UK-based Dairy Crest has commenced consultation with employees and representatives over the proposed closure of its Proper Welsh Milk dairy in Whitland, Carmarthenshire.
The plant was days from closure when the company gained its control in March this year to maintain production and employment and develop new products at the site, which currently employs 31 people.
The site witnessed a drop in production volumes and required huge investments to comply with the company's standards, making it impossible to operate economically, the company said.
Dairy Crest CEO Mark Allen said, "We are disappointed that it has not been possible to make a success of Proper Welsh, but lower sales and higher costs mean it is not possible to operate the site economically.
"We remain committed to the Welsh dairy sector and are continuing to recruit farmers and invest in milk collection facilities around Carmarthen."
The company will assess the staff affected by these proposals and will work with customers to offer them alternative packing arrangements and ensure there is no disruption to their service.