Dairy Crest said sales of its Clover brand fell in the first three months of its financial year as the firm continued to face a difficult spreads market.
Sales of its three other key brands – Cathedral City, Country Life and FRijj – grew by more than 5 per cent in the quarter to March 31 but Clover fell as more consumers turn to bread alternatives such as wraps.
The Surrey-based business is hoping to lead a fightback for Clover through a TV advertising campaign in the current quarter of the year.
Dairy Crest also warned it is “under pressure” from higher milk prices, with profits in its dairies unit likely to be weighted towards the second half of the year.
The company said in May it would cut the price it paid farmers for milk on standard contracts by 1.25p a litre to 31.2p a litre at the start of this month.
Shore Capital analyst Darren Shirley said the dairy market remains “very tough” and estimated that dairy operations were likely to be loss-making in the first half of its financial year.
Dairy Crest added that the rationalisation of its spreads and butter manufacturing sites is on target, and it expects to close its Crudgington plant later this year.
Overall, the group said sales grew 4 per cent across all four key brands.
The group said its FRijj drink, already a leader in the flavoured milk market, increased its presence on retailers shelves recently as new coffee flavours aided its growth.
The company said it was on target to cut group costs this year by £20m.