Dairy Crest expects half year profit to be ahead of last year and its forecasts for the full year remain unchanged.
An update ahead of announcing its interim results on 10 November says: In the first half we expect that combined volumes of our four key brands, Cathedral City, Country Life, Clover and Frylight, will be ahead of last year. This is an improvement on the first quarter where they were in line with last year.
"Three of these brands, Clover, Country Life and Frylight are all showing strong volume growth and continue to increase market share, building on momentum from the second half of last year.
"During the first half, Cathedral City successfully launched its new branding and packaging. In order to maintain the brand's premium positioning within the category we have chosen to discount less than our competitors during the period. As a consequence we expect a small volume decline in the first half of the year compared to a very strong performance in the first half of last year.
"Margins have improved and we have seen a positive consumer reaction to the new packaging and marketing campaign. We expect volumes to improve in the second half of the year.
"We continue to benefit from production efficiency improvements at our demineralised whey and galacto-oligosaccharide facilities in Davidstow. In partnership with Fonterra we are developing the customer base for both products."
It adds: "As usual, we anticipate that Dairy Crest's net debt will peak around the middle of year as the first half is characterised by increased stock levels due to the seasonality of milk supply. Reduced capital expenditure and strong underlying cash flow means that the increase in net debt in the first half of this year is anticipated to be lower than that seen in 2015."
Chief executive Mark Allen said: "Dairy Crest expects to report a good performance in the first half of this year. We continue to see good momentum from our key brands. Our butters, spreads and oils business delivered strong volume growth and increased market share in the first half. There has been a very positive customer response to the Cathedral City refresh which should underpin future growth of the brand.
"Recently we have seen inflation across all dairy markets. To date we have announced increases amounting to 12 per cent in the milk price we pay our farmers. Cream prices have been particularly affected, doubling over a very short period. This sudden cost inflation is likely to have an impact on butter volumes and margins in the second half.
"As a strong branded and added value business, Dairy Crest is well placed to deal with inflationary pressures. As such our outlook for the full year remains unchanged."