Bangers, faggots and the £3bn bid battle

As they vie to have Safeway for dinner, Jason Nissé finds out why the big supermarkets can't have enough local produce on their shelves

They are calling him "the Tom Archer of Thirsk", after the sausage-making character in Radio 4's The Archers. But Andrew Keeble, who along with his wife Debbie turned their struggling North Yorkshire farm into a £1m-a-year sausage business, could also be a secret weapon in the £3bn bidding battle for Safeway.

"Debbie & Andrew's sausages" are now available in 16 of Asda's northern stores, resplendent in newly designed packaging after Asda's buyers suggested to the Keebles that they pep up their branding. Along with Daryll's faggots, Warren's pasties, Rodda's clotted cream and a board game called Taxi (which outsells Trivial Pursuit and Monopoly in Edinburgh), the sausages only ended up on Asda's shelves as a result of the supermarket's regional sourcing initiative, which went nationwide a year ago.

Local sourcing is a massive issue for supermarkets. When the big four operators – Tesco, J Sainsbury, Asda and Safeway – were slated by the Competition Commission in 2000, one of the main complaints was about how they treated suppliers.

Now, with Tesco, Sainsbury's, Asda and Wm Morrison vying for the hand of Safeway, sourcing and the supermarkets' relationship with the farming community will be key factors determining whether the regulators let the bids go through.

Morrison's sees this area as its big advantage, having received support from many suppliers, notably the quiche maker Thomas Food, which wrote to regulators backing the Morrison's bid. "We came out of the Commission report with a clean bill of health," says Chris Blundell, corporate affairs director of Morrison's.

This is partly because the supermarket has been dealing direct with farmers for more than 30 years. Recently it celebrated the 25th anniversary of a deal struck with the Melton family, strawberry growers in Norfolk who sell their entire output to the Bradford-based supermarket chain. In that time Melton's acreage has risen from 100 to 1,000, and its strawberry-producing season from three weeks to 13. However, Melton has no written contract with Morrison's; the relationship exists on the basis of a handshake between the supermarket's founder, Sir Ken Morrison, and a member of the Melton family in 1977.

Morrison's is also unique in having its own abattoir, so farmers can turn up with small numbers of cattle and sell them to the supermarket. It also reduced its payment time to 48 hours during the foot-and-mouth crisis to help cash-strapped farmers. It has its own produce-packing plants and a fresh food factory, and has just invested in a frozen-chip-making project near Leeds.

It may have been Morrison's good relationship with suppliers, or the stinging criticism from regulators, or just sound business sense, but it appears that in the past couple of years all the big supermarkets have started to become much more pally with small farmers.

Sainsbury's has its supplier development programme. Launched in 1998, it involves the supermarket targeting specific regions to find new suppliers with local produce. "We have a customer satisfaction monitor and it tells us where in the country customers think it is important to have locally sourced produce," says Jane Wakeling, regionality manager at Sainsbury's.

"In London, people do not think it is very important. After all, there isn't much farming in London. But we found that the South-west is where customers think local regional produce is most important."

For Sainsbury's, local sourcing has gone as far as allowing a Perthshire butcher, Simon Howie, to open his own meat counters in 14 Scottish stores. The retailer has also struck a deal with one of its long-standing Cheddar suppliers, AG Barbers, which has become a hub for cheese makers in the South-west to sell into Sainsbury's.

The hub structure is being developed by a number of supermarkets. Asda worked with John Geldard, an egg supplier from Cumbria, to promote produce from the area, which was hit hardest by foot and mouth. Mr Geldard's business, Plumgarth's, now markets beer, organic milk, bread, cakes and sausages under the Best of the Lakes brand, selling heavily to Asda.

According to Karen Todd, who runs the initiative at Asda, the key is to make it easy for a small farmer to deal with a great big supermarket. Asda allows farmers to invoice by fax and deliver direct to the supermarkets. It has reduced payment times and created a fast-track hygiene accreditation system. Ironically, Asda has been better equipped to deal with these local suppliers since its takeover by Wal-Mart, the US retailing giant. The state-of-the-art systems introduced mean that Asda can now handle small suppliers delivering to one store cost effectively.

Ms Todd says most of the new products have come as a result of local store managers suggesting that a regional speciality is stocked. In the case of Malcolm Allen sausages, for example, it was delivery men at Asda's Grangemouth distribution depot who enthused about how good the products were.

Meanwhile, in Thirsk, Andrew Keeble says that he approached Asda two years ago when he was selling just £30,000 of sausages a year. This year his turnover will exceed £1m.

"I was really nervous as a small company going up against Wal-Mart, but it was painfully easy," he says. "From the first contact to putting sausages on the shelves, it took four weeks."

If only it were so simple for Tom Archer.