Coles' is slicing the cost of its bread in a move that could open another front in the major supermarkets' price war.
Australia's supermarket giants have already fought fiercely on milk and meat, and the Wesfarmers-owned chain has now cut the price of more than 30 varieties of loaves and rolls by as much as 35 per cent.
Coles general manager of bakery Jon Haggett said lower prices are key to luring more customers.
"We know bread is a household staple and always on the shopping list," he said.
A range of Tip Top branded products will also be discounted, and Woolworths is matching at least one of those.
Coles managing director John Durkan told investors in June that he wanted "Coles to be famous for its fresh bread".
He said plans were underway to convert an additional 180 stores to include full bakeries as Coles works towards offering fresh-baked bread in every store.
Woolworths bakes bread on-site at more than 630 of its supermarkets.
A Woolworths spokesperson said it was also focused on lowering prices on bakery goods and, as of Thursday, its most popular products will be markedly reduced in price.
Brumby's Bakery owner Retail Food Group said it was not worried by the moves.
"Brumby's Bakery is confident they will be able to sustain their customer base should there be a price war between major supermarket brands," a statement from the company said.
It said Brumby's, as a specialty bread retailer, offers artisan and quality goods, while major supermarkets base their business on scale and quantity.