Premier Wholesale has fallen into administration with sources blaming its multimillion pound diversification into catering.

Administrator Leonard Curtis, confirmed it had taken over the running of the Harrow-based cash & carry, which was still trading, and said it hoped to sell it as a going concern.

The business had failed because of its decision to add a catering offer, claimed one insider.

The move had "sucked cash from the business", he said. "It moved into catering in a big way and spent millions of pounds three years ago extending its depot kitting it out with a new range," he said. "But it's an extremely difficult game to be in because you are competing with Brakes and 3663, who really know what they are doing."

It is not yet known what will happen to the 100-plus independent retailers that are part of Premier's fascia group AM2PM.

The most recent accounts for Premier, for the year ending April 2010, show the company, run by Raj Samani and family, had made pre-tax profits of £224,000 compared with a loss of £152,000 the previous year. Its turnover had dropped 20.6% to £31.5m, however, and it said it was seeking to sell £600,000 worth of shares to repair a £246,000 hole in its balance sheet.

Premier is the third member that Landmark Wholesale has lost this year. Bellevue was bought by former Landmark member Bestway in June and Elbrook Cash & Carry is to leave at the end of 2010.

There is also speculation over CJ Lang's C&C and foodservice businesses, which could also be sold to Bestway.