Dairy Crest is to invest £85m in its cheese business over the next five years, £75m of which will used to expand its Davidstow cheddar factory in Cornwall, to meet growing demand for cheddar in markets such as China.
The group, which manufactures Cathedral City and Davidstow, said the investment will be funded partly by the sale of £70m of new shares to institutional investors.
Around 200 people are employed at the plant and there will be further jobs available as this expansion rolls out.
Dairy Crest, which has seen revenue from Cathedral City grow by 6%, will be increasing its annual cheese production at the factory from 54,000 tonnes to up to 77,000 tonnes. The funding will include new technology and machinery, plus infrastructure for a self-sufficient water supply. About £10m will be spent on new machinery to increase its use of recyclable packaging.
In the UK, the cheese market is growing at around 2% a year and Cathedral City is the No 1 brand, with a 20% share of the cheddar market.
Currently, 98% of Dairy Crest’s cheese sales are in the UK, with 2% of exports going to Europe, predominantly to destinations popular among British holidaymakers. However, Chinese consumers were developing a taste for mature cheddar, with demand also growing in Europe, the US and east Asia.
Mark Allen, Chief Executive, said, “I’d like to think that seven or eight years down the road we’ll be at about 20% exports.
He continued, “This has been a year of considerable progress for Dairy Crest. We have delivered a strong performance, broadly maintaining our industry-leading margins against a backdrop of unprecedented cost inflation in the butters market. Our brands are in good shape. Cathedral City has had a good year growing value, volume and market share, and we see plenty of room for further growth for this industry-leading brand.'
Group revenue rose 10% to £456.8m in the year to 31 March, while pre-tax profit increased by 3% to £62.3m.
Cathedral City was the main driver of growth over the year, outperforming the wider cheese market. Dairy Crest said it was a top-20 food grocery brand, 'found in more than half of all fridges across the country'.
The group said snacking was a key part of its growth strategy for Cathedral City, which has already launched a snack bar version available in most convenience stores.