Scandinavian dairy group Arla confirmed it had lost out to small Danish dairy Ollingegaard for the right to supply milk to convenience store chain 7-Eleven.
Louis Honoré, Arla spokesperson, said the blow was softened by Arla picking up a contract with another, as yet unnamed, convenience retailer in the last few days. But, he admitted "we have lost more contracts than we have won".
Arla's share of Denmark's 500m-litre liquid milk market has fallen from around 89 per cent in 2003 to 80 per cent today.
"The main reason is that [cheaper] German milk has found its way onto the Danish dairy market. But, some Danish consumers have turned their backs on products from Arla," said Honoré to www.DairyReporter.com.
The 7-Eleven chain said its decision to drop Arla reflected growing consumer preference for milk from smaller dairies.
Honoré said Arla had suffered from a bad press over the last two years, following a visit from Danish competition authorities and accusations that Arla had bullied and suppressed smaller dairies in the country.
He also added that Arla "has not been clever enough to have a dialogue with consumers in Denmark. We have focused on promoting Arla as a successful exporter."
The group only makes about 15 per cent of its €6.2bn annual sales (2004/05) in Denmark, with the UK and Sweden much stronger markets.
Arla has, however, begun new initiatives to put itself back on track in Denmark.
The group has used newly developed filter technology to create a new, lower calorie milk.
The product, called Mini30, was launched in Denmark in time for the traditional post-Christmas dieting period and claims to contain the same amount of fat, 0.5 per cent, as Arla's Minimilk drink, but 30 per cent less calories.
The group said its newly developed filtering technique made it possible to halve the amount of milk sugars in Minimilk, therefore reducing calorie content by 30 per cent, but maintain the same amount of minerals, such as calcium, and protein.
"As far as we know, there are no other products in the world with these characteristics," said Karsten Jeppesen, Arla's consumer marketing manager.
Mini30 is being targeted at calorie-counting women, and particularly teenage girls. Arla said research showed that only one in every four teenage girls in Denmark were getting the recommended daily intake of calcium.
The firm added that Mini30 was selling for around DKK6-7 in shops, around DKK1 more than ordinary milk.
The new product may help to claw back some ground for Arla alongside the firm's lower-priced brand, 'Danmaelk', which was introduced in 2004 to combat cheap German imports.
Spokesperson Honoré said Arla had also taken steps to combat its image problem by setting up a number of marketing projects with Danish organic dairies, aimed at improving sector-wide co-operation.
And, he said the firm held a "massive dialogue" with consumers on its website, with between 30 and 40 employees were on hand to answer questions. Customers are currently also able to visit selected Arla facilities.