Northern Foods, the maker of Goodfella pizzas and Fox biscuits, gave warning today that its business has been hit by the rising cost of raw materials such as cocoa and cheese.

It expects commodity prices to rise by up to 10 per cent in the next year and analysts say that this will bring a tough second half.

Northern Foods said in a trading update today: "In line with industry trends, commodity prices have continued to accelerate during the last three months, especially in cereals, dairy, cocoa and fats."

The Leeds-based firm is passing on some of the increased costs to customers.

The group said that it has enjoyed strong underlying growth, despite inflationary pressure in the food industry and a poor summer.

Northern Foods revenue for the first six months to Sept 29 grew by 2.6 per cent, although its revenue from frozen food fell.

The firm blamed constrained UK supply and "difficult global market conditions" for the cost rises.

The price of British-produced food rose by 3.1 per cent, as the cost of wheat was driven to a record high by fears of a shortage.

The firm, which makes microwave meals for retailers such as Marks & Spencer, said that volumes in ready meals grew strongly and that biscuit sales had stabilised after a steep fall early in the summer.

Stefan Barden, the chief executive of Northern Foods, said: "We are operating in a challenging trading environment, but the achievements of the past 12 months have positioned us well to deal with these conditions.

"In all of our businesses, we have made good progress in recovering commodity cost increases."

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