By Johannes
Kotilainen
There are
all kinds of companies that produce ethical, organic, fair trade, and socially
responsible products. For the larger ones, though, they must source their base
ingredients from somewhere. SunOpta Inc.
(TSX: SOY) has become
the supplier of raw ingredients for companies including Starbucks, PepsiCo, and
Costco, to name the big ones, as well as numerous other natural and organic
producing companies.
In order for
these products to be validated as organic or natural, the supplier must also be
able to prove its products are up to standard. SunOpta sources a variety of raw
ingredients from verified sustainable producers and provides them to companies
like Starbucks, who then use them in their products. SunOpta takes the raw
ingredients and processes to meet their client’s needs.
SunOpta is
part of the supply chain for organic products, and as such the company has seen
its revenue grow by over $200 million since 2011. This is largely due to the
fact that the demand for organic products has climbed over the past few years.
As consumers have demanded organic and sustainably produced foods, large
companies like Starbucks and PepsiCo have increasingly developed products to
meet this demand. This drove them to find suppliers like SunOpta to supply the
raw organic and sustainably produced goods. SunOpta is one of the largest
producers of raw organic ingredients, positioning itself to meet the substantial
quantities these clients require.
SunOpta
currently has a market cap of about $900 million and its most recent financials
list revenue at $1.2 billion with gross profit of more than $140 million, up
from $125 million the previous year. Long-time investors, meanwhile, have already
reaped the rewards: its stock price has soared about 225% during the past five
years, which represents an average annual return of 45%.
SunOpta also
appears to be taking steps during the past year to move its business to the
next level. In becoming an integrated natural and organic foods company, it has
divested its fiber and starch business for $37.5 million, while adding Citrusource,
a supplier of not-from-concentrate private label organic and conventional
orange juice and citrus products, with annual revenue of about $30
million. As well, SunOpta has reduced its net debt by $61 million in 2014.
Recently a number
of analysts, including Citigroup and Canaccord, have given SunOpta’s stock a
“Buy” rating. SunOpta is well positioned as a leader in organic and sustainably
sourced raw ingredients, which should allow it to increase market share in this
fast-growing industry.
This growth
in organic demand can been seen in the shrinking profits of large-scale
agricultural chemical companies such as Monsanto, which has seen a decline in
both revenue, with a drop of 11%, and earnings per share, which has slipped
from $3.15 to $2.90. This decline in the conventional agricultural business can
be seen as a result of the increase in consumer demand for organic products. SunOpta
is already benefitting from this shift to organics, and should continue to do
so as consumers demand more organic and sustainably-sourced food.
Find out why sustainability is important in
business and investing: http://www.smallcappower.com/posts/why-sustainability-is-important-in-business-and-investing-johannes-green-investing
Do you wish to share your knowledge of a
particular stock in 300 words or less? If so, please send your submission to sean@smallcappower.com and you could have your article published on
Small Cap Power!
Disclaimer: This article was posted with
the permission of a third-party contributor and the opinions contained
therein do not necessarily reflect those of SmallCapPower. SmallCapPower
does not endorse any investment advice provided by these third-party
contributors.
Please consult your investment advisor
before making any investment decisions. Ubika Corporation and its
divisions SmallCapPower, Ubika Communication and Ubika Research are not
registered with any financial or securities regulatory authority in
Ontario or Canada, and do not provide nor claims to provide investment advice
or recommendations to any visitor of this site or readers of any content
on this site. – See more at: http://www.smallcappower.com/posts/small-cap-power-disclosure
