Australian businessman Dick Smith will wind down his namesake food company over the coming months to avoid bankruptcy.

"It is my melancholy duty to inform you that the decision has been made to close Dick Smith Foods Pty Ltd," Mr. Smith wrote in a five page letter to the managing directors of Coles and Woolworths, as well as Jeff Adams, the CEO of grocery marketing and distribution company Metcash.

"Now that I have made the decision to close Dick Smith Foods, we will be winding it down over the next 12 months," he wrote.  "Yes, at the present time the company is successful and viable. However, it is clear that this will not go on forever, so I have made the decision before the inevitable takes place and we are forced into bankruptcy."

But while his range of 13 food products still "achieve sales at an acceptable level", he's having to discount to the point that profits are evaporating.  And for that, Smith blames the "extreme capitalism" of the Aldi business model of employing ultra-low cost overseas labor.

"It looks as if there is nothing we can do about this," Mr Smith said.

Aldi Australia CEO Tom Daunt denies this.  "At ALDI we strive to provide our customers with high-quality products at affordable prices.  Losing focus of this purpose just adds costs," he said, noting that Aldi employed 11,500 Australians and partners with more than 1,000 local suppliers.