DBC was plagued with cashflow and supply problems in the months leading up to this week’s announcement that the company is for sale, The Grocer has learned.

Trade credit insurers removed cover for dealing with the foodservice wholesaler as it reported a £4.95m loss in the year to 25 March 2011 (versus profits of £1.3m in 2010), despite sales rising by 10.6% to £302m.

With manufacturers who were owed money pushing to be paid more quickly, and others switching to pro-forma invoicing to be paid in advance, a number of suppliers are understood to have placed orders on stop, and customers turned to DBC’s rivals for orders. It is understood DBC has lost £35m in sales this year.

One customer described service from DBC in the past two months as “abysmal”. He said deliveries turned up with half the products missing because they weren’t in stock. “I’ve never seen service so poor in foodservice in my life,” he added.

Andrew Ramsden, who returned to the company as CEO three weeks ago, said the situation had deteriorated when rivals spread “malicious rumours that things were a lot worse than they actually were. It caused uncertainty in our supplier and customer base.”

Ramsden said the decision to sell the business had not been taken lightly. “Yes, it is and has been struggling, but we’re trying to protect the interest of our stakeholders and our 1,000 staff.”

DBC was trying to meet supplier obligations, he added. “We’re trying to pay everyone, but you can only spend £1 once. Have some people not been paid this week? Probably. Have they not been paid since forever? Probably not. We’re trying to balance the books but it’s difficult.”

DBC was acquired by Iceland bosses Malcolm Walker, Tarsem Dhaliwal and Andrew Pritchard in 2009.