UK Promotional activity said to have cut into margins
The company said in highlight figures released before its accounts are filed later this month - sales last year were down more than two per cent to £125.8 million from £129 million the previous year.
Moray-based Baxters said the cost of promotional activity in the UK had dented revenues, though overseas sales are reported to be in double digit growth.
Baxters, which acquired the Fray Bentos brand last November for an undisclosed sum, is also planning further growth through acquisitions in the coming year.
Chairman Audrey Baxter said: "These figures reflect a solid financial performance in a tough economic environment.
"We have operated in economic uncertainty for the last two years and we believe this will continue well into the next two years and beyond.
"The volatility in demand, cost of operating and uncertainty of supply, make the planning and implementation of good practice in a manufacturing company very challenging.
"Our strategy is to focus on our core strengths targeting markets well suited to our product portfolio.
"The contraction in turnover is attributable to the UK market where the practice of low margin promotional activity shows no sign of easing. Our overseas operations saw a healthy double digit rise in sales."
She added: "With a strong balance sheet and strong support from our financial suppliers we plan to achieve further growth through acquisition.
"The recently completed acquisition of Fray Bentos demonstrates our ability to acquire one of the UK's best known heritage brands. We are currently considering a number of other options.
"Our retail division is not immune to the poor consumer demand on the high street evident throughout the UK and further investment is unlikely.
"Although challenges remain we are well placed to deal with them and have implemented a robust strategy for growth.
"We believe strongly in our customers, consumers and product portfolio and look forward to the challenges and opportunities that lie ahead."