* Total Q3 group sales down 4.2 pct vs 1 pct fall in H1
* Branded sales up 4.6 percent
* Grocery market volumes down 3.2 percent
* Trading environment increasingly challenging
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LONDON, Oct 28 (Reuters) - Britain's largest food producer Premier Foods said revenues dropped in the third quarter as higher sales of its branded products were offset by declining volumes among its non-branded products.
The maker of Branston Pickle and Bisto gravy added that the trading environment had become increasingly tough.
"We still aim to make progress in the full year but the slowdown in Q3 means this is likely to be more modest and is, as always, dependent on Christmas trading," Chief Executive Robert Schofield said in a statement.
Total group sales fell 4.2 in the period to Sept. 30, although third-quarter sales of its "drive brands", which include Hovis bread and Mr Kiplings cakes, were up 7.9 percent.
The group said it had completed a repricing in its grocery and Hovis bread businesses to adjust to a sharp rise in wheat prices.
Earlier this month, Premier Foods said it had received a bid approach for its meat-free business, including the Quorn brand.
Analysts expect Premier Food to report a full-year trading profit of 278 million pounds ($439.8 million) compared with 323 million pounds in 2009, according to a Thomson Reuters I/B/E/S poll of 6 brokers.
Shares in the FTSE 250-listed group closed at 18.75 pence on Wednesday, valuing the company at around 450 million pounds. ($1=.6321 Pound) (Reporting by Caroline Copley; Editing by Sudip Kar-Gupta)