Cheese

Our flagship brand, Cathedral City, is the leading cheese brand in the UK. It is made at our well-invested creamery in Davidstow, Cornwall. Then it is matured, cut, wrapped and despatched to retailers, all from our combined packing and distribution centre at Nuneaton. Some of the cheddar made at Davidstow is sold under the Davidstow label as a retailer ‘named creamery’ brand, and we also supply some high quality retailer branded products

Our flagship Cathedral City brand is made at our state of the art creamery at Davidstow in Cornwall with milk that comes exclusively from farms in Cornwall and Devon	Our cheese is made in Davidstow and moved to Nuneaton where it is matured, cut, wrapped and despatched to our customers’ regional distribution centers. Nuneaton is ideally placed for this

Cathedral City sales reach £214 million

Despite its maturity, the UK cheese retail market continues to grow, and is now worth nearly £2.4 billion. The market grew by 3% in value and 5% in volume in the 52 weeks to 21 March 2010. The cheddar category grew by 3% in value (6% in volume). Branded cheddar continued to out-pace own label products and now represents 46% of the market.

Cathedral City has again outperformed the category, with sales up 12% and volume up 18%. The brand now sells £214 million at retail prices, and has a 16% share of total cheddar. This performance reflects our new and successful consumer marketing campaign, with new advertising proclaiming the Nation’s Favourite cheese brand, and new updated packaging. The Davidstow named creamery brand has also improved its position with volume up 21% and value up 7%.

Our segment operating profit of £16.9 million was lower this year due to the absence of stock profits enjoyed last year. Mature cheddar is generally around a year old when it is sold. Stock profits occur when raw milk costs and cheese sales prices increase while the cheese is maturing. The cheese we sold in 2008/09 at these higher prices was made with milk purchased a year earlier when milk costs were lower.

In addition a strong increase in Irish cheddar imports early in the year led to increased promotional pressure. We responded by increasing marketing and promotional expenditure to ensure the continued strong performance of our business, with revenue up £15.8 million or 6%. Towards the end of the year the promotional pressure has abated slightly as both UK and Irish cheese production reduced.

World class cheese supply chain completed

We are now approaching the anniversary of the commissioning of our highly automated, cheese cutting and packing facility at our national distribution centre and maturation store in Nuneaton. In addition to the efficiency of the facility itself, we have removed 250,000 miles of transport by putting every element of the post-conversion supply chain together. This completed our plans to achieve a world-class supply chain for cheese linked to our state-of-the-art creamery at Davidstow, served by a dedicated pool of local dairy farmers.

As with our butters and spreads range, we have been successful in launching alternative cheese recipes to suit health-conscious consumers. The Cathedral City Lighter variant has continued strongly and now represents 11% of the brand’s sales. The launch of a lighter variant of the Davidstow brand has further enhanced our health-conscious range.

Our strategy is to focus on brands and businesses where we can add value, and where we own the brands outright. In line with this, we announced in January 2010 our intention to sell our majority share in Wexford Creamery to our farmer partners, Wexford Milk Producers. This will allow us to focus on the Cathedral City and Davidstow brands in cheese.