Dairy Crest said sales of its Clover brand fell in the first three months of its financial year, as the firm continued to face a difficult spreads market.
Sales of its three other key brands - Cathedral City, Country Life and FRijj - grew by more than five per cent in the quarter to March 31, but Clover fell as more consumers turn to bread alternatives such as wraps.
The Surrey-based business is hoping to lead a fightback for Clover through a TV advertising campaign.
Dairy Crest also warned it is under pressure from higher milk prices.
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.
Shore Capital analyst Darren Shirley said the dairy market remains very tough and estimated that dairy operations were likely to be loss-making in the first half of its financial year.
Dairy Crest added that the rationalisation of its spreads and butter manufacturing sites is on target.
Overall, the group said sales grew four per cent across all four key brands.
The group said its FRijj drink, already a leader in the flavoured milk market, increased its presence on retailers' shelves recently as new coffee flavours aided its growth.
The firm said it was on target to cut group costs this year by £20m, with distribution costs and its dairies the focus of this programme.
Dairy Crest said it was on target to make £10m to £15m from the disposal of redundant depots this year. But, it said its first quarter financial position met its expectations, and its outlook for the year remained unchanged.