The Canterbury District Health Board has announced it will not renew its contract with Compass Group, the hospital food supplier which sparked street protests in Dunedin.

Hundreds of people protested outside Dunedin Hospital after the Southern District Health Board began outsourcing hospital meals through Compass Group in February last year.

Patients called the food "slop", there was a stream of complaints, and the doctors' association threatened to sue the SDHB over the food quality.

Compass Group has been providing meals to the CDHB since 2004, and holds the contract until June.

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But chief executive David Meates announced this morning it would not be renewed, and the food services would be brought in-house from July.

"Our food service enjoys high levels of customer satisfaction and we won't be doing anything to jeopardise the quality of food or service. We will be using the same food production methods as we currently do for patient meals, meals on wheels and staff meals. Over time we plan to enhance the range of healthy choices available," he said.

He said the 300 workers and managers currently employed by Compass Group would be offered jobs with the CDHB, with the same terms as their current contracts.

"Our intention is that all current food services staff are retained by Canterbury DHB and we don't expect the public to notice any difference in the food services provided in our hospitals," he said.

A proposal was put to health boards last year, which promised up to $190 million per year could be saved if all 20 health boards signed up with Compass Group.

But the deal had to be renegotiated, after only six signed up.

A spokesperson for NZ Health Partnerships, which negotiated the deal, said the decision to use Compass Group was up to individual health boards, and it would not be commenting.

Compass Group Medirest chief operating officer Julian Baldey said his priority was ensuring staff were supported, and the continuity of services as the hospital continued.

He said patient satisfaction levels was Compass Group sat at about 95 per cent.

"While disappointing, Compass is proud of what our company has achieved over nearly 14 years at the CDHB. We have been a major partner in opening new kitchens, cafes and facilities - including the Cook Chill facility that Compass led the design and commissioning of - while providing solutions and support during the Christchurch earthquakes, snowstorms and the more recent fires," he said.

He said staff and clients of the services were notified of the decision yesterday.