An increase in the price of cream has forced Dairy Crest to take a step back on promotional deals in an attempt to relieve pressure on margins.
Sales of Country Life butter had been weakened by its decision to reduce promotional activity.
Dairy Crest has issued an Interim Management Statement for the 3 months ended 30 June 2017 ahead of its Annual General Meeting which will be held today.
The dairy giant said trading in the first quarter was in line with expectations and the outlook for the full year remains unchanged.
But it said that cream prices, which determine input costs for its butter business, have increased substantially during the first quarter.
The company said this will put pressure on margins on its butter business.
The company has thus reduced promotional activity on Country Life, which is adversely impacting volumes but mitigates some of the margin pressure.
Mark Allen, Chief Executive, commented: “The year has started well and our branded business has delivered good growth in the first quarter.
“The functional ingredients business continues to progress well and new customers are being signed up. We still expect that the profit contribution from this business will be second half weighted.”
The boss of dairy giant Arla has warned that there could be butter and cream shortages in the UK this Christmas.
