Dairy Crest has lost its contract to supply liquid milk to Tesco, less than 18 months after gaining a supply foothold with the nation’s biggest retailer.

Tesco told the dairy giant yesterday that the liquid milk supply contract would not be renewed when it expires in July.

The dairy giant said the loss of the Tesco business – equating to 3% of its liquid milk sales in 2011-12 – did not change its “wider and important” relationship with Tesco. Dairy Crest supplies Tesco with its Cathedral City, Country Life, Clover and Frijj brands.

In a separate move, Dairy Crest also announced the closure of its Aintree and Fenstanton dairies. It said the closures resulted from its ongoing £75m investment programme increasing capacity at other sites.

Chief executive Mark Allen insisted the loss of the Tesco business “has not driven the restructuring decisions”, which have put up to 470 jobs at risk. A consultation has begun with employees.

News of the Tesco contract loss, whilst relatively minor in terms of the overall business, is a strategic blow to Dairy Crest, whose rivals Arla and Robert Wiseman continue to supply Tesco. Dairy Crest added that the news would not impact its profit expectations for the coming year.