Welsh Country Foods (WCF) could be forced to shut its operations on Anglesey with the loss of almost 350 jobs after Asda decided to consolidate its fresh lamb supply chain with an alternative supplier.
Vion, which owns WCF, has now announced it was beginning a 90-day consultation exercise with its unions and workers.
Jose Peralta, managing director of Vion’s red meat business said: "This is an extremely difficult day for everyone at Welsh Country Foods following the decision by its key customer to de-list Welsh Country Foods as a supplier.
"We recognise the impact which this decision will have on the local economy and the community in Anglesey and we are currently in discussions with the retailer to establish if their decision can be overturned and if any steps can be taken to mitigate their decision.
"Throughout the consultation process we will explore every opportunity to limit any potential job losses which will include attracting new customers to the site or the sale of the business to any interested parties. We will also work with our farmer supply base to minimise any impact that this may have on their activities."
A spokesman for Asda said: "Following a strategic review of our lamb business we have taken the decision to serve notice on our supply relationship with Vion-owned Welsh Country Foods, Gaerwen Anglesey.
"This decision was not taken lightly, however we feel it is an opportune time to review our lamb sourcing to meet the changing needs of our customers.
"We have built a strong relationship with Welsh lamb farmers and we remain committed to sourcing lamb from the country."
WCF, which processes 640,000 lambs a year, was purchased by Vion in 2008 when it took over the Grampian Country Food Group. Vion recently announced the sale of all its UK operations as the company plans to refocus its operations on the continent.
Jose Peralta added: "If the consultation exercise does not reveal a viable way forward for this plant regrettably we will have no other option but to close the site.
"We have today spoken to the workforce at the plant and have opened discussions with union representatives. We have also informed the Welsh Assembly, Welsh Government, and Isle of Anglesey County Council. If the plant closure is confirmed, we will take all practical steps to work with the relevant agencies to minimise the undoubtedly significant impact on jobs and the local economy."