Good morning, and welcome to SunOpta's fourth quarter fiscal and full fiscal year 2021 earnings conference call. By now, everyone should have access to the earnings press release that was issued this morning and is available on the investor relations page on SunOpta's website at www.sunopta.com. This call is being webcast, and a transcription will also be available on the company's website. As a reminder, please note that the prepared remarks which will follow contain forward-looking statements, and management may make additional forward-looking statements in response to your questions. These statements do not guarantee future performance, and therefore, undue reliance should not be placed upon them.
We refer you all to all risk factors contained in SunOpta's press release issued this morning, the company's annual report filed on Form 10-K, and other filings with the Securities and Exchange Commission for more detailed discussion of the factors that could cause actual results to differ materially from those projections in any forward-looking statements. The company undertakes no obligation to publicly correct or update the forward-looking statements made during the presentation to reflect future events or circumstances, except as may be required under applicable securities laws. Finally, we would like to remind listeners that the company may refer to certain non-GAAP financial measures during this teleconference. A reconciliation of these non-GAAP financial measures was included in the company's press release issued earlier today. Also, please note that unless otherwise stated, all figures discussed today are in U.S. dollars and occasionally rounded to the nearest million.
Now I'd like to turn the conference call over to SunOpta's CEO, Joe Ennen.
Good morning, and thank you for joining us today. With me on the call is Scott Huckins, our Chief Financial Officer. I want to start by saying, while we are disappointed in the fourth quarter results, we are confident these results are a point in time and do not reflect the current or future earnings potential of the company. The causes are clear and are not unique to SunOpta. The supply chain issues and labor market shortages are broadly felt and well-publicized. Now let me share some key takeaways from the fourth quarter. First, Q4 consolidated gross margin was impacted by three headwinds. The most significant was higher costs in our plants without a corresponding increase in output. We were also impacted to a lesser extent by unrecovered inflation and yield-related issues in fruits.
Let me share a bit more perspective on the Q4 challenges in our production facilities and provide an update on progress in Q1. First, 70% of the decline in plant-based gross margin was due to increased plant expense and lower utilization. Higher expenses were driven by hiring and training approximately 90 new employees, fueled by the great resignation over the summer. However, this infusion of new employees did not immediately produce a step change in production output, partially as a result of significant Omicron-related absences across the network. Additionally, our plant-based facilities are sophisticated and complex plants, and employees require weeks, and even months of training to become proficient. Additionally, we incurred costs to improve overall equipment effectiveness, which disproportionately hit us in Q4. In total, these Q4 investments are paying dividends in Q1. We have staffed our plants and ended the year up 73 employees.
We are deep into training our new employees, and retention of these new hires is consistent with our expectations. We have seen material improvement in our manufacturing output in the first seven weeks of Q1. We are currently forecasting Q1 production to be approximately 15% above Q4 levels and are tracking to this level of improvement halfway through the quarter. Beyond labor, let me comment on what is happening in the macro environment, which you are all very familiar with, as these factors are impacting nearly every CPG company. Raw material availability in Q4 was tight, but we saw sequential improvement. There were a couple exceptions in the fastest-growing segments of our business, one being fruit purees from South America for our fruit snacks business and oats for our plant-based business.
We still grew our oat business 120% in Q4, but we could have grown even more, and the same goes for our fruit snacks business. In an effort to support growth, we have added incremental suppliers, have improved safety stock on both ingredients, and we are working to secure additional volume for anticipated growth in 2022. As it relates to raw material inflation, all the currently known raw material cost inflation has been presented to customers, accepted, and implemented. There is always a delay between cost increases and price increases. It is typically a 90-day process from realized cost inflation to the new price being on an invoice to the customer. Lastly, let me comment on freight. The back half of Q4 saw even more inflation than the run rate, and this impacted Q4 by approximately $2 million.
Additionally, the availability of trucks was very tight. In our plant-based business unit, almost every customer, and remember, these are some of the biggest CPG companies in the world, had difficulty lining up trucks to pick up their product, which impacted our revenue. In fruit, where we are generally responsible for the freight, we also saw availability issues and cost inflation. Pricing reflecting the new freight costs will be fully passed on to customers by the end of Q1. The revenue impact of the production shortfalls and transportation availability challenges was estimated to be at least $10 million in the quarter. While Q4 was a challenging quarter, it is important to recognize the long-term core earnings power of the plant-based business remains strong. Industry supply is still very tight, demand is very strong, and our manufacturing network remains strategic and will further improve with the new Texas plant.
Despite our temporary production challenges, we continue to win in the fastest-growing segment of the market, which is oat. We are aggressively adding capacity, and we are aggressively passing on inflation through price increases. All of this leads me to the view that the future of the company has never been brighter. In 2022, we expect strong top-line growth, with plant-based growing double digits, and we expect the fruit business to return to growth largely via pricing, as we have consistently stated during 2021. At a total company level, we expect at least double-digit revenue and adjusted EBITDA growth in 2022. Our plant-based capacity expansion, capability additions such as 330 ml, and new business development efforts in plant-based indicate adjusted EBITDA will increase significantly in 2023 and 2024 as our new Texas plant comes online.
Based on our success to date pre-selling Texas capacity, we have line of sight to $100 million of adjusted EBITDA in 2023. Now let me share some of the top-line results for the total company. Total company revenues as reported in Q4 were nearly flat to prior year. Adjusted for the extra week in the year earlier period, our top-line growth would have been 2.5% in the fourth quarter of 2021. Full-year revenue was $813 million, with full-year plant-based revenue growing 13% on an as-reported basis or 14% excluding last year's 53rd week. Gross profit declined 650 basis points on a consolidated basis during the fourth quarter, with both plant-based and fruit-based segments down materially. For the full year, gross profit was $98 million, down 10% versus prior year.
We managed SG&A aggressively to offset a portion of the corresponding decline in gross profit, but the net result was still a 48% decline in adjusted EBITDA in the fourth quarter to $11 million. Full-year adjusted EBITDA was $61 million, growing 3.4% versus 2020, with 3x 2019's adjusted EBITDA. Now we'll turn to our segments, starting with plant-based. I would like to remind listeners that we have three strategic priorities in plant-based. One, strengthening and fortifying our competitive advantages. Two, building a strong ingredient business focused on oat to drive growth in refrigerated beverages. And third, building a multi-pronged go-to-market business that includes co-manufacturing, private label, and owned brands. Plant-based revenues adjusted for the extra week last year increased 9.2% versus prior year to $125 million in the fourth quarter, another record for SunOpta.
This represents our 13th consecutive quarter of revenue growth, and this was up 18% versus two years ago. Plant-based beverages were the primary driver, reflecting strong demand for oat-based offerings, which increased over 120% versus the prior year period. Oat now accounts for 22% of our plant-based milks portfolio, up from 10% a year ago. We also saw strong gains in tea stemming from growth at our two biggest tea customers. Production capacity challenges negatively impacted our broth business and partially offset growth in other plant-based beverages. However, as I mentioned, we have seen a solid improvement in output so far this year. As it relates to product category, we continue to focus on oat. Our oat sales were $80 million in 2021, and we expect continued strong acceleration of this business.
Plant-based milks continue to see solid overall category growth, with the latest 13 weeks showing 5% growth, and oat continues to be the driver with 55% growth. In 2022, we expect to continue to see strong oat segment growth. The national brands we support continue to lead the market and grow faster than the oat segment in total, which in part explains why SunOpta grew 2x the rate of the oat category. In addition, we see significant upside in oat at our largest customer for 2022. Based on all of these exciting developments, we expect to continue to have strong double-digit growth in oat milk sales in 2022. In addition, as previously communicated, we are expanding oat extraction production to keep pace with demand. This added capacity will likely come online at the end of Q2 2023.
From a go-to-market standpoint, the brands we acquired in 2021, Dream and WestSoy, contributed to growth. We will be relaunching these brands in Q2, Q3 with new packaging, new products, and a push to rebuild distribution that had been lost over the last several years. Several of the people on this call have seen Dream Oatmilk in Starbucks, so I thought it would be worth confirming the go-forward approach with oat milk at Starbucks is via the Dream brand. We also launched a brand of organic oat coffee creamer last year called SOWN. Our focus has been the natural channel, and we are seeing great success with this effort. As a leading natural channel retailer, SOWN is now the number two brand in terms of sales velocity for the plant-based creamers after less than 15 months in market.
Moving on to our fruit-based segment, our three strategic priorities are, one, de-risking the business through geographic diversification, customer pricing programs, and better grower relations. Two, becoming the low-cost operator in frozen fruit through automation, footprint re-engineering, and aggressive cost takeouts. And three, evolving the portfolio via innovation towards more value-added offerings. Fruit-based revenue decreased 9.4% to $79 million in the fourth quarter, reflecting ongoing efforts to rationalize SKUs and customers, along with the impact of supply constraints in certain fruit varieties, partially offset by pass-through pricing actions. Fruit snacks had another strong quarter, with growth accelerating to 23.5%. As we communicated all of last year, we expect a sharp return to revenue growth in 2022 on the frozen fruit side of the business, fueled by aggressive pricing moves and confirmed distribution gains beginning in mid-Q2 at our largest frozen fruit customer.
As it relates to de-risking the business through geographic diversification, we are largely complete on this strategic initiative, with Mexico now representing the largest source of fruit. More geographies, more fruit types, fewer customers for less complexity, all equal less risk. As we discussed last quarter, all pricing in support of the higher cost fruit has been passed on and reflects the strength of our customer relationships and our expertise in the industry. With regard to becoming the low-cost producer, the automation we have installed, combined with a simpler business and the cost advantages we have in Mexico, along with the 2021 cost takeouts, point to improved performance in 2022. I'll recap the totality of the actions taken in fruit in 2021 to give you a sense of the breadth and depth of work completed. First, we passed on about $40 million of pricing.
Second, we took out an additional $10 million of manufacturing costs, including the closure of two of our six plants in the network in 2021. Third, we took out several million dollars of people costs, creating a leaner, simpler business model. Please note that a significant amount of the pricing actions will be absorbed by higher fruit costs and other forms of inflation. These numbers are not designed to simply be added to 2021 profitability. Instead, I share these numbers to give you a sense of what we have undertaken to transform the results in this business. Lastly, on the innovation front in fruit, we've had great success in the launch of our smoothie bowls platform, which is part of our fruit snacks business unit.
We have partnered with three major retailers who are launching private brand versions of smoothie bowls, and a CPG leader in frozen foods who will be launching our smoothie bowls under one of their globally recognized brands. Lastly, we will continue to use our own brand, Sunrise Growers, to lead the innovation and push the edges of what we can develop. While fruit has certainly been a challenging business for SunOpta over the last five years, the transformation of the business against our three priorities gives me hope that 2022 will be the year where you are hearing about positive surprises on fruit. Let me end by updating on the progress we are making in Texas with our new greenfield plant-based manufacturing facility. If you want to follow our progress, please follow SunOpta on LinkedIn, where we share periodic updates.
We posted an updated photo on Tuesday, so you can see the scale of the plant and the tremendous progress we are making. As I shared on the last call, one of the capabilities we are putting in Texas is 330 milliliter production equipment. For those not familiar with the term 330 ml, this is the Tetra Pak carton most associated with on-the-go protein shakes. This is a $3 billion segment, and it is an industry that is short in capacity, and we currently have a 0 share of this market. Based on preliminary awards to date, we are confident we will sell out the capacity on this asset in the first year. In addition to 330 ml, we are putting in three other capabilities all in phase I.
We are installing tea extraction, which has seen huge growth in the last two years, along with two processing packaging lines to support our core business. We are similarly confident that we will have strong utilization of this tea extraction capability and one of the two processing and packaging lines in year one. Progress selling the incremental capacity created by this plant is ahead of our internal expectations, and the project is on track to be operational by the end of the year, generating salable product no later than 12/31/2022. In summary, our strategic growth priorities around portfolio transformation, innovation, and doubling the plant-based business have not changed. We continue emphasizing growth in our plant-based business and improving profitability in fruit-based. We remain committed to our long-term growth algorithm of annual double-digit plant-based revenue and profit increases and continue to focus on improving return on invested capital.
Now I'll turn the call over to Scott to take us through the rest of the financials. Scott?
Thank you very much, Joe, and good morning, everyone. Fourth quarter revenues of $204.2 million were down 0.6% year-over-year on an as-reported basis, reflecting continued demand growth in plant-based, where revenues increased 5.8%. Offset by a 9.4% decline in fruit-based revenues due to planned SKU rationalization, along with constraints in certain fruit varieties. Adjusting for the 53rd week in 2020's fourth quarter, revenue grew 2.5%, with plant-based delivering 9.2% growth.
Gross profit was $18.4 million for the fourth quarter of 2021, a decrease of $13.4 million compared to the fourth quarter of 2020, and consolidated gross margin declined 650 basis points to 9%. The factors that negatively impacted consolidated gross margin during the fourth quarter were, one, plant operations, including higher plant spend and lower-than-planned production and loss absorption of 340 basis points. Two, yield-related issues on raw materials of 210 basis points. And three, net unrecovered inflation of 100 basis points. In plant-based segment-level gross profit decreased $8.4 million and gross margin was down 770 basis points to 11.7%. Let me take you through the major drivers.
First, plant spend was up 380 basis points as we hired and trained the 90 positions Joe spoke about earlier. Second, unrecovered inflation was 160 basis points, primarily comprised of freight. Third, underutilization of our plants was 140 basis points. Let me provide further detail on the 380 basis point plant spend drivers. This is comprised of 150 basis points of labor costs, 130 basis points of overhead, and 100 basis points of depreciation. We expect to recover roughly 40% of the margin rate decline in Q1 and expect the business to return to a high teens margin rate on existing capacity in the second half of the year.
In fruit-based segment level gross profit declined to $5 million, and gross margin decreased 530 basis points to 4.8%. The decline in fruit-based gross margin reflected poor raw material yields as a result of excess spoilage of 350 basis points, with plant variances representing, on a net basis, the remaining 180 basis points. The yield issues became known as we pulled work in process to produce finished goods. The vast majority of these costs are now behind us. Segment operating loss was $1.6 million in the fourth quarter compared to operating income of $6.8 million in the year earlier period, reflecting lower gross profit of $3.4 million adverse foreign exchange result, and $0.5 million of incremental amortization expense related to Dream and WestSoy.
These factors were partially offset by a reduction in SG&A expense, which was down $8.8 million versus a year ago, largely due to lower variable compensation. Loss from continuing operations attributable to common shareholders for the fourth quarter was $2.6 million or $0.02 per diluted share, compared to a loss of $37.2 million or $0.41 per diluted share during the fourth quarter of 2020. On an adjusted basis, fourth quarter of 2021 loss was $1 million or $0.01 per diluted share versus an adjusted loss of $2.5 million or $0.03 per diluted share in the prior year period. In the fourth quarter, adjusted EBITDA was $10.7 million compared to $20.6 million in the prior year.
In addition to the $8.4 million decline in segment operating income, depreciation and amortization increased $1.4 million versus a year ago, reflecting our capacity expansion initiatives in plant-based. Partially offsetting this increase was a $4.7 million reduction in stock-based compensation expense. Finally, adjusted EBITDA included a net increase of $1.8 million in EBITDA adjustments related to business development and startup costs. I'd like to remind listeners that adjusted EBITDA and adjusted earnings are non-GAAP measures, and a reconciliation of these measures to GAAP can be found toward the back of the press release issued earlier this morning. Turning to the balance sheet and cash flow.
As of January 1, 2022, total debt was $225 million and reflects $165 million drawn on our asset-based credit facility, $53 million of capital leases with a balance representing smaller credit facilities. Leverage stood at 3.7x at the end of the fourth quarter. From a cash flow perspective, cash provided by operating activities during the fourth quarter of 2021 was $19.7 million, compared to $19.8 million of cash provided by operating activities during the fourth quarter of 2020. Cash used in investing activities was $23.3 million, compared with $11.2 million in last year's fourth quarter, primarily reflecting investments in capacity expansion projects. Let me close by providing our outlook for 2022, recognizing the environment is very fluid as it relates to inflation, supply chain, labor, and raw materials.
On the top line, we expect revenue in the range of $890 million-$930 million, which translates into growth rates of approximately 10% to over 14% compared with 2021. Revenue growth will be led by plant-based, but we do expect fruit to return to growth in 2022 as we have been communicating. We generally expect the first half of 2022 to be more challenging than the second half of the year. As such, we would expect margins to be stronger in the second half of the year than the first on our existing capacity. I'd also like to offer commentary around the new plant-based facility in Midlothian, Texas, and how this is likely to affect 2022 gross margin. As we have previously stated, we expect commercial production to start at the very end of the year.
In order to be ready for year-end production, we expect to incur approximately $10 million of start-up costs primarily in the second half of the year, roughly evenly distributed between Q3 and Q4. While these start-up costs are added back to adjusted EBITDA, they will affect gross profit and gross margin rate as reported. From a profitability standpoint, we expect adjusted EBITDA in the $67 million-$75 million range for 2022. This represents 10%-25% growth over 2021. From a capital standpoint, we expect capital expenditures to be in the $110 million-$115 million range as reported on the cash flow statement, driven primarily by the new greenfield plant in Texas. As we have previously communicated, these expenditures are largely financed through the company's credit and lease facilities.
We have no reason to believe that we have the need for equity capital to support these investments. Finally, while we are a ways away from 2023, we are currently forecasting adjusted EBITDA of $100 million, benefiting from the capacity expansion projects we have across the network. Two final items to mention. First, we are planning to host an investor day during the second quarter, likely in the May, June timeframe. We intend for this to be both an in-person event and a webcast available to all investors.
This event will be held at our new headquarters and innovation center in Eden Prairie, Minnesota, where we can showcase our full range of products and our pilot plant, provide a deeper understanding of our business, introduce you to the broader management team, and map out the financial impacts of the significant progress we've made over the last two years increasing our capacity and capabilities as a plant-based milks manufacturer. More details will be provided as we get closer to this event, and we hope you can join us. The second item is really housekeeping. Beginning with the first quarter of fiscal 2022, we intend to move our earnings release time to after market close based on feedback we've received from several of you. Before opening the call for questions, just a reminder that for competitive reasons, we do not provide detailed commentary regarding customer or SKU level activity.
With that, operator, please open up the call for questions.
At this time, I would like to remind everyone in order to ask a question, press star and then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Brian Holland. Your line is open.
Yeah, thanks and good morning. I appreciate all the color that you provided around the factors impacting the miss and how we think about the recovery, and particularly the color you gave around some of the gross margin dynamics. I'm curious on the top line with the plant-based segment. You know, last two years, you've grown pretty consistently at about 15%. You know, going back to 2019 and 2020, you were on pace for that throughout the first three quarters of 2022. How soon, if we think about the gross margin improvement, can we get plant-based back to that level of growth? Is that something that happens in the first half of 2022, or are we kind of back-half weighted?
Yeah, Brian, thanks and good morning. You know, we would expect continued acceleration through the year. I think we will be on that pace in the first half and potentially accelerating past that in the second half. You know, certainly Q4 was impacted. I think we called out $10 million of lost revenue or opportunity loss, that was nearly 100% on the plant-based business. To some extent, you can think about that as an add to Q4. It obviously didn't show up that way. You know, from a demand standpoint, we continued to experience very strong demand. You know, if we had been operating at a higher level, you know, we certainly would have punched out a larger number.
I appreciate you may be somewhat limited on what you're willing to say, but you put it out there, so I'll ask about it. This $100 million of EBITDA in fiscal 2023. The reason for doing that now, given the issues that you know are inherent in the supply chain here right now. Why go out with that number, which is obviously you know over 15% ahead of consensus? Really what's the construct of that? How much of that is just revenue flow through from the new facility and contribution there versus anything else on the margins that we should be thinking about?
Yeah, the simple reason, Brian, for putting it out now is to underline our confidence in the number. You know, when we look at the build of the 2023 number, especially relative to Texas, and obviously there are material, you know, costs and capital investments coming with that. We wanted to frame up for investors, the benefits of that investment and, our progress in realizing the potential of that investment. When we look at 2023, there is a combination of both, you know, pretty significant EBITDA contribution from the Texas plant, but certainly we see additional growth, in our core business that, you know, isn't directly linked to new capabilities in Texas. It's a combination of new business in Texas and continued core business growth.
Maybe just taking a step back strategically on, you know, some of the new verticals that you're exploring and building capacity towards. I think certainly anyone that's looking at the competitive landscape and some of the commentary from public companies, especially in the on-the-go protein nutrition shake, you know, sort of segment, there are certain shortages there. On the one hand, frankly, the logic is fairly obvious and straightforward as far as the need for that capacity at a high level. The fact that you are supplying that, where is that coming from? Is that coming from customer requests? I guess what I'm getting at is, you know, you're presumably adding some layer of execution risk by adding your category exposure.
Good to be diversifying, but also adding some execution risk at a time of unprecedented challenges, you know, for manufacturers such as yourself. Help us understand why divert capacity towards some of these other categories as opposed to just staying focused on the plant-based beverage opportunity.
Yeah. First of all, we are and remain incredibly bullish and optimistic about plant-based. I mean, 2/3 of our growth in 2022 will come from plant-based, you know, core plant-based products, oat, and others. You know, we continue to see very, very strong growth in plant-based. The protein shake entry is really a logical extension of our technical capabilities as well as our operational capabilities. While the end consumer experience might seem quite different in practice, producing a vanilla protein shake in a Tetra Pak carton is not dramatically different than, say, making almond milk. We think it's a very, very logical extension of our technical and operating capabilities. You know, we're confident that we can stand this up with very little interruption.
We've already been working with these products here in our new pilot plant and innovation center. It's given us a head start in terms of starting to formulate and gain expertise in the production of those products.
I appreciate the color. I'll hop back in the queue. Best of luck.
Thanks, Brian.
Your next question comes from the line of Andrew Strelzik. Your line is open.
Good morning. This is Amanda Morley on for Andrew. Thank you for taking the question. Can you just discuss further your expectation for sales growth progression for each segment throughout the year?
Yeah. Good morning, Scott. You know, I think as we said in the commentary, we would certainly expect the core growth driver to be followed by fruit all throughout 2021. We commented on rationalizing customers and SKUs and resetting the manufacturing base and putting the fruit business in a position to grow. I know Joe, in his commentary outlined the quantum of pricing we've taken in 2021 that'll benefit 2022. I think the only call out there is just remember, we will be lapping quarters as we go through 2022 in fruit that had what is today rationalized SKUs. There's the benefit would be the pricing. The takeaway would be the SKU rationalization overlap.
I mean, I think that's the color in terms of the outlook that you saw in the range of revenue for 2022.
Great. Thank you.
You're welcome.
Your next question comes from the line of Bobby Burleson. Your line is open.
Yeah, good morning. Curious about your supply agreements, what kind of visibility you get there in terms of, you know, allocation and costs going forward.
Good morning, Bobby. When you reference supply agreements, obviously we have...
Raw materials that you guys are procuring.
Yeah. On the raw material front, we have covered 100% of our current known raw material exposure through pricing that has all been fully implemented. That's true on both the plant-based business unit as well as the fruit-based business unit. We do not have any unrecovered inflation on raw materials. As it relates to both business units, the dynamics of kind of the contract agreements are quite varied, but you know, some of them are straight contracted passthroughs. Others are negotiated agreements whereby, you know, we will present to them, "Hey, here's the raw materials," literally down to invoices if they wanna see them, to outline what's happened with the raw material costs.
I can confidently share that, you know, we've had some lively discussions, but no material pushbacks on, you know, fact-based raw material pricing changes and getting those passed through to invoiced prices.
Okay, great. It looks like you guys alluded to some pretty significant labor disruptions that look like they're resolved. Are there kinda longer term plans to maybe explore implementing automation in places that maybe you know previously you weren't using automation? I know you've talked about in the fruit-based business, but just maybe more broadly to kinda offset these types of disruptions in the future.
Yeah. You know, on the plant-based side of the business, I mean, they are already incredibly automated plants. I mean, we might only have 35, 40 people on a shift of production operating, you know, what could be $100 million worth of machinery. You know, these are incredibly sophisticated plants that are highly automated. I mean, the touch points are at the very beginning of the process and at the very end of the process. You know, there's always opportunities for, you know, small additional automation, case packing, automated palletizing, et cetera. You know, we're not operating and, you know, relative to some of the manufacturing environments that I've been involved in throughout my career, where you have literally hundreds and sometimes 1,000 people on a production line or on a shop floor.
You know, we have a couple of dozen. You know, I'll never say never, and we always look for ways to improve efficiency through automation. There isn't a big step change for us on automation because we're already highly automated.
Just last one, on the SOWN line. I think you talked about being number two in velocity after, I guess, just not that long, obviously, but being in the market. Are there additional launches that you're gonna contemplate here this year to kind of build on that success?
Yes. We are, you know, looking at additional flavors to fill out the product line, as well as, potentially some small scale opportunities to extend the brand outside of the core plant-based milk category into other dairy alternative categories. You know, we're excited about the consumer response. We're really the only organic player in the category, and we've seen great enthusiasm for our organic offering. That is a core competency of SunOpta, is organic based foods and beverages. You know, we're gonna take that kind of oat organic platform and see what else we can do with it. You know, I wanna kind of underscore-
Great, thanks.
I wanna underscore, you know, we're a little bit of the little engine that could, if you will, in terms of how we will approach expanding distribution. You know, we fully respect and understand and are focused on our core business, which is, you know, co-manufacturing. You know, the degree to which this helps us advance our technical capabilities and understanding as well as kind of push the boundaries of innovation, you know, we love it. You know, we're not gonna be spending tens of millions of dollars on advertising to try to grow these brands. We're really making sure we get the product propositions right and, you know, see if they can seed and forge new ground for us.
Great. Thank you.
Your next question comes from the line of Alex Fuhrman. Your line is open.
Great. Thanks very much for taking my question. You know, the $100 million target for EBITDA in 2023, that's obviously a pretty big number. Can you help us bridge the gap of how you get there from your 2022 guidance? How much of that is coming from the new Texas facility as opposed to other growth elsewhere in the company? Or just the expectation that supply chain costs are gonna get back closer to normalized levels next year?
Yeah. Scott, good morning, Alex. Appreciate the question. I think, you know, the main driver of that incremental EBITDA profitability is from capacity and top line growth. Obviously, as we talked about through the prepared remarks, you know, recovery certainly relative to Q4 and margin. Because just remember that in addition to Texas, we have, you know, a few other capacity projects that we've commented on throughout 2021 coming online. I think the way to think about it is that the network collectively, including Texas, big contributor, you know, is responsible for unlocking, you know, capacity and in turn, top line growth that flows through to EBITDA.
Okay. That, that's really helpful. Thank you. Just for 2022, your EBITDA guidance is, you know, it's a fairly wide range considering it sounds like you have pretty strong visibility into your demand. For the year, can you give us a sense of what the difference is between the high end and the low end of your guidance? Is that, you know, just uncertainty given the volatility of some of the costs that go into your model? Just any color on kind of what would cause you to hit the high end or low end of that range would be helpful.
You bet. I think what we're trying to do, frankly, both on the top line and on EBITDA's is consider, you know, a number of factors, including just the potential for price elasticity. You know, Joe talked about, you know, the quantum, for example, of pricing we've taken in fruit, and there's not a lot of comps, at least in the last 30 years of, you know, what that level of pricing, you know, might manifest itself in terms of consumer demand. So, you know, it's probably the biggest thing that runs through my mind in the fruit business. Then I think on plant-based, it's just a progression, you know, over the course of the year, recognizing we're trying to call a year, it's tough to call or tougher to call, you know, the quarter by quarter sequential development.
I would say, Alex, so those are the things that went through our minds in trying to form the top line and the bottom line.
Okay, that's really helpful. Thank you very much.
You're welcome.
Your next question comes from the line of Ryan Meyers. Your line is open.
Hey, guys. Thanks for taking my questions. First one for me. I know you talked about this a little bit on the call, but when we think about some of the labor pressures that you guys are seeing, how much of this was just purely inflationary? And then where are these pressures sitting today in relation to the fourth quarter?
Yeah. On the labor front, there's really a simple way to think about it, which is, you know, over the summer, I think everybody experienced a significant amount of employee turnover. I commented on the Q3 call that we were seeing sequential improvement in labor availability, and that, in fact, turned out to be true for us. We onboarded a significant number of new employees, and actually ended the year net positive 73 employees versus the beginning of the year. We did a great job of bringing people on board. What surprised us candidly was the productivity of those new employees lagged our expectations and specifically our ability to get our overall production levels. You know, think of it as weekly number of cases produced.
We did not see those levels snap back or return as quickly as we thought they would with the infusion of new people. That is what I referenced on several occasions in the prepared remarks. You know, we are seeing a significant step change in Q1 versus Q4 as all of our new employees you know become much more proficient. We did some much needed catch up on maintenance in the fourth quarter as well. You know, those two investments in new people and taking downtime on our production lines to do maintenance is paying dividends for us in Q1. You know, we expect you know I think we've said consistently that we would expect some first half headwinds.
You know, I wanna make sure I frame my comments as we're seeing material progress. You know, you know, the skies aren't completely blue and tulips are blooming, et cetera. You know, we still have some wood to chop, relative to getting everything lined up, but we're excited and encouraged by the progress we're making in Q1.
Great. That's helpful. Can you give us some color on the food service business? I know you guys called that out in the press release there. Just kind of looking where the demand's coming from.
Yeah. You know, when we look at 2022, just based on the customer mix and where we see new business, we see a bit more sales growth on the retail side than the food service side, call it 60/40. We expect significant growth of oat milk sales in the food service channel in 2022 as we continue to find productivity efforts and raising our output in our oat extraction facility. We're able to serve more and more of the food service channel, and we expect really significant growth in oat both in food service and retail.
Great. Last one for me. On the fruit-based business, when do you guys feel like you'll be in a good spot on the SKU count and customer count where we won't see this planned reduction in volumes anymore? Or is that something that's gonna kind of continuously be ongoing?
I would say that probably the shortest answer is thematically we're done with that. You know, we spent a lot of time in 2021, you know, aligning or realigning, you know, customer profile, customer profitability with plant capacity. Because remember, we took two of our six plants out of our network. I would say that is materially behind us. You know, we always are looking for profit opportunities, you know, in fruits. I don't wanna suggest that, you know, we never look at it because of course, we do, but materially it's behind us.
Great. Thanks, guys.
Your next question comes from the line of Jon Andersen. Your line is open.
Morning, everybody.
Morning, John.
Morning, John.
Morning. I wanted to ask just about raw materials. First, are there any materials, you know, whether it be oats or another main input where availability just, you know, the ability to kind of get enough of it, if you will, has been or maybe an issue that you're kind of watching closely, and if you could help us understand that, which is separate from kind of the cost-related matters, I guess.
Yeah, John, I would tell you the pain points, and I talked about this similarly on the Q3 call. The pain points are really in the areas of the fastest-growing parts of the business, which, you know, if you think about it, isn't super surprising. You know, if you take Q4, for example, we grew our oat business 120%. So obviously, we were able to secure enough oats to grow 120%. But we also could have punched out an even higher number had there been unlimited and easy availability of oats. Same on fruit purees.
Many of those for us come up from South America, and obviously, with all of the logjam in the ports, et cetera, you know, we experienced some production disruptions related to shipping delays with raw materials coming up from South America. You know, those two, and I think it's not surprising, two of the fastest-growing parts of the business were the two places where we had some pain points just because you're trying to ramp up, you know, the receipt of materially larger quantities of a raw material than, say, the prior year. You know, we've stood up additional suppliers. We definitely made progress in Q4 versus Q3 as it relates to getting more raw materials in. You know, as we look at Q1, you know, I would say sequentially.
Now, obviously, with what is going on in the world, you know, it's obviously impossible for anyone to predict what the world looks like going forward. At least as we stand here today in Q1, you know, we've seen sequential easing of the constraints around raw materials vs. Q4. Q4 was better than Q3, and Q1 is better than Q4.
Is the $10 million of lost sales or opportunity sales in the fourth quarter, was some portion of that related to just the lack of availability of certain raw materials versus, say, you know, internal production constraints or, you know, less yield, as you pointed out earlier, with respect to new labor that you've onboarded?
Yeah. I would say it's three things, John. You know, the $10 million, I would say, was a conservative estimate, to be honest. You know, there was a portion of that lost revenue that was related to freight and just the inability to get both our customers who often pick up their inventory, you know, their inability to line up trucks and arrive at our warehouse to pick up their orders. There was a portion attributed to the labor challenges that I referenced, specifically having orders in excess of our ability to produce.
The third piece would just be the raw material input component where, you know, we had orders in the system and, you know, we would be delayed a few days on, say, receipt of a raw material and you know, obviously it's tough to make up those days once you lose them in the production schedule. Really those three factors contributed to what we would loosely articulate as at least $10 million of missed opportunity.
Okay, that's helpful. On the pricing side, I just wanted to make sure I understood the commentary there. You have commodity inflation, you have maybe internal wage inflation, the freight costs, et cetera. Is the pricing that you have communicated and has been accepted by customers has that been put in place or accepted to offset, you know, all of these elements of inflation? At what point will you be fully realizing the benefit of that pricing?
Yeah, Jon, I would say from a raw material pricing standpoint, you know, that has been materially passed through. I mean, you know, probably the easiest is to break it down. You know, we gave the number of the quantum of fruit pricing. I mean, that is every penny of all known raw fruit cost inflation. I would say the focus today, literally today, would be really on the transportation side. I think Joe mentioned a little bit in his prepared remarks that, you know, we obviously saw, you know, data point. You know, diesel fuel Q4 2021 vs. Q4 2020, up 50%. You know, it got sequentially worse from Q3. You know, where we've got any leaky buckets on freight recovery, you know, those efforts are underway.
I think Joe had pointed out, those are probably done by the end of the quarter, meaning the end of the first quarter. That's probably the way to think about the quantum of pricing and the drivers.
Great. That's helpful. I wanted to ask because you're seeing such strong growth in oat milk, and I'm assuming a good portion of that is driven by the extraction capacity that you put in place at the end of 2021. Where do you sit? I think there's another piece of extraction capacity coming on. I think you said mid-2023. That's still kind of a ways off.
I mean, are you constrained in any way at this point from a capacity standpoint on your ability to serve the demand that's out there for oat milk, whether that be you know, co-pack or private label or extraction or finished goods? I'm not talking from a labor standpoint necessarily, just kind of like assuming the labor's in place and operating at a high level. Are you just limited for the time being in how much demand you can satisfy until that extraction capacity comes online in mid-2023?
You know, John, we shared the number that we had revenue of $80 million in oat in 2021. We can grow up to probably 50% on top of that number in 2022 through additional. You know, I think the team has identified eight productivity projects to increase the output of our oat extraction. We are trying to move heaven and earth to make more oat base. Right now, we have line of sight to 50% potential 50% oat growth in 2022. After that, we will be somewhat constrained to grow beyond that until the new system comes online, unless we are able to find oat base somewhere else in the marketplace to, you know, for us to bring in and package.
You know, we definitely have headroom in front of us in terms of our ability to grow oat milk in 2022. The second part of your question was just around demand. I mean, if I could wave a wand and, you know, stand up that facility that I referenced coming online at the end of Q2 2023, if I had it today, could I sell a good chunk of it? Yes.
Yeah. That's really helpful. Last one I had was on fruit. It sounds like you know the combination of pricing and I think you mentioned confirmed distribution wins gives you confidence that the business can grow in 2022. Can you talk a little bit about these distribution wins and are they you know fully confirmed? You know what part of the fruit business those may be in whether it be the snack side or the frozen et cetera? Thanks.
You bet, John. Maybe two different thoughts. I mean, we saw very strong demand, you know, really accelerating throughout, you know, 2021 in our fruit snacks business. You know, it posted a 23% ± level of growth in the fourth quarter. I think we've seen that continue. In the frozen business, your question around a true distribution wins, I think we mentioned that with our largest frozen customer. What we've generally seen is, you know, kind of a whipsaw where, in the last year or two, you know, customers seeking to add a greater variety of suppliers and in a supply chain challenged environment that probably didn't work as well as maybe they would have hoped.
I think there's maybe a view going the other way, which is to consolidate supply. I think you know, we're one of the largest frozen processors in the United States, and I think our improved cost position and frankly, credibility with customers around pricing we spoke about, you know, is helping us. I'd say, direct answer is, yep, we have seen firm, you know, volume awards including our largest customer in frozen back to the core about our level of confidence about growth is very high.
Great. Thanks so much for the help.
You're welcome.
There are no further questions at this time. Mr. Ennen, I turn the call back over to you.
Great. Well, thank you for your time today, and I look forward to speaking to you again soon. Thank you.