DAIRY Crest says it is enduring a difficult market, with higher milk prices compounding falling margarine sales.

The firm has revealed sales of its Clover brand fell in the first three months to June 30, as customers turn away from bread.

Bosses launched Clover more than 30 years ago, hailing it as the first dairy spread to taste like butter.

However, it says people are turning away from bread to other alternatives, such as wraps, and aims to launch a television advertising campaign to address the shift.

It also warned it's under pressure from higher milk prices, with profits in its dairies division likely to be weighted towards the second half of the year.

The company said in May it would cut the price it paid farmers for milk on standard contracts by 1.25p a litre to 31.2p a litre at the start of this month.

Despite the worries, the firm revealed sales of its three other key brands, Cathedral City cheese, Country Life butter and Frijj flavoured milk drinks, increased by more than five per cent.

Frijj particularly benefited from new flavours, including coffee, which lifted its presence on retailers' shelves.

It added group sales grew four per cent across its four key brands, with bosses expecting it to cut group costs by £20m, by reducing spending in its distribution and dairies divisions.

Mark Allen, chief executive, said: "Three of our four key brands have performed well in the first quarter and we expect Clover’s future performance to benefit from the forthcoming television advertising campaign.

"We are also on track to meet our cost reduction targets, which together with our projects to benefit from the increasing global demand for infant formula will underpin future growth.

"Despite the continuing challenging market conditions, our full year expectations remain unchanged.”