Waitrose, the upmarket supermarket chain, has called off secret talks about a deal that would have involved it taking a stake in Planet Organic, its smaller rival grocer.

Sky News has learnt that Waitrose, part of the struggling John Lewis Partnership, terminated discussions late last week about an agreement.

Retail industry sources said a deal would have seen Waitrose inject millions of pounds into Planet Organic in exchange for a significant shareholding.

The abandonment of the previously confidential talks will come as little surprise given the financial pressures facing Waitrose's mutually owned holding company.

This month, The Sunday Times reported that JLP bosses led by chair Dame Sharon White were exploring a move to sell a minority stake to outside investors for the first time.

Such a move is a reflection of its troubled trading performance and the constraints on its existing capital structure.

Its decision to call off the talks with Planet Organic has left the smaller organic supermarket chain seeking alternative sources of funding.

Insiders said it was now in discussions with a number of other strategic and financial investors, and was attempting to stitch together a deal within the next few weeks.

Planet Organic, which was founded in 1995 by Renee Elliot, has been working with Interpath Advisory on a review of its strategic options since early this year.

The chain, which trades from 13 stores, sells organic food and drink, as well as healthcare and bodycare products.

Like many retailers, its recent performance has been hampered by the pandemic and reduced city centre footfall.

It is understood to have been loss-making in each of its last two financial years.

Planet Organic is run by George Dymond, who took over as its chief executive just over a year ago.

A spokesperson for Planet Organic declined to comment on the talks with Waitrose, but said in February in relation to the wider funding process: "We are working closely with our advisors to help us navigate options to secure further investment.

"This additional funding will enable us to support the next phase of our current growth plans."

Earlier this year, Waitrose announced a deal to stock a range of Planet Organic's health and wellbeing products on its website and in up to 50 of its shops.

Mr Dymond said the partnership was "another really significant development here at Planet".

"As a small and agile business, Planet Organic is able to spot trends and bring innovation to market swiftly, something which will play a really key role in this partnership.

James Bailey, Waitrose's executive director, said: "We see Planet as an ideal partner in offering our customers the best in health and wellbeing products while building on our strategy to take Waitrose products to more customers.

"Their ethos on delivering quality for customers, while prioritising suppliers, the planet and our communities aligns perfectly with ours."

A John Lewis Partnership spokeswoman declined to comment on the negotiations with Planet Organic.