SunOpta - which recently launched a new organic oatmilk creamer brand called SOWN - is a leading manufacturer of plant-based milks for CPG brands and retailers' store brands, and already manufactures the Westsoy line and around 50% of the products in the Dream portfolio, said CEO Joe Ennen.
“These two brands are perfect examples of niche brands that complement, but do not directly compete with, our vitally important co-manufactured partners. Since SunOpta has been manufacturing these brands for years, when this opportunity presented itself, it was an obvious fit for us to own these brands.
“These leading brands will receive the appropriate attention within SunOpta, along with an objective of developing growth opportunities for each of the Dream and WestSoy branded products.”
Launched in 1982 with broad distribution across natural & organic and traditional grocery channels, Dream is the #2 brand of shelf-stable, plant-based milks in the US, with offerings in soy, rice, almond, coconut, and a new line of oat beverages.
The WestSoy brand – which is sold at many leading national retailers - is the only branded shelf stable soy beverage with a USDA organic certification and the American Heart Association certification of a heart-healthy product, according to Hain Celestial, which sold the Westsoy tofu, seitan and tempeh business to Keystone Natural Holdings in 2019.
Speaking to analysts during SunOpta's latest earnings call in March, Ennen said: "We see brands as augmenting our current customer focus and we remain committed and focused on co-manufacturing and private label as our primary business."
Explaining the rationale behind the SOWN oat creamer launch, he said: "The plant-based creamer category is a $335m segment at retail growing over 30%. And there was not an organic offering in oat milk. And we saw that as a key opportunity. We don't make a product like that for any of our existing customers. And so, we thought it was a great opportunity for us to capitalize on that market opportunity that we saw and launch our own brand."
Speaking to FoodNavigator-USA last year, 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 in Alexandria, Minnesota.
"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. We’ve also invested in further aseptic processing capabilities for shelf-stable plant-based milks because we’re seeing strong growth in every format.”
'Broadening or deepening our business in the plant-based ecosystem'
Asked about acquisitions, 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."
Hain Celestial has not commented on the performance of Dream or Westsoy, but is in the process of optimizing its portfolio by “exiting businesses and SKUs that have limited potential within Hain and add unnecessary complexity,” CEO Mark Schiller told analysts in February. Read more about Hain's portfolio re-engineering HERE.
The transaction was funded principally by a new $20m FILO term loan within SunOpta’s ABL facility at LIBOR plus 250 to 300 basis points, depending on the utilization of the ABL facility, said SunOpta, which recently sold its organic commodities business for $390m and used the proceeds to pay down debt and accelerate expansion plans in the plant-based food and beverage segment.
US retail sales of plant-based milk rose 21.9% to $2.542bn in measured channels in the year to Jan. 24, 2021, according to data shared with FoodNavigator-USA from SPINS.
The key segments are: (figures below exclude included blended products)
- #1 Almondmilk (+16.9% to $1.59bn): Refrigerated +17%, Shelf-stable +15.8%
- #2 Oatmilk (+219.3% to $264.1m): Refrigerated +218.6%, Shelf-stable +85.9%
- #3 Soymilk (-0.9% to $201.4m): Refrigerated -0.2%, Shelf-stable +11.3%
- #4 Coconutmilk (+25.9% to $134.6m): Refrigerated +8.3%, Shelf-stable +68.6%
- #5 Peamilk (+15.8% to $45.2m): Refrigerated +16.4%, Shelf-stable -2.1%
- #6 Ricemilk (+4.2% to $44.68m): Refrigerated -8.5%, Shelf-stable +12.2%