A spike in the price of key inputs has hurt profit margins for industry operators
New York, NY (PRWEB) February 01, 2015
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.
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 such as supermarkets and grocery stores, as well as from restaurants," Neville says in the updated report. 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 in the five years to 2020. Increasing import penetration, however, especially from the United States, is expected to temper revenue growth.
For more information, visit IBISWorld’s Bread Production in Canada in Canada industry report page.
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IBISWorld industry Report Key Topics
This industry manufactures bread and bakery products, such as cakes, muffins, croissants, pies and other similar baked goods. These retail and commercial establishments sell these products to downstream supermarkets, convenience stores and food-service providers. Many bakeries also sell their products directly to the public.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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