Performance Of Dairy Crest’s Key Brand Improving; Warns Of Sudden Cost Inflation

In a trading up for the six months ending 30 September, Dairy Crest said it now expects that combined volumes of its four key brands, Cathedral City, Country Life, Clover and Frylight, will be ahead of last year. This is an improvement on the first quarter when they were in line with last year.

The group said that three of these brands, Clover, Country Life and Frylight are all showing strong volume growth and continue to increase market share.

During the first half, Cathedral City launched new branding and packaging. Dairy Crest said that in order to maintain the brand’s premium positioning within the category, it chose to discount less than its competitors during the period. As a consequence, it expects a small volume decline in the first half of the year compared to strong performance in the first half of last year. It added that margins have improved and it has seen a positive consumer reaction to the new packaging and marketing campaign with volumes expected to improve in the second half of the year.

Dairy Crest now expects half year profit to be ahead of last year with expectations for the full year remaining unchanged.

However, Mark Allen, Chief Executive, warned: “Recently we have seen inflation across all dairy markets. To date we have announced increases amounting to 12% in the milk price we pay our farmers. Cream prices have been particularly affected, doubling over a very short period. This sudden cost inflation is likely to have an impact on butter volumes and margins in the second half.

“As a strong branded and added value business, Dairy Crest is well placed to deal with inflationary pressures. As such our outlook for the full year remains unchanged.”