Allied Bakeries has won the multi-million-pound bread contract for own-label bread lost by Premier Foods – as rumours mount the food group is looking at options to sells its bread business.

Following a review of its contracts, the supermarket firm has decided to change its contract next year from British Bakeries’ Hovis brand, one of Premier Foods’ Power Brands, to Allied Bakeries, which will be responsible for supplying the majority of The Co-operative’s own-label bread, as well as a significant proportion of branded bread and morning goods.

The move comes as Premier Foods announced this week within its interim management statement it would not be renewing a bread contract with a major retailer in mid-2013.

Mike Osmond, commercial director, The Co-operative Food, said: “The switch to Allied will ensure we continue to provide our customers with the very best own-label bread, made from 100% British wheat, at a competitive price, and that we can maintain high levels of availability, quality and value across our entire bread and mornings goods range.

“While we have enjoyed a good working relationship with British Bakeries over a number of years, the move to Allied Bakeries has been made in the best interests of our customers and members.”

A spokesperson from Premier Foods told British Baker this morning that it would not confirm whether it was the company’s or The Co-operative’s decision not to renew the contract, and stood by its initial statement published as part of its financial results that the own-label bread contract had low margins and high costs associated with it.

National bakery Warburtons and regional suppliers, such as Roberts and Braces Bakery, will also continue to supply the supermarket.

British Bakeries’ owner Premier Foods, which has more than £1bn of debts, has been busy selling off parts of its business. The possible sell-off of the bakeries division is part of a review that kicked-off earlier this year.