Lurpak parent firm Arla has said sales were marginally lower in 2023 as many shoppers bought cheaper and own-label products amid pressure on household budgets.

The dairy giant said it saw an improvement in the second half of the year, as more customers returned to its brands, which also include Castello cheese.

It came as the group, which includes over 2,000 British farmers, cautioned that revenues could slip next year and said it could be impacted by volatile market conditions.

On Tuesday, Arla revealed total revenues of 13.7 billion euros (£11.7 billion) for last year, having posted revenues of 13.8 billion euros (£11.8 billion) in 2022.

It said this came after an impact from “negative currency effects” during the year.

The cooperative added that UK sales rose by 2.4% over the year to three billion euros (£2.6 billion), slowing from 17.5% growth a year earlier amid a sharp reduction in inflation as diary prices slipped.

It added that “consumers started returning to branded products in the second half of the year” with the group highlighted particular demand for its Arla Protein brand and licensed Starbucks products.

Bas Padberg, managing director of Arla Foods UK, said: “As we saw in the first half of 2023, inflationary pressure continued to dominate, however, thanks to the strong execution by our farmer owners, employees and management, Arla has demonstrated its ability to adapt to challenging market conditions.

“As the UK’s largest dairy cooperative and supplier of some of the UKs best loved brands, it’s important that we ease pressures on cash strapped shoppers when we can, as well as returning a fair price to our farmers so we can keep supermarket shelves full.

“Arla’s brand portfolio demonstrated its robustness in volatile conditions, and we made strong recovery in the second half of 2023 with a strategic branded volume growth.”

The group added that it expects “volatile market conditions”, which it partly linked to geopolitical tensions, to “continue to impact the business in 2024”.

It said group revenues are predicted to be between 13.2 billion euros and 13.7 billion euros (£11.3 billion and £11.7 billion) for 2024 due to lower pricing.