitable enterprise in the world and all that needs money," he said. "The arrangement we have entered into with Waitrose in concept is no different from lots of the arrangements we have with commercial companies to support charities across a broad range. It's exactly the same, using licensees and agencies to market and distribute our products."

Although the Prince will retain ownership of Duchy Originals, which has donated £7m to his charities over two decades, its effective takeover is likely to be viewed as evidence that its stewardship was flawed.

When he founded the firm in 1990, the Prince hoped the sale of premium soups, jams, biscuits and ales would promote the virtues of organic food, support small-scale farmers and manufacturers and promote sustainable business. But it controversially laid off its sales staff two years later, passing the job of promoting its products to its manufacturers instead. It also opened a loss-making bakery division.

Yesterday its chief executive, Andrew Baker, blamed a 50 per cent price rise in organic ingredients and a dip in organic buying during the recession for its losses, which he declined to quantify. "It's absolutely not the case that this is a rescue by Waitrose. We have a strong business model that has gone through a difficult trading period," he said.

Michael Jary, the company's non-executive chairman, insisted: "There was no problem with the business model maintaining sales at the status quo, which was about £50m of retail sales, or continuing on a growth path which would have taken us to £60m or £70m.

"But what we identified is that if you really want to grow this brand as fast as the market allows and maximise the income for the charities, you need a degree of strength and support.

"Almost all entrepreneur-founded ethical brands reach that same conclusion: Green & Blacks and Cadbury's, Jordan's and ABF, Innocent [and Coca-Cola], almost all of them have said: 'We've had a very successful run, we've grown the brand to be a leader within its category, but we need to take it to the next level'."

Stars in their aisles: Supermarket celebrities

* Sainsbury's flew John Cleese over from the US to gesticulate in its aisles in the 1990s but the campaign was a flop. Now cheeky chappie chef Jamie Oliver gurns at housewives.

* For Tesco the Spice Girls, Paul Daniels, Des O'Connor and Cleese's old sparring partner Prunella Scales – in the guise of "Dorry Turnbull" – have told shoppers Every Little Helps.

* After a redtop controversy last month, ex-Atomic Kitten Kerry Katona was sacked as the face of Iceland, for which she promoted cut-price snacks.

* While strolling fields and farms, family-friendly Alan Hansen, Richard Hammond and Denise van Outen have extolled the virtues of Morrisons' home-produced fresh produce.

* Asda shuns celebrity TV ads but signed footballer's wife Coleen Rooney to promote its clothing range, George, and ex-Hear'Say singer Suzanne Shaw to model its lingerie.

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