New York, NY – The Bread Production industry has grown slightly in the past five years. Disposable income has grown, pushing up demand for bread from consumers at grocery stores and food service establishments. In turn, these sectors demanded more bread from industry bread producers, leading to an increase in revenue. IBISWorld estimates that revenue has increased in the five years to 2015.
Although revenue has grown in the Bread Production industry, profit margins have shrunk. Profit is determined largely by the price of inputs such as wheat and sugar, which affect overall purchase costs. Industry operators typically have a hard time passing on price increases to customers, and therefore, the rise or fall of input prices often determines industry profit margins. IBISWorld Economic Analyst Antal Neville says in the updated report "as global demand for grain crops has increased in the past five years, wheat prices have grown and, as a result, industry profit margins have shrunk, further hurting companies in the industry." As a result of declining profit margins, many companies have opted to exit the industry. Consolidation has been a significant trend during the past five years. For example, Mexican bakery giant Grupo Bimbo purchased industry major player Canada Bread Company in an effort to generate cost savings by creating economies of scale.
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