SunOpta strengthens supply network in new organic deal

28-Aug-2008 - Last updated on 29-Aug-2008 at 15:15 GMT

SunOpta is expanding its global organic supply chain to help tackle shortages with a new agreement to acquire the Pure Nature Organics brand.

The SunOpta Global Organic Ingredients (SGOI ) division said it is looking to develop supply sources for organic broccoli, green beans, edamame, asparagus among other vegetables and fruits.

The produce will primarily be sourced in Central America where, under the terms of the agreement, SunOpta now has arrangements with a number of strategic organic suppliers and processors.

Also, as part of the deal, SGOI said it has acquired a number of existing supplier and customer relationships in North America, and the rights to the Pure Nature Organics frozen fruit and vegetable registered trademark.

Joseph Stern, president of SunOpta Global Organic Ingredients, commented: “These agreements allow SGOI to act upon a key strategic initiative by not only diversifying its supply source for organic IQF (individual quick frozen) vegetables and fruits, but also allowing the group to get much closer to the farm gate in a rapidly developing and reputable region for the procurement of commodities which are in global short supply.”

The company estimated that the deal will generate incremental revenues of about $5m to $7m in the first year. It predicted that this will continue to grow as the products are developed and incremental supply becomes available.

Global presence

Amarjit Sahota, director of Organic Monitor, said the move came as no surprise.

He told FoodNavigator-USA.com: “SunOpta has bought a number of organic ingredient companies in the last few years. With the global organic food industry continuing to show high growth, many organic food companies are struggling to find adequate supply of organic ingredients.

“SunOpta is looking to develop global supply chains for organic ingredients to meet this challenge. Its strategic partnerships in Central America are part of this objective.”

Sahota highlighted SunOpta’s acquisition of the Dutch firm Tradin Organics in 2007 and its investments in organic grower projects in South America and Asia.

He added: “It is now one of the few organic food companies with a significant global presence.”

In recent years the organic market has grown by about 20 per cent annually in the US with large multi-nationals coming onboard.

Growers have been switching to organic produce but production is not keeping pace with demand, leaving a shortage of organic ingredients and organic foods, according to Sahota.

Growth strategy

Steve Bromley, president and Chief Executive Officer of SunOpta said that expanding supply capabilities and supply of branded and private label organic food products was key to its strategic growth plans.

He added: “We intend to leverage the new customer and supply relationships in order to expand supply of various organic food products processed at existing SunOpta operations and also leverage SunOpta's extensive global expertise to bring a number of these products to markets serviced by Tradin Organics, a recent SunOpta acquisition.”

SunOpta saw its profits plunge in 2007, following hefty pre-tax write-downs after it over-valued its berry stocks and delayed filing its 2007 results because of an internal investigation.

Its earnings were $407,000, for the year ending December 31, 2007, compared to nearly $11m in 2006. However, revenues increased 34.5 percent to $804m in 2007, compared to revenues of $598m the previous year.

SunOpta’s food group specializes in sourcing, processing and distribution of natural and organic food and natural health products integrated from seed through packaged products.