Dairy Crest, the UK dairy products group, has reported a 3 per cent drop in sales for the year to March 2003 but stressed that its branded business continued to grow strongly.
Turnover for the year was £1.33 billion (€1.87bn), reflecting the company's decision to withdraw from less profitable retail milk businesses in the first half of 2002 year, as well as lower volumes in the commodity cheese sector. The company last week announced it was to reduce its exposure to the commodity market in a bid to reinforce sales.
But despite the decline in sales, pre-tax profits for the year were up 4 per cent to £76.8 million. Group operating profit, including the recently acquired St Ivel Spreads business but before exceptional items and goodwill amortisation, increased by 5 per cent to £97.5 million, with a strong improvement in the second half.
If the commodity business continued to struggle during the year, there were no such problems for Dairy Crest's branded business. The key brands Clover, Cathedral City, Frijj and Yoplait all preformed well during the year, while the St Ivel Spreads business acquired from Uniq also improved.
The Consumer Foods division - Dairy Crest's business with major UK retailers, including its share of the Yoplait Dairy Crest joint venture - saw sales drop 3 per cent to £814.8 million, while operating profit fell by 1 per cent to £62.4 million. This performance reflected margin pressure in commodity cheese, offset by ongoing brand growth, together with the benefits from the St Ivel Spreads acquisition.
The existing spreads business (excluding the acquisition) benefited from the continued strength of the Clover brand, which lifted volumes by 9 per cent compared with the spreads and butter market as a whole where sales volumes declined by 2 per cent. This strong growth, combined with the brand's premium position, has helped maintain Clover as the clear brand leader in the dairy spreads sector, Dairy Crest claimed.
In the cheese division, the Cathedral City brand showed "outstanding progress", with sales volumes ahead by 23 per cent compared to the mature cheddar market as a whole which grew by just 2 per cent. The group's other main cheese brand, Davidstow, also performed well, with significant volume increases of 18 per cent.
However, the profitability of the cheese business as a whole was significantly impacted by adverse market conditions in commodity cheddar. The company said it expected to see a recovery in the commodity market this year.
In the fresh dairy products sector, the Yoplait brands performed strongly in the second half of the year, although industrial action at the Yoplait plant in France impacted sales in the first half. The Petits Filous brand enjoyed a good year, which, combined with continued growth on the Wildlife range, helped Yoplait Dairy Crest to enhance its position as the leading supplier to the children's sector, the company claimed. The Weight Watchers range, Yop and Yoplait Best There Is all performed well over the year, resulting in the Yoplait brands achieving their highest ever market share.