Owned by Arla Foods, Express Dairies has used its fleet of milk floats to deliver small parcels, magazines and catalogues to homes since 2002.
It signed a partnership with TNT Mail, the UK postal business of Dutch group TPG, in June last year. TNT took responsibility for collection, sales and marketing.
TNT and Express reviewed the partnership after one year, which may have hastened the decision.
TNT said that it will now focus on developing its own end-to-end capability, encompassing the delivery of letters and heavier items.
The prospect of fiercer competition after Royal Mail's move to size-based pricing next year was blamed by Express Dairies in a letter to its business customers informing them of its decision to stop the service.
In addition, Express said that Royal Mail's recent introduction of its Big Book catalogue delivery promotion was putting downward pressure on its own pricing.
A spokesman for industry regulator Postcomm said it has, in the last few weeks, received a complaint about the Big Book promotion from a mail operator and was looking into it.
According to the spokesman, the promotion applies to deliveries of a minimum 12,000 items weighing between 500g and 1,500g that can be folded in half to go through a letterbox.
Sarah Chambers, chief executive of Postcomm, said: "It is disappointing. In a market where there is a very substantial operator, almost a monopoly, it is important for customers that there is competition."
Postcomm estimates that Express was delivering between 5m and 6m items a year.
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