Premier Foods, the firm behind Hovis and Mr Kipling, has revealed more pressure on its bread business with the loss of a £75 million supermarket contract and soaring wheat costs.
The group also warned yesterday that there may be a small number of job losses as part of a further £20m in cost savings.
The St Albans-based company will lose the bread contract with an undisclosed major grocery chain from the middle of next year, accounting for £75m in annual sales.
It said it was unable to agree renewal terms as it put profits before sales volumes in an effort to improve performance at the Hovis division.
Premier is separating its bread business into a different division amid intense competition and a surge in wheat price inflation caused by poor weather in the UK and overseas.
But the firm said its eight frontline brands – including Ambrosia, Bisto, Loyd Grossman and Mr Kipling – delivered a 2 per cent sales hike in the third quarter to 30 September.