The asset sale from its plant in Allentown, Pennsylvania, is in conjunction with the company's decision to discontinue flexible, re-sealable pouch products as part of its ongoing portfolio optimization strategy and Value Creation Plan.
'Exiting product lines'
"This asset sale, and discontinuation of the flexible re-sealable pouch business aligns with our stated portfolio optimization strategy of exiting product lines where the company is not effectively positioned," said Dave Colo, CEO, SunOpta.
"We anticipate the discontinuation of contract manufacturing pouched baby food products to be profit neutral and allow for the redeployment of capital and resources for investment in more profitable segments of our business where we have enhanced strategic positioning."
SunOpta is an organic food company specializing in sourcing, processing and packaging of natural and certified organic food products. Products include soy, almond, rice milk, fruit juices, enhanced water, fruit snacks, nutrition and protein bars.
Its flexible re-sealable pouch products accounted for $46m of revenues in fiscal 2016, and $10m of revenues in the first quarter of 2017, and were part of the healthy snacks platform within the consumer products segment.
Potential sales channels
Speaking during SunOpta’s Q1 2017 Earnings Conference Call in May, Colo said since the initiation of its Value Creation Plan, the company has implemented process improvements and cost savings, which are expected to yield $1.3m of annualized EBITDA benefits.
The focus of the go to market effectiveness pillar is to optimize customer and product mix in existing sales channels and to identify and penetrate new high potential sales channels.
“The focus of the portfolio optimization pillar is to simplify the business, investing where structural advantages exist, while exiting businesses or product lines where the company is not effectively positioned,” he said.
“This pillar was the first one we acted against upon launching the value creation plan, which led to the decision to close two underperforming facilities.
The company will continue to produce aseptic beverages from its Allentown facility, which were not part of the sale.
The sale of equipment is expected to close during the fourth quarter of 2017.
"I want to thank all of our employees involved in the flexible re-sealable pouch operations for their hard work and dedication," added Colo.
"Each employee has contributed to our goal of bringing well-being to life in their own way and has had a meaningful impact at SunOpta."
Skjodt-Barrett, established in 1985, makes organic, non-organic, natural and specialty food products. Its portfolio includes baby food, children's fruit snacks, smoothies, sauces and marinades, functional gels and puddings.