Australia’s bread production industry is facing numerous challenges, forcing it to both rationalise and innovate.

According to industry analyst IBISWorld’s Bread Production in Australia market research report bread manufactures have been impacted by several trends, among the most significant being growing competition from supermarkets’ in-store bakeries, consumer preference for healthier food, and a shift towards premium products.

Decisions by grocery retailers to aggressively increase the share of private-label bread by baking products in-store is expected to compete with franchise and artisan bakeries. Sales of private-label bread have increased significantly in the past decade and now account for more than 30 per cent of supermarket bread sales.

Despite the obstacles, the report didn’t spell doom and gloom for the baking industry. In fact, it presented several seeds for growth, particularly regarding artisanal bakery products.

In the next five years, the report predicted growth in high-margin premium breads is likely to drive revenue growth. Branded industrial producers of bread, such as Goodman Fielder, are expected to respond to this consumption trend by altering their product mixes to reflect demand for gourmet and artisan breads.

The research also confirmed what many bakers already know: Australians have become more sophisticated in their bread consumption, opting for a greater variety of international and artisan breads, including seeded, wholemeal, organic and gluten-free loaves, along with sourdough, rye breads and focaccias. To capture this market, many industrial bread manufacturers are widening their product ranges to incorporate more premium products.

Evolving nutritional concerns, particularly those relating to carbohydrate and wheat consumption, have also meant sliced white bread is falling out of fashion. Rather than seeing this as the suburban bakery’s death knell, the report did suggest there are a number of niche growth opportunities for the industry. For example, demand for freshly-baked bread, as opposed to par-baked and frozen bread, is growing. What’s more, low-carb and other healthier-for-you claims are expected to drive demand.