Dick Smith has made the "saddest decision" of his life to shut down his two-decade-old food company behind Ozemite, saying Aldi "basically forced us out of business".

The announcement comes a day after the 74-year-old slammed the "secretive" German supermarket in an open letter to owners Karl Albrecht Jr and Beate Heister, calling on the pair to show their faces in Australia.

The closure of Dick Smith Foods, which markets Australian-made products including jams, spreads and cereal under a licensing arrangement and donates the profits to charity, will put three employees out of work and will indirectly affect "thousands".

"In two years' time we will go out of business, so I'm closing it down now when times are good," Smith said. "It's a decision forced on me because most people just want the cheapest prices, and the cheapest prices will always come from overseas."

Smith praised Coles and Woolworths for doing "everything they can to keep us on the shelves", even when Dick Smith Foods products were selling below the rate at which other products would be dropped.

Dick Smith Foods will be wound down over the next 12 months. Smith said it had generated total retail sales of about A$480 million ($522.7m) and given more than A$10m to charity over the past 19 years.

The entrepreneur previously flirted with closing the business in 2011 but "everyone went crazy and said 'no you must keep it going', so I put in the most incredible amount of work, selling below cost" resulting in a short-term sales uplift.

Smith said the "nail in the coffin" was learning Aldi had been voted the most trusted brand in Australia in a Roy Morgan survey, above the likes of Qantas, Dairy Farmers and Blackmores.

"It's shown the message is if you can sell cheaper, people will vote you as the most popular and give you incredible support," he said, describing Aldi as "modern extreme capitalism".

"They simply look around the world and buy the absolute lowest cost and make sure they hardly share the wealth in Australia. They hardly have any employees, and it's worked. Unless Coles and Woolworths (cut staff) I don't know how they're going to survive.

"I'm not complaining about Aldi, by the way. They comply with the law. I'm just amazed they can get away with their owners never talking to the media. You go to Wikipedia, there's not even a photograph of them."

Smith has called for tariffs to protect Australian farmers and producers.

"People will tell you a lie that I made money importing electronics," he said. "For the first five years I was a manufacturer in Australia, then without any discussion the Whitlam government took the protective duties off (in 1973).

"I nearly went broke. Luckily a friend said, 'I'll take you up to Japan and show you how you can buy there.' I reckon I would have made more money and employed more people if Whitlam hadn't taken the duty off. We need start protecting our workers."

Smith conceded that a tariff was effectively a tax on consumers.

"Yes, but that means your children and grandchildren will have a job. I agree it's a tax, but otherwise our young people will all be selling coffee to each other."

On Wednesday, Aldi Australia chief executive Tom Daunt hit back at Smith's open letter, saying the company employs more than 11,500 Australians and partners with more than 1000 Australian suppliers.

"We continually refine our exclusive brands together with our suppliers while supplementing these with other popular national brands," Daunt said.

"As a privately owned business we have never sought to 'maximise' profits at the cost of something or someone else. Rather, we opt for long-term sustainable growth strategies."