The Sun claims that Iceland executives are poised to end the former Atomic Kitten's £250,000 deal after an email sent round its headquarters detailed some of the complaints made by customers.
One said: "I wonder how you can use her as a figurehead for your 'Mum's gone to Iceland' campaign." Another said: "I won't shop at Iceland until she is gone."
It would be costly for Iceland to drop Katona now as she has already been shot for its Christmas campaign, created by the Tom Reddy Agency.
The agency is currently recording radio ads with Katona and Coleen Nolan and has already shot the Iceland idents for the next series of 'I'm a Celebrity...Get me Out of Here!', which will air next month.
Tom Reddy, managing director of the Tom Reddy Agency, said that Iceland will not drop Katona until research shows that she is no longer popular with its target audience.
Reddy said: "Iceland shoppers are still very loyal to her... [and see her as] one of their own".
Reddy also said that Katona is monitored very closely and that continuous image research is conducted.
An Iceland spokeswoman this morning told Brand Republic the company had no comment on the newspaper report and reiterated the company's statement following Wednesday's interview.
That statement said Katona remained under contract to appear in its advertising.
The company also said that it had first-hand experience of Katona taking her medication at the wrong time, but that after a short period she had been fit to resume her work.
The statement said: "We were unaware of her appearance this morning on 'This Morning', and it is our opinion that Kerry should not have appeared."
Katona's agent Max Clifford said yesterday that her sponsors were "seriously considering their positions", according to The Sun.
Katona slurred her words during an interview with Philip Schofield and Fern Britton on ITV1's 'This Morning' on Wednesday prompting the presenters to enquire about her health.
Katona appeared on the show to promote her new MTV1 documentary 'Whole Again', which follows her as she spends £15,000 to regain the figure she had before giving birth to four children.
The reality TV star said her slurred speech was due to prescription medication for her bipolar disorder and accused Schofield of ambushing her live on air.
Schofield has defended the interview saying that no-one had the chance to assess her condition before she came on air because she arrived late at the studio.
He told BBC Radio 1 yesterday that the show's producers would not have allowed her on if they had been aware of her condition before filming.
Iceland has been loyal to the star through previous troubles such as admitting she took cocaine and being caught smoking while pregnant.
In April it renewed her contract for another 12 months contradicting a Daily Mirror report it was going to drop her.
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