Palmer & Harvey has lost its £25m contract to supply chilled goods to Tesco's One Stop c-stores but has made up for the loss with new business from Little Chef and Blockbuster.

P&H won the contract to supply medium and long-life chilled products to One Stop's 507-store estate in May last year from Kerry Foods Direct To Store. But as the 12-month contract drew to a close, Kerry Foods Direct To Store submitted a "very competitive package" that P&H would not match, a source close to P&H told The Grocer.

P&H will deliver chilled goods to One Stop until the contract runs out on 4 February. Its frozen products contract is unaffected.

Although the loss is a blow to P&H, which has increased its chilled offering over the past two years to meet customer demand, the UK's biggest wholesaler has won new contracts for Blockbuster and Little Chef estimated to be worth a combined £25m.

It started delivering to Blockbuster this week and Little Chef two weeks ago. The Blockbuster contract to supply the DVD rental chain's confectionery and soft drinks was previously held by Booker, which was handed the contract in September last year after buying group Key Lekkerland was wound up.

As part of the Little Chef deal, P&H will supply all the chain's impulse and ambient products.

The One Stop win will boost the fortunes of Kerry Foods Direct To Store. Last week, parent company Kerry Foods admitted that the profitability of the chilled distribution service had fallen in the six months to 30 June due to channel consolidation and the decline of the independent retail sector.

However, Kerry Foods has been steadily picking up business in recent months. It makes Tesco's City Kitchen premium range of chilled dishes, which launched in June.

Meanwhile, P&H said its summer deals for independents had been well received. The campaign resulted in strong volume uplift and prompted new retailers to open accounts, the wholesaler said.