Speaking to FoodNavigator-USA after posting a 20.4% increase in net revenues to $243.5m in the second quarter and raising guidance for the full year, Ennen said oatmilk – the rising star in the plant-based milk category – “is currently about 20% of the market and we can comfortably see line of sight to 30% in the next three to five years.
“We are selling every drop of oat milk we can make, and we have additional demand that we cannot satisfy.”
‘Capacity-constrained’ high-protein plant-based beverage space has ‘huge huge runway for us’
A new production line at SunOpta’s plant in Modesto is coming online in Q3, 2022, with a new oat extraction plant to follow in Q3, 2023.
The first phase of the Texas plant should be up and running by the end of this year producing plant-based beverages including oatmilk, while a new line for producing high-protein, more viscous plant-based shakes – a $6bn “capacity-constrained” market Ennen says has been “growing double digits for a number of years and has huge, huge runway for us” – is due to come online in late q1/early Q2, 2023.
SOWN organic oat-based creamer: ‘We doubled revenue in the quarter albeit off a relatively small base’
While Nielsen data for the 13 weeks to July 1 showed that US retail dollar sales of plant-based milks were up 9% in measured channels, revenues in SunOpta’s plant-based business were up 31% in Q2, said Ennen.
“So if you compare and contrast that to our results, we have great partners who are growing faster than the market, we have sizable growth in foodservice, which isn’t captured in those Nielsen figures, and we picked up new business that also contributed to growth.
“Our SOWN organic oat creamer [a brand developed by SunOpta in-house to fill what it saw as a gap in the plant-based creamers space] is also doing very, very well in the marketplace and is one of the top two or three brands in the whole creamer category at Whole Foods. We doubled revenue in the quarter albeit off a relatively small base.”
He added: “A lot of companies in the space are reporting revenue growth, but really it’s all coming from pricing,” claimed Ennen. “The encouraging thing about our quarter was it was both pricing-driven growth and volume-driven growth, and that distinguishes us from many other food and beverage companies.”
‘We’ve weathered the oat storm’
Meanwhile, the oat supply situation is looking far more favorable in 2022 vs last year, he said.
“We’ve weathered the storm. It certainly impacted us in Q3, Q4, of last year, but this year, we came into the year in a really good position. We have all the oats we need for this year, the pricing is all locked, and the volume is completely contracted.”
He added: “The 2021 oat crop in Canada was down 40% versus 2020, but the weather has been cooperative this year, so 2022 is looking to be much more of a normal year. A good harvest is expected and that will have a downward pressure on price and certainly make availability a non-issue.”
Pricing in plant-based milk
Asked about inflationary pressures more generally, he said, “We’ve been aggressive, transparent and fact-based with our customers [during pricing negotiations], so if we’re seeing costs going up, we’re going to be quick to share those with our customers. It has proved advantageous for us in terms of being able to continue to run our business at or near our historical gross margin level.”
As to how or whether those price rises have been passed on to end consumers, he said, “Honestly it’s been a bit surprising to me the variety that we have seen. But if you look generally at pricing inflation for plant-based milk, compared to all food and beverage, it is right in line, and actually going up slower than dairy milk.”
Acquisition opportunities
Asked about acquisition opportunities in the plant-based arena, Ennen said he was “certainly looking inside of our core plant-based milk category, as well as tangential other plant-based dairy alternatives. This would either be through a brand acquisition or through the acquisition of a manufacturing company in those spaces.”
SunOpta posted a 20.4% increase in net revenues to $243.5m in the second quarter and raised guidance for the full year from $890-$930m to $930-960m.
The plant-based business grew 31% to $145.9m in Q2 while the fruit-based business grew 7.4% to $97.6m, said Ennen.
“Our fruit snacks business is on fire. We grew 48% in the quarter and we are running at full tilt capacity, so we adding additional manufacturing capabilities that’ll come online in Q3 of next year. We also saw a pretty solid improvement in our frozen fruit business. So between frozen fruit and fruit snacks, we had probably the best quarter that we’ve had on fruit in half a decade.”
Net earnings from continuing operations were $2.5m in Q2, 2022, compared to net loss of $0.9m in Q2, 2021.
