Dairy Crest suffers 35% summer rise in milk costs

Dairy Crest, which makes Clover spread and Cathedral City cheese, is raising prices across its product ranges due to the spiralling costs of raw milk.

The company, which also provides doorstep delivery to 1.6 million households, said the price it pays for milk on both liquid and cheese contracts has risen by 35 per cent since June, but it has managed to pass the whole of this rise on to its customers. Consumers are paying between 50p and 55p for a doorstep pint of milk after the price of a pint rose by 4p in September.

The rising cost of animal feed is pushing up the price of raw milk.

Mark Allen, the chief executive, said he didn't have any reason to believe the company couldn't continue passing on the price increases. "The general population understands the issues," he said. "This is being caused by strong demand for dairy products from countries such as China and a shortage of milk. Australia, which is a big dairy-producing country, has suffered from drought for the past few years, which has impacted supply."

He added that the poor summer in the UK had not helped the situation "as grass was under water and not growing".

Despite the challenging market conditions, Dairy Crest said its expectations for full-year results remained unchanged. In the half-year, pre-tax profits for the six months to 30 September rose 21 per cent to £37.1 m, reflecting the benefits from the acquisitions of Express Dairies and the St Hubert spreads business last year, while revenues jumped 29 per cent to £761.4m. Shares in the company rose 5 per cent to 590.5p yesterday.

The company's spreads division faced the biggest challenge during the period, with higher cream costs and the impact of a product recall. Clover sales were down 17 per cent by value and 18 per cent by volume following the discovery that a mould typically found in blue cheese had got into the manufacturing process. However, Mr Allen said sales of Clover had since "bounced back".

Mr Allen added that trials of the company's "milk &more" service had been going well. The internet-based service, which allows customers to order online as late as 10pm for next-day doorstep delivery, is being trialled at five depots. Dairy Crest may roll it out across the country next year.

"This has brought the milkman into the 21st century," Mr Allen said.