As well as the potential for the loss of 350 jobs, the closure of the North Wales plant would remove one of the UK's major lamb slaughter facilities, and be a major blow to those Scottish lamb producers who are in its supply chain.
The news comes as the National Sheep Association said it was 'shocked' to hear of staff in some supermarket stores telling customers that UK lamb is 'out of season' as an explanation for the high volumes of New Zealand lamb on their shelves.
NSA Scotland development officer George Milne said: "This couldn't have come at a worse time for the sheep sector if this plant has to close. It raises concerns about actual slaughter capacity, with 640,000 lambs per year going through the plant, about 12,000 per week.
"Historically this plant would have taken a lot of Scottish lambs when it was killing in excess of 30,000 lambs per week. They also covered a large specification in weights and was a good outlet for many lightweight Scottish lambs."
NFU Scotland's livestock policy manager John Sleigh said: "The closure of Vion's lamb processing business on Anglesey would have a devastating impact on its staff and the Welsh sheep industry and remove a key piece of the British processing jigsaw.
"Scotland, whose own lamb processing capacity is limited, utilises well established live export routes to Welsh abattoirs, meaning the Anglesey closure would have an effect on the Scottish lamb market as well.
"The 90-day consultation on the plant's closure will take us into April, well into the peak production of the 2012 lamb crop," added Mr Sleigh. "Given Scotland's long-standing deficit in lamb processing capacity, we shall need to provde alternative solutions in order to prevent a potential shortfall in 2014."
The Unite union, which represents 1.5 million workers in the UK, is rallying to the aid of the North Wales lamb plant's workers, describing the situation as 'desperately sad' and pledging to take the case to the Welsh Government.
Unite's national officer Julia Long said: "A glimmer of hope is that the Vion Food Group realises the gravity of the situation and has pledged to have discussions with Asda, its main customer for its fresh lamb products, to see if the decision to close the Anglesey plant can be overturned."
A spokeswoman for Asda confirmed the Anglesey plant had lost the supermarket's lamb contract, but could not say whether it has been re-awarded, or to whom.