Profits have slipped at dairy group Yeo Valley despite a £14m rise in sales to £275m as its margins were squeezed by the steady increase in its ingredient prices.

The 5.4% jump in revenues at the company in the year ended 1 June 2014 was driven by growth in the yoghurt, milk and desserts categories.

Yeo Valley’s yoghurt business registered value growth of 2.2% in the period in the face of a 2.5% drop in volume in what is a very competitive trading environment, with high levels of investment in promotional activity and marketing by rival brands.

The category was propped up by a stellar performance from the Yeo Valley Organic brand, which includes yoghurt, milk, butter, cream, ice cream, compote and rice pudding products, which saw a year-on-year increase in volumes of 17% and another 17.5% in value. According to The Grocer’s upcoming Britain’s 100 Biggest Brands report, Yeo Valley Organic has boosted sales in the 52 weeks to 4 January by 16.6% to £138.1m [Nielsen].

Own label volumes were flat in the fresh liquid milk category with all the growth again coming from the Organic brand (volumes up 13.7% and value 17.9%.

However, cost of goods sold increased ahead of revenue at 6.8%, which was mainly the result of rises in dairy ingredient and fruit prices. This, coupled with increased investment of £6.1m in additional packing hall space and new machines, pushed pre-tax profit back by 28% to £3.4m.

“The increase in branded volume and value reflects the continued investment being made in targeted marketing and consumer communication through the Yeo Valley website and through on-pack messaging and offers,” the business review in the newly published accounts said.

“This, combined with the strategy of offering in store on-going multi-buy promotions on the Yeo Valley range, has worked to drive the brand’s market share and move us into the top 100 food brands in the UK.”

Yeo Valley Group employed 1,740 staff at the year end, up from 1,650 12 months earlier.