The shake-up at Dairy Crest, which has already seen it close some milk processing plants and sell off its French business, extended into the boardroom, with the loss of two senior managers – including one revealed to have retained a key contract.

The UK dairy group said it was ditching a multi-division structure, after last year's sale of the French St Hubert business, and the disposal in 2009 of its interest in Yoplait yoghurt, left is a "less complex business".

The new structure, tying in the dairies operations to the leading brands such as Cathedral City cheddar and Country Life butter," will facilitate best practice, eliminate duplication and maintain Dairy Crest's strong focus on profit delivery", the group said, estimating cost saving at £5m or more a year.

"The reorganisation announced today is right for Dairy Crest," Mark Allen, the Dairy Crest chief executive, said.

"It reflects our focus on consumers and customers as we continue the progress we have made in simplifying the business and becoming more efficient."

'Quite tough'

However, the simplification has meant the departure of two board members - finance director Alastair Murray, after 10 years in the post, and Toby Brinsmead, the head of the dairies division.

The announcement of Mr Brinsmead's departure came the same day as Dairy Crest revealed that, under his leadership, the dairies division had retained a key three-year contract with Sainsbury, the supermarket chain, against competition from Arla, which is beefing up its UK operations.

"That's quite tough," a Dairy Crest spokesman told Agrimoney.com.

"But we are moving from two divisions to one, but had two managing directors – one had to go."

Keeping the Sainsbury contract, which accounts for about one-third of Dairy Crest's retail volumes, and keeping it had come at a cost, with its conditions "to change from 2014", the group added.

"Our ongoing cost reductions are expected to offset any financial impact on our business."

Market reaction

Mr Allen added that the management revamp would allow "the next generation of talented managers in the business to develop and attack the opportunities we have in front of us with renewed vigour".

Mr Murray will be replaced by Tom Atherton, Dairy Crest's director of financial control.

Tuesday's announcements received a broadly positive response from analysts, with Peel Hunt raising to 450p, from 440p, its target price for Dairy Crest shares, on which it maintained a "buy" rating.

Panmure Gordon analyst Graham Jones, while maintaining a 430p price target on the shares, said that the management shake-up "make sense in the context of a simplified business", and while the retention of the Sainsbury's contract "removes a key risk".

The shares stood 0.2% higher at 421.8p in morning deals in London.