Profit margins have fallen at UK cereals giant Weetabix amid a wider consumer shift to cheaper private label breakfast products.

Newly filed accounts for the year to 30 September showed a sharp drop on profits for Weetabix Ltd, despite overall sales rising 9.1% to £368.8m.

However, gross profit margins slumped back to 31.5% from 39.4% in the previous financial year due to inflationary impacts on raw materials and packaging.

That meant overall operating profits fell back more than £30m to £47.7m from £78.4m.

Weetabix said the cost of living crisis in the UK had “had a dramatic effect on the way people shop, with many households being forced into changes, and others encouraged by a culture of money saving and smart shopping”.

It said these “squeezed household finances” had affected where people buy their groceries (with the continued growth of discounters) and what and how much they buy.

“Throughout grocery and across categories, many shoppers have switched from brands to private label in an attempt to maximise spending power,” the group said.

“Despite an improving financial outlook for households, we do not expect a swift return to previous shopping behaviour.

“We are seeing a growing trend of ‘intentional’ shopping, where all prices have been scrutinised, new cheaper channels frequented, and new product repertoires have given shoppers a sense of clear agency.

Cereal remains a great value for money breakfast option, as such we anticipate the category remaining relatively robust in 2024, but with a continued shift towards private label volume.”

This shift to private label in its own portfolio has been reflected by recent Weetabix trading commentary from US parent company Post Holdings.

In Post’s second quarter, Weetabix grew net sales to $138m, up by 10.5% in value and 2.9% in volume, “primarily driven by increases in private label products”.

Those second-quarter sales also included $7.2m from new acquisition Deeside Cereals, which was completed in December 2023.

Adjusted EBITDA for the quarter was $27.8m, a decrease of 0.7%, or $200k, compared with the prior year despite a boost from currency translation.

Early this month Weetabix announced it had appointed Colm O’Dwyer as managing director to replace Sally Abbott, who is retiring.

Effective 1 October, O’Dwyer will step up from his current role as commercial director, and Abbott will assume the position of strategic advisor.