Spreads

Our Spreads portfolio comprises St Hubert, in France and Italy, and the UK Spreads business.

During the year our Spreads portfolio had to contend with market declines in the UK, France and Italy, as well as significant increases in input costs - most notably the cost of cream. Despite this pressure, we have increased our investment in brand advertising and at least matched competitive levels of promotion in order to provide value to our consumers and compete for in-store display space.

Impacted by market declines, our segment revenue has reduced by 2%, and our segment operating profit at £54.0 million has reduced by 9%. However, with a margin of 19%, Spreads remains a key driver of profitability for the Group, and the market share gains from our key brands gives us a good platform for future growth

St Hubert

No1 brand in French spreads
St Hubert was acquired in January 2007 from Uniq, and has now become an integral part of the Dairy Crest Group. We manufacture our spreads at Ludres in North Eastern France, for distribution across France and to Italy. The business continues to strengthen its leading market positions in France and Italy, through increased investment in marketing activity, funded by strong cost control. Despite difficult market conditions, St Hubert continues to perform ahead of our expectations.

The total non-butter French spreads market declined by 2% in value to €376 million. Overall the St Hubert business has held market share, with the St Hubert total brand in growth, and now the number one brand in the French spreads market with 29% value market share. Within the ‘health’ segment, which continues to grow by 4%, our leading brand variant, St Hubert Oméga 3, has strengthened its market leadership, with value growth of 9% (volume +11%) to achieve an all time high value share of 21% of the French spreads market.

Building on last year’s launch of two products targeted at health-conscious consumers, St Hubert Oméga 3 Leger in France and Vallé + Leggera in Italy, we have further expanded our offering this year. St Hubert Bio is the first mainstream organic spread in the French market and has been well received by both retail and consumers.

St Hubert’s subsidiary, Vallé Italia, remains the undisputed leader of the Italian spreads market. With continued media support, Vallé has achieved a record value market share of 57%.

UK Spreads

Further share growth for our key brands, Clover and Country Life
Our UK butters and spreads are manufactured in two factories at Kirkby near Liverpool, and Crudgington in Shropshire, and distributed to UK retailers via our national distribution centre in Nuneaton.

Despite unprecedented levels of consumer promotion, the £1.1 billion UK market for butter and spreads was flat in volume (+0.6%), and declined by 2% in value in the year to March 2010. The only significant sector in value growth was dairy spreads at +1%, driven in large part by the performance of our Clover brand.

We have focused our efforts behind Clover and Country Life.

The Clover brand had a very successful year, growing by 5% in value and 13% in volume. The mid-year re-launch activity, based on the proposition of “churned like butter with half the saturated fat”, has been very successful, with the advertising scoring well in consumer tracking studies.

Our butter brand, Country Life, has continued to grow strongly, out-performing the butter and spreadables segments, with sales up 4% in value and 6% in volume. The brand has continued with the highly successful television and radio advertising campaign, which emphasizes the provenance of Country Life as the only major British butter brand.

Both of our leading brands’ reduced fat options, Clover Lighter and Country Life Lighter Spreadable, have seen good growth during the year with value sales up by 13% and 12% respectively. Clover Lighter has been confirmed as the most successful launch in the butters and spreads market in the last 5 years and its sales are now 13% of total Clover sales. Country Life Lighter Spreadable sales are 26% of total Country Life Spreadable sales.

In addition to our main brands, Clover and Country Life, we also continue to manufacture and sell Vitalite, Willow and Utterly Butterly. Although Vitalite and Willow have maintained prior year sales volumes, Utterly Butterly has seen a decline this year. Despite solid base rates of sale, based on strong consumer loyalty, the brand has suffered from distribution losses due to increased competition. Sales have declined from last year’s peak by 27% in value and 21% in volume.

To remain competitive we have recently reduced the number of employees at our Kirkby factory.

Clover has had a very successful year, growing 13% by volume supported by television advertising. Our latest advertisement sets out the proposition that Clover is churned like butter but has half the saturated fat