The new bakery, which will be refurbished and ready to operate by July 2006, will produce a range of white and wholemeal loaves, including the company's farmhouse loaf, its best selling product in Wales.
The move is part of Warburtons' aim to corner the premium bread sector by combining mass manufacture with local supply.
"We pride ourselves on delivering the freshest bread possible and the new bakery will mean an even shorter time between the bread being baked and reaching consumers," said David Williams, regional sales manager for Warburtons in the South West.
The company, which is amongst the nation's leading bakeries, has said its sales in the area have "grown considerably" , resulting in the need for increased capacity.
"This is a massive investment for Warburtons and reinforces our commitment to Wales and the South West.
Demand for our products continues to grow in the area and the addition of another site in the south of the UK makes sound business sense and is key to our expansion plans," said chairman Jonathan Warburton.
The bakery will produce 125,000 loaves a day and will help to serve South Wales and the South West of England, along with the company's existing South Wales depot, which has been operating since 2001.
The popularity of local produce generally has certainly made a comeback among consumers in recent years, as shown by the rapid growth in farmers' markets offering premium local goods.
A 2003 survey by market researchers Mintel showed that 23 per cent of those asked bought food from farmers' markets and that British shoppers preferred local goods because they deemed it to be fresher.
Warburtons' 'local' policy has paid dividends so far by making it the UK's third biggest bread manufacturer behind British Bakeries and RHM, a feat made more impressive by the fact that Warburtons makes no own-label products.
The company must now hope that the UK bread market can hold up to its programme of expansion, which also includes the construction of a huge bakery capable of producing two million bread loaves per week in West Yorkshire.
The latest figures from Mintel show that the UK bakery market has been steady in the last few years with a value of more than £3 billion in 2003, and most growth is expected in the premium sector; a move likely to suit Warburtons.
Early this year Warburtons announced that it had bought up the Rathbones bakery in Stockton, northern England, in order to meet increased consumer demand.
Last year, as well as building its £60 million Yorshire bakery, the company also opened a £15 million extension to its Bellshill Scottish bakery, doubling the plant's output to 1.5 million loaves every week.
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