SunOpta, the Canada-based ingredients supplier, private-label group and contract manufacturer, said today (12 January) it will this year focus on improving the performance of its consumer products business.
The company is a supplier of organic and non-GMO ingredients, makes private-label lines for retailers and is a contract manufacturer for brand owners like US snacks group Snyder’s-Lance and Kellogg.
SunOpta generates the majority of its sales through its ingredients division. Rik Jacobs, SunOpta’s president and CEO, said the company had made “very good progress” with its ingredients unit, which had seen growth of around 30% last year.
In 2016, Jacobs said the group would turn to its consumer products division, which supplies non-dairy beverages, frozen fruit, snacks and chilled juice. Last year, SunOpta saw its profitability come under pressure as it invested in expanding the capacity of its consumer products businesses. The company hopes with the additional capacity comes better cost absorption and improved profitability.
“The focus for 2016 for us is very much inside our consumer products. If you look at where we’ve come from in 2015 on our global ingredients, very good progress on the organic ingredients, about a 30% external growth rate, quite amazing, that’s not how fast these markets are growing. But in CPG, quite frankly, we have been building out a lot on our platform, we’ve been building ahead of the demand curve, so now it is about filling up those factories and now it is about getting consumer products back to a healthy gross margin,” Jacobs told the ICR investment conference in Florida.
Jacobs outlined the growth SunOpta expected to see from its aseptic, non-dairy beverage business, emphasised the company’s focus for the recently-acquired US frozen fruit business Sunrise Growers, its plans for the snacks unit and its ambition for the chilled juice operation.
“Aseptic, we have to get the pipeline filled. We are counting on double-digit growth in 2016. On fruit, integrating Sunrise Growers and achieving the synergies. We have been public that out of the $10m we want to hit $6-7m of that this year and I believe we are on-track with that. In snacks, it’s about filling up the facilities that we have and growing our capabilities, especially on the innovation. We’ve invested in our juice facility. That has to get gross margin positive in 2016.”
Strategically, Jacobs said SunOpta wanted to take more of its business “up the value chain” and insisted the company had to develop “comprehensive category solutions” for retailers looking to expand their organic ranges.
“Make no mistake about it: all the big retailers are getting into this space,” he said. “Everybody has hopefully heard of Simple Truth, the brand from Kroger and, if you see what they have done in the organic space in a very, very short period of time, it is quite amazing. They’re one of the larger brands right now, probably behind Costco. At the same time, you see Walmart going in, you see Target going in, you see all of the traditional retailers getting into the organic space. It is a huge opportunity for us to focus on delivering category solutions. We do that with proactive innovation. We just opened up an innovation centre in Minneapolis earlier this year and we’re very much focusing on-dairy beverages, on fruit and snacks and delivering more innovation over there.”
SunOpta announced the US$450m acquisition of Sunrise Growers in August. As well as focusing on achieving synergy targets, SunOpta is looking at adding products to the Sunrise range. “Two-thirds of what they do, they go all the way back to the grower. One third of what they do, which is mostly the organic side of things, they have to import. We already there. We have the resources all over the world. They’ve been using brokers. We think there’s a huge procurement opportunity,” Jacobs said. “We do see an opportunity for new innovations. It doesn’t mean we are going to come out with a new strawberry. It does mean that we think there’s a lot of opportunity to come out with new packaging materials.”