Dairy Crest aims to revive doorstep deliveries
The UK's largest dairy group has seen annual profits jump 24% to £96.1m, even though costs rose 40% in the past year.
Dairy Crest supplies the major UK supermarkets and delivers direct to more than one million doorsteps.
The firm has been hit by rising fuel and other other costs and supply fall, and has put up the price of its milk.
The maker of Country Life butter, Cathedral City cheese and Petits Filous yoghurt said the rises were needed to offset these rising production costs.
The firm has passed on its growing costs directly to consumers, through its traditional doorstep delivery business, and indirectly via the supermarkets.
Dairy Crest increased doorstep prices from 53 pence a pint to between 55 and 59 pence over the last eight months.
Chief executive Mark Allen said: "We have to work closely with retailers to make sure consumers get value for money given that price inflation is such an issue at the moment."
Mr Allen said an exodus of farmers from the dairy industry had also squeezed supply and inflated prices.
"UK production is at lowest level for a number of years and is set to decline further," he added.
Meanwhile, the firm also hopes to launch an expanded internet delivery service nationwide in 2008 after a trial in London.
According to the Office for National Statistics' (ONS) latest inflation report, food prices increased 6.6% in April, the fastest annual rate in more than a decade.
Joel Segal, head of consumer products at Ernst & Young said: "Supermarkets have had the dominant position for years, enabling them to drive down food prices.
"But manufacturers have seen input costs rise 23%, they're passing this onto retailers and so consumers are paying more."
Mr Segal said higher food prices were down to global population growth, changing diets in developing nations, a switch from agriculture to biofuel crops and the impact of adverse weather conditions.
Last year, Dairy Crest was one of six firms, including the big four supermarkets, accused by the Office of Fair Trading of colluding to fix dairy product prices in 2002 and 2003.