New York, NY – The Bread Production industry has contracted slightly in the past five years. Disposable income growth slowed to a near halt, causing purchases of bread products, especially premium, higher-value products, to decrease. In turn, supermarkets, grocery stores and food service establishments demanded less bread from industry operators. Industry revenue has therefore dropped an annualized 0.9% per year on average in the five years to 2014. In 2014 alone, revenue is expected to grow 0.1% to total $6.3 billion.
Though revenue has only dropped marginally, profit has suffered more significantly. According to IBISWorld Industry Analyst Antal Neville, “Profit is determined largely by the price of inputs like wheat and sugar, which affect overall purchase costs.” Industry operators typically have a hard time passing on price increases to customers, so the rise or fall of input prices often determines industry margins. As global demand for grain crops has increased in the past five years, wheat prices have ballooned, growing 7.9% per year on average. As a result, industry profit margins have shrunk, further hurting companies in the industry.
These tough conditions are expected to reverse in the next five years. “Disposable income will increase more quickly, leading to further increases in demand from retailers like supermarkets and grocery stores as well as from restaurants,” says Neville. In addition, industry operators are expected to provide products that cater to the increasing number of consumers who have switched to gluten-free options. This dietary trend has boomed in recent years, and it shows no sign of waning. More companies will develop product lines that include gluten-free options, resulting in industry revenue growth. Increasing import penetration, however, especially from the United States, is expected to temper revenue growth.
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