UK dairy firm Dairy Crest has said its cheese business performed below expectations in the year to 31 March 2004.

The company said the weak performance of the cheese business was due to reduced sales volumes. In particular, volumes of Cathedral City were flat for the full year. Dairy Crest said it was taking action to improve performance.

“As anticipated, despite challenging market conditions in the first half, we achieved firmer cheese realisations in the second half. However this was accompanied by increased raw milk prices going into cheese,” Dairy Crest said.

The company said its investment in cheese manufacturing at Davidstow is nearing completion in line with plans.

In the dairy spreads business, the company’s main brands Clover and Utterly Butterly consolidated their market positions with good volume growth. The relaunch of the company’s St Ivel Gold brand in the autumn, with a new television commercial and new packaging, appears to have been successful, and the product delivered strong volume growth in the second half following a long period of decline.

The company said its Yoplait brands have had a good year, performing well in the second half after exceptional first half volume growth. However, Dairy Crest added that the retailer own brand sector continues to be very challenging.

“The year just ending has been satisfactory for Dairy Crest with good progress in key areas. We believe that with strong brands and a well invested manufacturing base Dairy Crest is well placed to face the challenges of the future,” said CEO Drummond Hall.

For the new financial year, Dairy Crest said it expects to face an increasingly competitive retail environment and uncertainty in raw milk pricing as CAP reform is implemented.