Cathedral City new design 2022

Source: Saputo Dairy UK 

The supplier also saw a slump in demand for its lucrative dairy ingredients business

Cathedral City owner Saputo dairy UK experienced a sharp drop in profits last year amid rising production costs and a fall in demand for its lucrative ingredients business.

Operating profit fell by 70.9%, from £125.1m in the previous accounting period to £36.4m in the year to 31 March 2022, according to accounts newly filed at Companies House.

Meanwhile, EBITDA fell by 4.7% to £64.2m, according to the annual report for the UK subsidiary of Canadian dairy giant Saputo, which is still registered under its former name, Dairy Crest Limited. Cost of sales rose by 16.8% to £396.5m.

However, year-on-year turnover did increase in the period, by 12.9% to £512.4m.

The supplier put its growth in sales down to NPD and increases in distribution through new channels (such as its expansion into branded frozen food through a successful partnership with Iceland).

A continuing rollout of Cathedral City in export markets such as the US and Canada was also described as a key driver, while the brand gained a major new distribution partnership in Germany.

Saputo also secured new own-label cheese contracts over the year, the annual report stated, while specialty cheesemaker Wensleydale Dairy Products, which was acquired by the business in July 2021 for £22.2m, “contributed positively” to the company’s bottom line.

But the business cited “suppressed demand in infant formula markets caused by declining birth rates in China”, which was exacerbated by the covid pandemic, as a driver of “adversely impacted profits” from its functional ingredients operation – which manufactures demineralised whey and galacto-oligosaccharides at its Davidstow plant in Cornwall.

Inflationary pressures within the dairy sector also meant Saputo increased its farmgate milk price by 23% over the course of the year, it added, while input costs for products such as Frylight were impacted by the sharp rise in vegetable oil prices.

However, the supplier stressed it had found new supply contracts with global infant formula manufacturers towards the end of the financial year, while both Cathedral City – which rebranded in 2022 – and Clover maintained their positions as number one brands.