Performance continued

product group grew by 19% to £39.3 million, Although nearly all of its sales are Cheese & whey resulting in a margin of 14.9% (2013: profit branded, Dairy Crest does supply cheese £33.1 million, margin 14.3%). to two premium retailers for their own label Total retail cheese market products. One of these customers, Marks £ million 2013/14 2012/13 sales remained unchanged in the year & Spencer, has awarded Dairy Crest sole Revenue 264.6 231.3 although volumes fell back by 3%. supply of its entire cheddar range from Product group profit 39.3 33.1 Cathedral City sales strongly outperformed April 2014. Margin 14.9% 14.3% the market, growing 12% by value and Dairy Crest’s Cheese operations are 9% by volume. As a result Cathedral City highly efficient and product group profits now has an 11% share of retail cheese, continue to be boosted by improved Share of the total retail up from 10% last year. Retailer own label efficiencies at all three of its manufacturing cheese market by value cheese sales account for nearly 55% of locations. Cathedral this sector. Cathedral City sales continue City comfortably to exceed the sales of the Demineralised whey powder project next three cheddar brands added together on track to grow future profits 11% and it is now Britain’s 18th largest grocery Profits have also been supported by brand (Source: The Grocer, March 2014). strong returns from whey. At present this is dried into powder and sold to food Other 89% Innovation driving Cathedral City’s manufacturers. Dairy Crest has initiated success a project to invest in the manufacture Source: IRI 52 weeks ended 29 March 2014 New product development remains key of demineralised whey powder, a base to the success of Cathedral City. Grated ingredient of infant formula. We plan Dairy Crest produces and markets mini-bags, spreadable cheese and to spend around £45 million on new the UK’s leading cheese brand, Selections have all widened the appeal manufacturing assets at before Cathedral City, as well as the premium of the brand, as have new launches May 2015. We expect production of Davidstow cheddar brand. under the children’s brand, Cathedral City demineralised whey powder to commence The short supply chain starts with Chedds. For the first time we extended the in mid 2015. We anticipate that the milk from around 400 dairy farms in Cathedral City brand outside of cheese project will have a five year cash payback and . This is made into with Baked Bites – Cathedral City cheese and enhance annual Cheese and whey cheese at our in biscuits – which are manufactured by product group profits by over £5 million Cornwall. The cheese is then matured Burton’s Biscuit Company. Cathedral from 2015/16. We are in the process of for on average 11 months at our City also continues to lead the way with agreeing a contract with an exclusive purpose-built Nuneaton facility before innovative packaging and has recently customer who is already well established being cut packed and distributed responded to consumer demand by in the appropriate markets and who will to customers. We also operate a introducing new ‘easy-tear’ packaging provide technical advice as we move the highly flexible packing site in Frome, across its range. project forward. Somerset. The whey produced as a Advertising and promotions are also by-product of cheese making is also important and Dairy Crest has continued Looking forward – well positioned processed at Davidstow. to invest in Cathedral City’s award winning for growth Since the year end we have further advertising campaign. Looking forward our strong cheese brands simplified the business by selling our Alongside Cathedral City, Dairy Crest’s and efficient production facilities, together remaining 30% stake in Wexford Creamery premium cheddar brand, Davidstow, has with the exciting whey project, leave us Limited for €3.4 million. performed strongly in the year. Sales of well positioned to increase the already Reported revenue for the year ended 31 this brand, supported by new varieties strong returns from this product category. March 2014 grew by 14% to £264.6 million and improved packaging, have grown and profits from the Cheese and whey 3% by value.

12 % Growth in Cathedral City sales by value

18 Dairy Crest Annual Report 2014