The West Lothian bakery group said sales increased from £20.69 million to £22.86m in 2013.
Meanwhile, its market share of branded shortbread has grown from 14.9 per cent in January 2014 to 15.5 per cent.
Sales and marketing director Allan Miller said trade in both the food service and UK retail businesses was improving, but it was a surge of interest from shops that has made the biggest impact.
Several retailers have opted to take bigger orders of Paterson Arran goods and stock them in more stores.
"One of the things we're trying to do is make sure they know shortbread's not just for Christmas," he said. "We're able to demonstrate to the market that when they stock shortbread at Easter, for example, they can get good sales out of that."
In June, the firm was picked by Asda to produce oatcakes for the supermarket's "Chosen By You Scotland" range, putting its stock in nearly 60 Asda stores across the country.
Paterson, which also makes chutney, cakes and biscuits, sponsored the STV programme Loose Women last year to try and boost its sales further.
The company is working with industry group Scotland Food & Drink to try and get its shortbread and snacks sold by companies around the world.
It has devoted more resources and staff to international trade fairs as far afield as Singapore.
Mr Miller said the firm's Bronte food range, which appears on airlines and in hotels, has also been growing in popularity.
Despite the sales growth, the firm's profits after tax dipped from £1.02m to £939,363, due in part to a provision of £187,634 for a dispute over a new piece of equipment.
"The company has no debt, unlike many of its competitors, and has a strong balance sheet to support its future investment in developing new business," the firm said in its accounts recently filed at Companies House.
Paterson Arran declared an interim dividend of 693p per share, giving a windfall of nearly £150,000 to Scotch whisky company Edrington Group, which holds a minority stake in the company following a buyout in 1995.
The firm is majority owned and managed by Alan Hardie and Ian Appleton. Paterson Arran can trace its roots back to 1985, when it was started by John Paterson and his wife in Rutherglen.
Paterson Arran had 199 employees at the end of March, up from 175 a year ago.
New staff were primarily based at the firm's production sites in Livingston and the Isle of Arran.