MR Kipling and Hovis group Premier Foods has revealed more pressure on its bread business with the loss of a £75m supermarket contract and soaring wheat costs.
Premier also warned there may be a small number of job losses as part of another £20 million in cost savings.
The St Albans-based group will lose the bread contract with an undisclosed major grocery chain from the middle of next year, accounting for £75m in annual sales.
Premier 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.
It 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.
Premier has hiked the price of its bread to offset the higher wheat costs, pushing through a “single digit” increase.
But the group said its eight frontline brands - including Mr Kipling, Bisto, Ambrosia and Loyd Grossman sauces - delivered a two per cent sales hike in the third quarter to September 30.
Its key grocery brands have seen sales rise by 4.1 per cent in the year to date, helped by marketing campaigns including the launch of Mr Kipling “Great British Fancies” earlier this year for the Queen’s Diamond Jubilee.