Westminster Meals Service (WMS), the company formed in 1994 by a management buyout of Westminster City Council's welfare meals department, has lost its contract to run the council's meals on wheels service.
The contract, put out to tender at the end of its three-year term, has been won by chilled and frozen meals supplier Tillery Valley Foods, the company recently bought by Gardner Merchant.
The contract is set to turn over nearly £1m a year during its five-year period, with Tillery Valley providing 4,000 meals a week to 600 clients, starting on 1 February.
Despite losing its original contract, WMS - a former Caterer Adopted Business, taken over by German-based Apetito group in March - will continue to operate meals on wheels services in the London boroughs of Southwark and Kensington & Chelsea. These deals are together worth £1.8m a year in turnover.
WMS will also continue to provide 400 meals a day to Westminster's day nurseries.
WMS managing director Brian Smith said he was extremely disappointed to have lost the deal. "We've built a great team here over the past eight years and they were devastated by the news," he added.
WMS staff at the contract will transfer to Tillery Valley under transfer of undertakings regulations.
Although Tillery Valley supplies frozen meals to several other local authorities, this is the first time the company has bid to supply meals and deliver them hot.
It is sub-contracting the delivery to Kent-based company At Home. In an innovative new system, the frozen meals will be reheated in the back of its delivery vans, using regeneration ovens powered by bottled gas.
Westminster City Council said the new contract would increase the size and choice of meals and boost value for money. The price to customers will remain at £1.35 per meal.
Following the blow, WMS is to relocate to new offices at Nine Elms in south London, but will retain its name, despite the move from Westminster.