Lees Foods, the maker of Snowballs and Snowmallows, has warned that the rising price of coconut could hit its business.

Chief executive Clive Miquel said the company had been hit by unprecedented commodity and packaging cost increases at the end of last year, with the price of coconut more than doubling in recent months. He said: "It is too soon to estimate the net impact on the business for this year, as we are working very hard to mitigate these increases both through improved efficiencies and by passing a proportion of these costs on to our customers."

Medium and fine desiccated coconut is now selling for up to £2,000 a tonne, beating historical levels, according to ingredients supplier RM Curtis.

Group sales at Lees Foods were £18.7m for the year to December 2010, about 2.5% ahead of sales in 2009. Pre-tax profits for 2010 are expected to be in line with current market expectations. However, the company had reported sales up 9% with a 43% increase in pre-tax profit for the six months to June 2010.

Miquel added: "Sales growth was achieved across most product categories, which was very satisfying, especially given the adverse weather conditions we experienced in December. But the tremendous efforts made by the staff to both get into work and clear snow, enabled trucks to be despatched and minimised disruption to customer orders."