A lackluster market for plant-based beverages hindered SunOpta’s growth.
MINNEAPOLIS — SunOpta, Inc. saw an adverse effect from the trend in the second quarter that concluded on July 1 as inflation continued to eat away at the retail plant-based milk category.
The chief executive officer, Joseph D. Ennen, stated on a conference call on August 9 that “there are enduring demand drivers such as lactose intolerance, taste preferences for plant-based milks over milk from a cow and health benefits, both for the individual and the planet.” “I think the short-term effects of the inflationary environment and its effect on real wages are what’s causing the headwinds in the retail category.
“We are aware that plant-based milks cost more. For instance, at a well-known retailer, plant-based milk costs 5¢ per ounce while dairy milk costs 2½. Research projects a double-digit CAGR (compound annual growth rate) for the category over the next ten years as millennials and Gen Z fully assume center stage as the drivers of the US economy, which is consistent with our expectation of a return to growth as inflation relaxes.
According to chief financial officer Scott E. Huckins, tracked channel data for plant-based milks in the second quarter revealed softness throughout the quarter with revenues up 1% and volume down 8%.
Almond milk sales decreased by 3% on 10% lower volumes, whereas oat milk sales increased by 9% on stable quantities, according to track channel data, Mr. Huckins stated. “SunOpta’s overall plant-based milk results increased by 1% despite 9% lower volumes across all channels.”
The low demand for plant-based milks was one of the factors that led to SunOpta’s $19.3 million quarterly loss. The loss was marginally higher than the $18.6 million the corporation reported a year earlier.
Sales for the quarter dropped 14% to $207.8 million from $243.5 million in the 2022 fiscal year. The second quarter’s gross profit was $16.4 million, down from $34.9 million in the prior year.
Sales for the quarter decreased 8.1% to $114.5 million in SunOpta’s Plant-Based Foods and Beverages business unit, excluding the impact of a sunflower company that was sold off in 2022. Sales were up 3.2% due to pricing, but this was offset by a 10.2% drop in volume/mix. Lower demand for almond beverages, less sales of plant-based components, fewer sales of broths, and fewer sales of tea were among the factors influencing business unit performance.
The business unit’s gross profit decreased by 39.8%, primarily due to the beginning expenditures of the company’s new processing plant located in Midlothian, Texas.
Sales in the business area that sells fruit-based foods and beverages decreased 4.4% to $93.3 million. While volume/mix fell 4.5%, price hikes contributed less than 1% to the quarterly sales. The company claims that declining retail consumption trends, restrictions on specific fruit kinds that affect blends, and lost foodservice volumes were the main causes of the volume/mix impact.
The Fruit-Based Foods and Beverages segment’s gross profit decreased to $2 million from $11 million in the previous year. During the quarter, a frozen fruit recall had an effect on gross profit.
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SunOpta reduced its sales target for the quarter from $1 billion to $1.05 billion to $880 million to $900 million, citing the disappointing quarter and the rest of the year’s prospects. From a range of $97 million to $103 million, adjusted EBITDA was reduced to $87 million to $91 million.
“We would anticipate Q4 to be stronger than Q3, from a pacing standpoint for the entire company,” Mr. Huckins stated.
When asked about the demand patterns for plant-based milk during this fiscal year by an analyst during the call, Mr. Ennen responded, “… We firmly think that the category offers several advantages in the long run. Sincerely speaking, we don’t have any information that would indicate that we should start acting as though September 1st has arrived.