Plimsoll predict a new direction in the market with high-profile acquisitions squeezing out medium and smaller firms.
Senior analyst David Pattison said: "I see growth in the coming 12 months remaining in the three to five per cent slot, with the small group of market leaders again capturing the lion's share and the others increasingly playing catch-up."
The previous year has been a tough one for the industry with high commodity costs and increased competition resulting in disappointing sales for many bakeries.
According to Plimsoll, growth for 2006 was 4.2 per cent just above inflation but a third of the 940 companies examined by the firm saw a drop in sales.
Pattison said: "Overall margins in 2006 were three per cent with some companies enjoying a record 20 per cent or more but I believe these margins will be squeezed in 2007, and at least a third of companies in the sector will lose money."
The Plimsoll Portfolio Analysis-Bakery also notes a surprising trend in terms of new appointments during the year.
In the past 18 months 265 new directors took up their positions which could herald a fresh direction for several large companies driving the market.
In addition, the report claims a number of bakeries have a large amount of funds lined up for acquisitions in the new year which would consolidate the market further.