The company, which also has a store of food brands, said the failure to agree terms with the supermarket chain meant the site is no longer viable.
The jobs of 349 employees based at the site are under threat, and the company is beginning a 90-day consultation period with them.
This is not the first time the loss of a major contract has caused Northern Foods to halt production. In 2008 it stopped producing at its Fenland Foods factory in Grantham after failing to secure terms with Marks and Spencer.
