Kintyre farmers had hoped to buy the creamery after it was put up for sale by owner First Milk 18 months ago.
But First Milk said it had not been possible to find “a financially viable long-term business plan” for the Mull of Kintyre cheddar producer.
It is understood the plan faltered when a major supermarket chain reduced its commitment to buy the cheese.
First Milk put the creamery up for sale in April last year after concluding that it was not core to its business strategy.
Nearly 30 Kintyre-based members of the dairy co-operative launched an online crowdfunding campaign to help them buy the business when it became clear that a sale to a third party was unlikely.
The campaign attracted £95,000 – exceeding its £50,000 target – but was not sufficient to move their plans forward. According to the crowdfunding page, all contributions would be fully refunded if the buyout failed to go ahead.
‘Disappointed’
First Milk chief executive Shelagh Hancock said the co-operative was disappointed that it had not been possible to conclude a sale.
She added: “We regret the impact this decision will have on our colleagues and are committed to treating those affected fairly and with consideration during this difficult time.
“Throughout the last 18 months we have been in regular dialogue with our local members on Kintyre about the future of the site.
“Nothing will change in respect to their co-operative membership of First Milk, and we will continue to collect and pay for their milk on the same basis as before going forward.”
James Barbour, chairman of the Kintyre milk producers steering group, said: “There was widespread enthusiasm from the local farmers to try to secure the future of the site and genuine support from First Milk, the Scottish government and the local community, along with a successful crowdfunding campaign.
“Despite all of this we were not able to find a financially viable long-term solution for the creamery.”
John Smith, NFU Scotland dairy chairman and Kintyre dairy farmer, said it was regrettable that the Mull of Kintyre brand would now no longer be available.
He added: “That is due to the harsh, economic reality of processing milk in an incredibly tough dairy industry that has witnessed so many casualties at both farm and processing level in recent times.”