Pilgrims Choice owner North Downs Dairy has reported solid full-year sales growth, but warned that the tough Cheddar market was making trading difficult.

Although boosted by the inclusion of an extra week's trading compared with the previous year, turnover was up 26% to £82.3m and pre-tax profits were up 25% to £3m [53w/e 3 January 2009].Margins had tightened, however, because of increased cheese market prices, the company said.

Promotional activity by retailers was also having an impact, it claimed. "We are monitoring the consumption and pricing of cheese in retail alongside stock pricing and availability."

Distribution costs rose 7% in 2008 as a result of high oil prices and increased sales volumes.

North Downs has invested more than £1m in the past year in upgrading the plant and equipment at its Wincanton site, and has promised further NPD and packaging formats.