Dairy Crest on track, but spreads sales lackluster

Dairy Crest on track, but spreads sales lackluster

Dairy Crest said this morning (22 September) that it anticipates first-half sales of its four key brands – Cathedral City, Country Life, Clover and Frylight – to be flat year-on-year but conceded that the performance of spreads brands continued to lag.

The company said that Cathedral City and Frylight continue to perform “strongly”, growing sales and market share. However, Clover and Country Life sales fell in what the company described as a “challenging” butter and spreads category. Dairy Crest said that it has taken steps to attempt to boost the appeal of its spreads business. “We have recently introduced a new recipe for Clover to meet changing consumer preferences. It is now made with no artificial ingredients. We expect this innovation along with a supporting media programme to improve the performance of Clover in the second half.”

The company added that it expects the performance of both its cheese and spreads businesses to be second-half weighted and reaffirmed its full-year expectations. “First half profits in these businesses will be behind those of the first half of last year... Our expectations for the full year remain unchanged This reflects lower cheese costs and an improved performance from our Spreads and butters business in the second half.”

Despite the weakness of the spreads brands, Shore Capital analyst Clive Black suggested that the longer-term prospects for Clover - as well as the Cathedral City cheese brand - are positive. "We believe that Cathedral City and Clover, in particular, are highly valuable brands, produced in advanced facilities, the former supported by the excellent maturation and distribution centre in Nuneaton in Warwickshire. Davidstow, the Cornish cheese plant has also been materially beefed up to produce value added products using the whey. Such investment should further bolster Dairy Crest's EBITDA in forthcoming years," he wrote in an investor note. 

Dairy Crest also stressed that its investment in establishing manufacturing capabilities for demineralised whey powder and GOS at its Davidstow creamery is “nearing completion”.

CEO Mark Allen commented: “Lower cheese costs and an expected improved performance from our spreads and butters business in the second half mean that our full year expectations remain unchanged. Our investment to manufacture demineralised whey powder and GOS is almost complete and we look forward to accessing new sales channels in fast growing global markets in the second half of the year.”

Meanwhile, the sale of its liquid milk division to Muller continues to progress and the group expects the deal to be completed before the end of 2015.

Dairy Crest will report its full results for the six months to 30 September on 5 November.