Dairy Crest is to close its plant at Enfield, which is part of the Yoplait Dairy Crest (YDC) joint venture, with the loss of around 320 jobs.
The closure in early 2005 will see the company move away from production of own-label yoghurts and soft cheeses.
Dairy Crest said the closure was down to significant pressure on its margins as a result of intense competition in the desserts, yoghurt and fromage frais own-label sector over the past 18 months.
"Own-label yoghurts and soft cheeses are very competitive markets on price and they have very low margins," said the company. It said the move was part of Dairy Crest's strategy to concentrate on building its main brands, which include Cathedral City, St Ivel Gold, Clover and the milkshake drink Frijj.
Dairy Crest will transfer production of its creams, which account for around 30% of the Enfield plant's output, to its factory in Chard. Chard has room for the extra capacity following the company's decision to end its skimmed milk products and bulk butter operations at the plant in July last year.
Andrew Saunders, an analyst at Numis, said: "The decision to close Enfield will allow YDC to reconfigure its production assets in addition to relieving overheads and should ultimately make the business more profitable in a tough market."
Dairy Crest's trading in the first three months of the current financial year was in line with market expectations and Saunders predicted future sales growth for the company, particularly in liquid milk processing.
"Dairy Crest has an encouraging outlook in liquid milk, where margins remain firm, with possible wins with Tesco and Morrison following Arla's recent commitment to Asda," he said.