Industry update: growth predicted for bread and biscuits

While the bread manufacturing industry is a consolidated and mature domestic market, which has experienced a revenue decrease of approximately 0.1% per annum over the past five years, future growth is expected as a result of increased export opportunities, innovations in ingredients and processing, and new product development.

In fact, IBISWorld predicts that growth in industry revenue is expected to average 3% between 2007-08 and 2011-12, bringing annual revenue to $2276.2 million by June 2012.

While bread manufacturers have historically focused on supplying the domestic market — the highly perishable nature of bread products and the low unit value of bread making export unattractive — exports in the past five years have risen by an average of 14.7% per annum and are expected to increase in the future.

Rising incomes in Africa and Asia will lead to diversity in their diet, resulting in greater consumption of products like bread.

Australian manufacturers will be able to take greater advantage of their reputation as safe food producers, with international health and safety standards becoming more stringent.

The supply of longer lasting bread products such as breadcrumbs to export markets will allow the industry to be competitive with foreign bakeries that provide bread daily.

Innovation and product development are also tipped as growth opportunities although there is insufficient funding of research and development for new functional bread products in Australia, making commercialisation of high-technology products difficult.

Manufacturers have benefited from responding to consumer demand for healthier bread products by offering greater variety, a trend that will continue.

According to IBISWorld, one of the greatest growth areas has been functional breads, particularly enriched or fortified breads, which are growing at a rate of 10% to 15% annually.

The production of organic bread using organically grown cereals and avoiding artificial additives is also gaining momentum.

While growth in the industry is also expected to lie in product development, particularly products in a premium price range as consumers show an increasing willingness to buy higher quality specialty products, demand for generic goods is also growing as consumers on low incomes become less brand conscious.

Mixed bag for biscuits

Dominated by foreign ownership, the profitability of Australia’s biscuit market is threatened by the ongoing consolidation of the retail food-client base.

The continuing reduction in the number of retail buyers and growth of the giant supermarket chains will pose a similar threat to all food manufacturing industries.

While the biscuit industry experienced a 0.5% decline in revenue in 2006-07 from the previous year, it is expected to grow at an average rate of 0.6% over the next five years.

Main factors contributing to growth include the development of low-fat product ranges, export opportunities in Asia and innovative packaging formats that increase shelf-life and reduce breakage during transit, making them ideal for export.

While the industry is dominated by two major companies, smaller firms are finding success in the market by appealing to niche groups of consumers with specialty gourmet biscuits, both savoury and sweet.


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