Real Good Food is selling Garrett Ingredients, its dairy and bakery ingredients supply business, to food ingredients company Kent Foods for £1.8 million.
Real Good Food said the disposal is part of its efforts to turn the company around following a number of profit warnings.
The group said it believes Garrett has “more in common with Kent whose skills and aptitude are better suited to managing its contracts, given Real Good Food’s resources are being increasingly focused on serving the end consumer”.
Proceeds from the sale will be used to pay down debt, the company said.
Chief Exec Hugh Cawley said: “We are pleased to have agreed the sale of this small, non-core business as part of our plan to improve the group’s performance.”