SunOpta sells global ingredients division; accelerates expansion plans in plant-based food & beverage
Proceeds from the sale of the business - which contributed around $488m to SunOpta’s net sales for the year to Sept 26, 2020 - will be used to pay down debt and accelerate expansion plans in the plant-based food and beverage segment, explained CEO Joe Ennen, who said the deal should close by January 2021.
“I’m pleased to announce this strategically transformational transaction. This transaction further solidifies SunOpta’s future direction as a high-growth, plant-based company focused on providing value-added products in competitively advantaged categories with consistent, sustainable, above average growth characteristics.”
He added: “We have signed a long-term supply agreement with Acomo to continue to supply the organic ingredients we currently source from internally from Tradin."
The deal, which "de-levers and strengthens SunOpta’s balance sheet," would enable SunOpta to accelerate near-term expansion plans in its fast-growing plant-based food and beverage segment, said Ennen.
“The plans include both high-return capital investment projects, as well as synergistic acquisitions, that add to an existing set of strong capabilities in our core plant-based beverage platform.”
Speaking to FoodNavigator-USA about what kind of acquisitions the company is exploring, he said: "Our long-term M&A strategy will focus on either broadening or deepening our business in the plant-based ecosystem.
"Potential avenues would be exploring acquisitions that would deepen or strengthen our current business model - so businesses that look a lot like what we do today.
"Additionally, we are looking for acquisitions that broaden our presence in the plant-based ecosystem which pivot in several different directions."
This could include "geographic expansion outside the US; go-to-market expansion; customer / channel expansion or category expansion into other dairy categories such as [plant-based] cheese, ice cream, yogurt, and creamers."
Under the deal, SunOpta will sell processing facilities in the Netherlands, Bulgaria, and Ethiopia, with around 525 employees transferring to Acomo.
SunOpta has three key business: plant-based foods and beverages (+7.9% in Q3); fruit-based foods and beverages (+2% in Q3); and organic ingredient sourcing and production (which it's about to sell to Acomo, +8.8% in Q3).
In its latest quarter (ended Sept 26), it posted a 6.4% increase in revenues to $315m. Adjusted EBITDA was $22.8m vs $9.9m in Q3, 2019.
A 'seismic shift among consumers'
Speaking to FoodNavigator-USA last month, Ennen said there had been a “seismic shift among consumers [towards plant-based products]" that had prompted it to make a "huge bet" on oatmilk via a new extraction facility and aseptic packaging capabilities.
"I want to make sure that when the dust settles 20 years from now that we were sufficiently aggressive at this point in history in our aspirations and the bets that we’re placing.”
SunOpta’s fruit business - which was struggling when Ennen took the helm in April 2019 – is now firing on all cylinders, he added. “We’ve righted the ship and delivered on all of our expectations since Q3 of last year and we’re now delivering pretty significant year over year growth in that business."
‘SunOpta is no longer a turnaround story’
Speaking on SunOpta’s earnings call on November 1, Ennen said the company’s new oat extraction facility in Minnesota is in the final stages of commissioning, which coupled with added aseptic production capacity, had the potential to add $100m to annual sales.
“Consumption in the last 13 weeks shows refrigerated and shelf stable plant-based milks growing 18% and 16% respectively. We are excited to see the continued tremendous growth in oat milk with triple-digit growth rates. Oat milk is now the second largest plant-based milk, behind only almond milk.”
He added: “Frozen fruit also continues to see very strong consumer demand and while our supply constraints have somewhat limited our upside, we are encouraged by the consumers enthusiasm for this category.
“For three consecutive quarters, all three of our business segments have delivered topline growth and margin expansion... We are having a great year... It is safe to say that SunOpta is no longer a turnaround story.”