Finsbury Food Group, which owns Memory Lane Cakes, is celebrating the first significant rise in its prices for six years.
The company said that retailers were finally starting to recognise that manufacturers were unable to absorb the rising cost of raw materials.
Finsbury is pumping £1m into driving production and supply chain efficiencies in a bid to tackle interim pre-tax losses.
The losses, forecast in a company statement in January, were blamed on high raw material costs and Christmas staff shortages.
Finance director John Lomer said: “This has forced us to take a hard look at the business. We are planning to invest £1m in the next 12 months.”
Turnover was up 24% to £27.7m in the six months to December 31, with sales boosted by Memory Lane Cakes, especially Christmas lines.
Pre-tax losses ran to £200,000 in the same period.