Earnings Call: Q4 2020

Mar 3, 2021

Earnings release

Good morning, and welcome to SunOpta's 4th Quarter Fiscal 2020 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 its transcription will 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 to all risk factors contained in SunOpta's press release issued this morning, the company's annual report filed on Form 10 ks and other filings with the Securities and Exchange Commission for a more detailed discussion of the factors that could cause actual results to differ materially from those projections and 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 with 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 are occasionally rounded to the nearest million. I'd now like to turn the conference call over to SunOpta's CEO, Joe Anand. Good morning, and thank you for joining us today. With me on the call is Scott Hawkins, our Chief Financial Officer. Before we begin unpacking the results, let me offer 3 key takeaways from the quarter and the full year results. Number 1, strong Q4 results were fueled by strong execution from continuing operations. Both our plant based and fruit based segments had a great quarter year. Number 2, very strong margin performance in Q4 with 15.5 percent gross profit margin and 10 percent EBITDA margin reflects all our business optimization efforts and strong execution across both operating segments. 3rd, solid progress in our new business development effort as we seek to add $100,000,000 of plant based revenue in the next 2 years. With this call being our full year 2020 results, before we unpack the details of Q4, I would like to summarize for shareholders just how much progress we have made in 2020. As it relates to the balance sheet, we entered 2020 10x levered. We entered 2021 1.2x levered. In 2020, we had an annual interest expense of over $30,000,000 In 2021, we have an expected annual interest expense of approximately $10,000,000 In 2020, we had limited remaining term on our debt instruments. We now have 5 years on our debt instruments. We entered 2020 with approximately $40,000,000 of aged inventory. We enter 2021 with $5,000,000 of aged inventory. We enter 2020 with a CCC credit rating. We entered 2021 with a B or B- rating, and we are trending up. When reflecting on our fruit business, we began 2020 with a gross margin of 1.9%, too much capacity, too many non strategic customers, a Mexico operation that was not firing on all cylinders and a very new management team across the board. By the end of 2020, we had delivered our goal of a 10% gross margin in the 4th quarter. We grew year over year gross profit by $22,000,000 compared to 2019, and we enter 2021 looking to build on this momentum with positive overlaps expected in each quarter. We streamlined our operations in California to improve our cost structure, and we have made material progress in streamlining our customer base, which will, in the short term, mute sales growth, but will allow us to deliver better quality, better service and more profitability. We have stood up a new team in Mexico and we are projecting that Mexico will become our largest fruit operation in the not too distant future. Importantly, we enter 2021 with a more experienced team committed to driving improved profitability. In our plant based segment, we certainly had momentum coming into 2020, but it was a capacity constrained network. This constraint also limited our business development efforts. We enter 2021 with capacity in plant based beverages with a whole new capability in oat milk that is creating partnerships with new customers from ice cream to yogurt to refrigerated plant based milk manufacturers. We enter 2021 with more customer diversity, a very strong customer pipeline and optimism that as COVID-nineteen concerns decline, a foodservice business recovery will deliver significant upside in the second half of twenty twenty one. Perhaps it is most important to note that we entered 2020 managing 2 very different businesses, one being a global organic ingredient company headquartered in Amsterdam, the other a predominantly North American based consumer packaged goods business. We divested the Global Ingredients segment in December for approximately €330,000,000 The proceeds of the sale provided additional funds to invest strategically in our competitively advantaged plant based food and beverage platform, reduced our exposure to a commodity trading business, delevered our balance sheet and significantly reduced our working capital needs. We also signed a long term supply agreement with Accomo, the new owner, to ensure continuity of supply of organic raw materials for the foreseeable future. As we enter 2021, we have clarity of focus and clarity of purpose as we seek to help fuel the future of food. For the sake of completeness, I will comment briefly on the combined results of ongoing and discontinued operation in terms of revenue and EBITDA for the year and the quarter. Revenue for the full year 2020 was $1,290,000,000 a $102,000,000 or 8.6 percent increase versus 2019. Revenue for the quarter was 330,000,000 dollars a $35,000,000 or 11.7 percent increase versus prior year. EBITDA for the full year was $94,100,000 a $47,000,000 or nearly 100 percent increase. For the quarter, EBITDA was 26 $500,000 a $10,000,000 or 62 percent increase versus prior year. Of the $102,000,000 of revenue growth and $47,000,000 improvement in EBITDA, 75% of the revenue growth and 84% of the EBITDA growth came from continuing plant based and fruit operation. With the divestiture of Global Ingredients in December, unless otherwise noted, all of the results referenced from here forward will be for continuing operations, meaning the aggregation of our plant based and fruit based operating segments. 4th quarter results were better than expected, reflecting solid execution by the entire organization and a continuation of the strong underlying demand for our products. The 4th quarter also marked an important inflection point for the company as we completed a major multi year operational turnaround and portfolio optimization. Entering 2021, the entirety of our efforts will now be focused on driving growth and profitability in businesses where we have a demonstrable competitive advantage. Total revenue from continuing operations increased 10.4% on an as reported basis in the 4th quarter. Adjusting for commodity price variances and the impact of a 53rd week, total revenue was up 5.4%, driven by 6 0.6% growth in plant based and 3.9% growth in the fruit segment. After 4 consecutive quarters of doubling EBITDA versus prior year, adjusted EBITDA in Q4 increased a mere 84.3% on a year over year basis to $20,600,000 We are pleased with this result as this is 84% growth on a year ago number that was more than 6x the 2018 results. As a percent of revenue, adjusted EBITDA improved by 400 basis points to 10%, which had been our previously communicated long term financial target for EBITDA margin. It was helped by higher gross margins in both segments, including a sharp recovery in the fruit business, reflecting productivity and pricing initiatives. Turning to our segment results. Let me begin with our plant based segment where we continued to experience strong trends throughout the year. Full year revenue was $415,000,000 an increase of $54,000,000 or 14.9 percent. Gross profit for the year was $80,000,000 growing $22,000,000 or 37%. For perspective, our plant based segment is now approximately 75% of the company's total gross profit. For the Q4, revenue increased 11.1% or 6.6% on an adjusted basis as we cycled a 25% increase from last year's Q4. Our capacity additions helped deliver this increase as we were effectively at capacity in Q4 of 2019. And without our added capacity, we would not have achieved material growth in the quarter. Our foodservice sales channel remained challenged due to COVID-nineteen, especially as portions of the country moved back into heightened lockdown in the Q4. Gross margins improved 310 basis points for the year and 70 basis points in Q4, driven by higher volume as well as continued productivity gains. Our new business pipeline remains encouraging as our recognized expertise and expanding capacity makes SunOpta a desired partner for leading CPG companies focused on plant based foods and beverages. To that end, during the Q4, we completed expansion of our extraction capability as well as new beverage production and packaging capability. Additionally, last month, we announced another capacity expansion at our Allentown, Pennsylvania facility, all of which provides ample runway to support our plant based growth plan through 2022. As previously communicated, we want to surgically use SunOpta owned brand as a vehicle to bring innovation to market faster. As an example of this thinking, we saw a gap in the market for an organic oat milk coffee creamer. And so we launched our first branded offering in plant based beverages under a Synoptic created brand called sone.com for additional information on this exciting new growth initiative. Sone Organic Oat Milk Coffee Creamer is currently available nationally in Whole Foods, Sprouts and Amazon, along with other regionally relevant customers as we look to grow distribution throughout 2021. As we have been saying for the past several quarters, we plan to have an agnostic go to market strategy, quickly bringing innovation to market through a combination of branded, co manufactured and private label offerings. We see brands as augmenting our current customer focus and we remain committed and focused on co manufacturing and private label as our primary business. As proof point of our agnostic orientation, we are also launching oat milk creamers with a CPG customer as well as with a leading retailer's own private label brand. In the fruit segment, we have repeatedly communicated our key area of focus has been improving profitability and margin, and results in the 4th quarter demonstrated significant progress against this goal. Revenue grew 6.9% for the full year and 9.6% or 3.9% on an adjusted basis in the 4th quarter versus last year. Importantly, gross margin increased an impressive 7 20 basis points in Q4 to 10.1%, helping to drive positive segment level operating income for the first time in over 3 years. Gross margins benefited from volume, pricing and mix factors as well as the previously discussed successful automation and productivity initiatives. Over the near term, expect to continue focusing on improving profit and margins in the fruit based segment. As we've discussed in the past, not all customers are equal in terms of profitability. As such, we have endeavored to rationalize our customer portfolio in the fruit segment. And while we recognize that we may be compromising some near term revenue, we believe this will allow us to build a much stronger foundation for the future. We strongly believe that a tighter, more focused, more cost efficient business will give us the opportunity to continue to strengthen margins and grow strategically and profitably. In conclusion, the 4th quarter and full year results were exceptionally strong and continue to show solid progress in executing on our key initiatives, including expanding margins and significant growth in adjusted EBITDA. We've successfully transformed the company to be in an optimal position to capitalize on the number one global food trend, plant based foods and beverages. Our goal is to double our plant based business over the next 5 years. SunOpta's technical expertise across the full process spectrum from formulation to production is widely recognized by leading CPG companies. In turn, this has helped us develop very strong relationships with our customers as they view us as an essential partner in operating and growing their plant based businesses. Finally, the geographic diversity of our supply chain provides cost efficiencies while also mitigating risk through operational redundancies. I'm optimistic about our future and believe 2021 will be another strong year for SunOpta as we execute our plan, continue ramping up growth and leveraging the power of our platform. 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. We're excited to report another solid quarter. As Joe discussed, we saw 10.4% revenue growth in continuing operations and nearly doubled EBITDA with 84.3% growth. Gross profit from continuing operations was $31,800,000 for the Q4 of 2020, an increase of $9,600,000 or 43% compared to 22,200,000 during the Q4 of 2019. The fruit based segment was responsible for $6,500,000 of the gross profit improvement, reflecting revenue growth, pricing efforts and a favorable mix of higher margin retail versus foodservice sales, as well as ongoing productivity improvements in our plants. The plant based segment accounted for $3,100,000 of the increase in gross profit, primarily as a result of revenue growth, increased production volumes of plant based beverages and plant based ingredients, along with improved plant productivity. On a full year basis, the plant based segment generated $80,500,000 of gross profit, up $21,700,000 or 37 percent from 2019. The fruit based segment generated $28,600,000 of gross profit, up $22,100,000 or 3 40 percent from 2019. During the quarter, we continue to make progress with gross margin expansion. As a percentage of revenues, 4th quarter gross margin was 15.5% compared to 11.9% last year, a 360 basis point increase. On a full year basis, gross margin was 13.8%, up 4.70 basis points with both segments contributing to the improvement. In the 4th quarter, gross margin expanded 7 20 basis points in the fruit segment and 70 basis points in the plant based segment. Operating income was $6,800,000 or 3.3 percent of revenues in the 4th quarter compared to a loss of $500,000 last year. SG and A increased to $25,600,000 compared with $20,600,000 in the Q4 last year. The savings initiatives previously implemented are being offset primarily by variable compensation expense resulting from the significant improvements made in operating results. Earnings attributable to common shareholders for the Q4 was $70,200,000 or $0.78 per diluted share compared to a loss of $7,600,000 or $0.09 per diluted share during the Q4 of 2019. These results include discontinued operations or Global Ingredients, which produced a $112,000,000 pre tax gain on sale. Given the Global Ingredients divestiture, broad refinance of the balance sheet and the closure of a large fruit plant, let me unpack the impact these activities had on earnings from continuing operations for the 4th quarter. The reported loss from continuing operations was $34,300,000 driven by non recurring items, including a 12,700,000 foreign currency hedging loss on the global ingredients sale, 11,200,000 of exit costs, impairment charges and severance primarily associated with the exit of our Santa Maria fruit plant and an $8,900,000 charge associated with the retirement of the 2nd lien notes. The loss also reflects a full year's interest expense on the old capital structure or an approximately 440,000,000 debt load in existence before year end. On an adjusted basis, consolidated earnings were $1,200,000 or $0.01 per diluted share. The adjusted loss from continuing operations was $2,500,000 or $0.03 per diluted share compared to a loss of $7,100,000 or $0.08 per common share in the prior year. As Joe mentioned earlier, for the Q4 of 2020, adjusted EBITDA from continuing operations was 20 point 6,000,000 compared to 11,200,000 in the prior year. On a consolidated basis, adjusted EBITDA was 26 $500,000 up 62% versus prior year. 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. At January 2, 2021, total debt was $69,700,000 down approximately $410,000,000 from December 28, 2019. Total debt reflects $47,300,000 drawn on our asset based credit facility with the balance representing smaller credit facilities, lease and other financing arrangements. Leverage has improved to well under 2x from 10x as we entered 2020. As a reminder, we refinanced our previous ABL with a new 5 year ABL and delayed draw term loan at lower interest rates. The new facility is not due until December of 2025. Do expect the debt balance to grow as we recognize lease obligations on the balance sheet associated with capital projects and the use of the revolver for our customary seasonal build of inventory. From a cash flow perspective, during the quarter, cash generated from operating activities of continuing operations was 19,800,000 compared to cash generated of 33,200,000 during the Q4 of 2019. As a reminder, we drove down working capital last year nearly 30,000,000 and therefore entered 2020 on a much linear basis. Cash generated from investing activities was $352,300,000 compared with a use of $9,200,000 in the Q4 of 2019. The increased cash flow was driven by the sale of our Global Ingredients business. Let me close by offering some perspective on what we are seeing in terms of Q1 and full year 2021 results. From a top line perspective, our current view is growth in plant based will approach double digits in Q1, noting that we have a strong comp to hurdle of plus 30% from the prior year quarter. For perspective, we are forecasting the largest quarter in our history in Q1 on plant based. Beyond Q1, our current outlook suggests low to mid teens growth for the balance of the year. In fruit, as a reminder, we closed the facility and shared that we would be rationalizing customers and SKUs and therefore forecast high single digit revenue declines in Q1 as a result. In addition, we are rebuilding inventories following light fruit supply due to COVID-nineteen and hurdle a strong comp of +14% from the prior year quarter. Beyond Q1, we currently forecast low to mid single digit revenue decline while producing improved year over year margins. A margin perspective, we would expect plant based to remain in the high teens area and fruit based to make year over year improvements each quarter from a more efficient portfolio of plants and customers. Finally, from an adjusted EBITDA perspective, we expect solid double digit growth in 2021. With that, I'd ask the operator to please open up the call to questions. Thank you. Your first question comes from the line of Brian Holland from D. A. Davidson and Company. Your line is open. Yes, thanks. Good morning, gentlemen. So I guess a lot to dig into. So just on the plant based growth side, I appreciate the guidance here. Obviously, tough comps on the at home side, but I think for customer demand currently outstrips your supply. So is the math basically for 2021 that you take the 2020 base plus the pace at which you can onboard capacity expansion? Good morning, Brian. It's Scott. Yes, I think if you reflect on the comments about the outlook, I think we've given a fairly decent view of the, call it, the pacing of the development of that realization of revenue toward our $100,000,000 target. Yes, perfect. Timing and consideration set for further capacity expansion in plant based, obviously, there's a $75,000,000 delayed draw at your disposal. Can you just kind of talk about how you are thinking about adding to that base and maybe what's going to play into that? Yes, Brian. Good morning. It's Joe. We've stated many, many times our aspiration and ambition to double this business. Clearly, at some point in that 5 year journey, we're going to need to add additional capacity. But as I indicated on the call here, we have sufficient capacity to drive through 2022 and would expect sometime in, call it, 2023, we would need to onboard additional capacity. And then just, I guess, want to clarify, that $75,000,000 delayed draw lapses after 18 months and typically I mean, a 12 to 18 month timeframe would probably be reasonable for Greenfield in the new facility. Is that are those reasonable parameters from a time perspective? Yes. Okay. And then anything to read from the closing of the Santa Maria facility and further customer rationalization as it pertains to whether you might ultimately consider divesting versus holding on to the food business? Our view I mean, we're happy with the performance of the fruit business. This year, we improved gross profit $22,000,000 really solid year. We're confident in our ability to continue to add value and grow profitability in that business. And we're looking forward to knock on wood, a solid strawberry season in California and Mexico and putting continuing to put really solid numbers on the board. I appreciate the color. Last one for me and I'll get out of the way. Obviously, a lot of commentary around new customer wins on the oatmeal creamer side, also launching the or running with the Zone brand. Can you just I know we've talked about this before, but just a little context. I understand the ability to kind of manage both a private label customer pipeline with introducing your own products. But always seems a little like the sensitivity is higher with your launching your own brand versus how you how you walk that balance? Sure. It's really oriented around innovation, Brian. We would not be foolish enough to launch products directly on top of our existing customers' products that we're manufacturing for them. This is an opportunity for us to continue to drive the business through innovation, access innovation opportunities more quickly. And so this is really about expanding the portfolio of products, launching products on top of our customers. Your next question comes from the line of Alex Berman from Craig Hallum Capital. Your line is open. Good morning, Alex. Great. Thanks very much for taking my question. Yeah, likewise, good morning and congratulations on a really transformative year in 2020. Thank you. I wanted to ask more about the brand. I mean, it seems like a huge opportunity. I was lucky enough to get to pick up some of your stone product at the Whole Foods in my neighborhood. How can you tell us a little bit about the pipeline of what we could expect to see from Sone and from perhaps other brands that you could launch? I mean, is this considering that your business has been capacity constrained in the past, I mean, is this an area you'd like to get kind of as much product into your own cartons if you can? I'd love to just hear more about that. And obviously, I would imagine it's much higher margin. What should we be expecting in terms of the investment in sales and marketing and whatever else it takes to get a brand off the ground? Yes. So again, our focus here is really creating a platform for us to pursue innovation. I mean, our addition of brands as a growth lever for us really emanates from the desire to be able to quickly and surgically attack market opportunities that we see. So for example, the plant based creamer category is a $335,000,000 segment at retail growing over 30% and there was not an organic offering in oat milk. And we saw that as a key opportunity. We don't make a product like that for any of our existing customers. And so we thought it was a great opportunity for us to capitalize on that market opportunity that we saw and launch our own brand. Our approach to building these will be really starts with one core principle, which is to build unique differentiated products in the marketplace. We don't want to be the 7th, 8th, 9th offering in a category. This is really an opportunity for us to drive innovation. And if and when we can see those market opportunities where no one else is playing in it, we'll use either our brand or a combination of our brand along with a CPG command to really go and develop a market and develop plant based side. Obviously, your foodservice customers were under a lot of pressure in 2020, and it sounds like you're looking for there to be a pretty strong recovery there beginning in the second half of this year. What are the margin and growth implications as the business presumably shifts a little bit more into foodservice as we kind of enter this post COVID recovery? Is that somewhere that you see as being a big kind of long term growth engine over the next couple of years? Yes. So, we don't break out margin by sales channel. But as it relates to broadly our plant based business is, call it, fifty-fifty split between foodservice and retail. And so we all know what has happened within the overall foodservice landscape related to COVID. And so we would expect a strong recovery as consumersshoppers return to those channels and one only needs to look at some of the publicly reported same store comps to see where we see the upside in kind of Q2, Q3 forward. Okay. That's really helpful. Thank you very much. Thanks. Your next question comes from the line of John Anderson from William Blair. Your line is open. Good morning, everybody. Hey, good morning, John. Hi. Congrats on a fun dynamic and fluid year. I guess so many different things could ask. Starting on, I guess, the plant based food and beverage business, as you look at the pipeline, the new capacity plus the new business activity in the pipeline driving you towards incremental $100,000,000 over the next couple of years. Is there a way to characterize the likely composition of that new business? How much do you anticipate being your own brand, own branded business versus maybe CoPak for other CPG firms versus retail private label? Yes, we would expect the lion's share of that growth to come from co manufacturing of CPG brands. And then probably private label growth and then our own brand. I mean, again, we're managing our ambitions with brands relative to our capabilities and our focus on being a great co manufacturer for our branded partners. And as I mentioned to Alex, I mean, our intent is really to do this surgically where we can really bring true innovation to market. So I would see it as a very similar go forward model supplemented by us, really using brands as an innovation accelerator. Okay. That's helpful. Would that mean that let's take Sone for instance, clearly you found a white space in organic kind of creamer or the lack thereof and a great opportunity for you to kind of pursue that. I mean, should we think about longer term, Soma becoming a brand that could play in a more traditional milk, oat milk? Or is it do you think it will be more kind of surgical and targeted to these areas where you can bring something that's novel to the space. And maybe you can bring something novel to oat milk more broadly because of the very high quality kind of capabilities that you've developed there? Yes. So we see this as having a very strong innovation orientation as opposed to let's launch the 9th almond milk into the store 20 years after the first almond milk was launched. I mean, that's not how we see the opportunity here. So, and I think it's really important to understand, we're not going to launch products on top of our customers where we're currently manufacturing an identical or similar product to what we're doing for them today. That certainly would not be a partner like move and we're very kind of clear about the guardrail. I could certainly see the brand going outside of some of our traditional capabilities and helping us expand into kind of adjacency categories just like this being the creamer space is a bit of an adjacency expansion for us. That makes sense. That kind of leads into my next question. You mentioned that was interesting, you mentioned ice cream and yogurt specifically, I think with respect to the pipeline. Can you tell us a little bit more about that how meaningful those products could be in terms of allocating some of your new capacity to them. Those are areas I don't think you play in today. I may be wrong on that and correct me if I meant, but ice cream and yogurt would be kind of new categories for you, I think, right? Correct. And just to clarify, we're supplying oat milk to manufacturers in those categories as opposed to us being a we're not manufacturing ice cream or manufacturing yogurt. We're manufacturing oat milk. We're selling that oat milk to yogurt manufacturers or ice cream manufacturers who are turning it into a finished product. Just to clarify, we haven't stood up a yogurt plant since we last talked, Joan. But the core focus there and the thing that's exciting for us is our extraction capability and the unique way in which we're packaging it allows us to really work with a much more expansive customer base. And again, referenced kind of yogurt and ice cream as the type of customers who we wouldn't have been able to work with in the past, but for this new capability. So it's exciting. And I think if you reflect on the projected kind of 2021 growth rate that Scott outlined, you'll see the progress we're projecting against that $100,000,000 target pretty clearly in the numbers. And a lot of these new oat milk products are exciting, they're growing fast and we're hopeful and optimistic that the consumer in those respective categories adopts them and loves them as much as we do because we think they're fantastic. Absolutely. On the capacity in plant based foods and beverages, you have a new program for 2021. I can't recall, have you talked at all about the timing of that new capacity and the size of it? We know that the capacity you brought on at the end of 2020 was about $100,000,000 or more of incremental sales capacity. Any boundaries you can put around the new program in Allentown? And then if I can throw a follow on to that, can you continue to add lines, add capacity to the 3 facilities you have now, California, Minnesota and Pennsylvania? Or at some point, do you need a new location, a new footprint, a new plant and when might that be? So we did not break out a granular forecast for the Allentown addition. We were comfortable when we were executing 3 projects to kind of lump those together and give some line of sight to what that might mean in terms of incremental capacity. But we don't want to get into kind of individual kind of rates of return on that. It's a bit too granular. But it'll represent a significant chunk of business for us. I mean, it's meaningful or we would not have shared the news. Your second question about kind of what's our expansion potential within existing facilities versus the new facility, we have a little bit of wiggle room to add a little bit more to the existing network. But I would say, yes, at some point, in the near to mid term future, future, we will need to consider standing up a new facility. And obviously, we would love to do that as soon as possible because that gives us indication and line of sight that we're developing our pipeline and we need to stay ahead of that. So it's a good problem to have, so to speak. Absolutely. And then I guess my last question will shift gears over to fruit. You talked about customer rationalization and that helping you get to a more profitable business near term, it will have some implications on revenue as you outlined. Can you talk about the when you talk about rationalization, are we talking about the mix of business, meaning more retail, less food service or away from home or are we talking customer rationalization within each of those segments? How where are we taking the business, I guess, from a customer standpoint? And if there's a little bit more characterization of that, it would be helpful. Yes. And remember, fruit is comprised of fruit ingredients, frozen fruit and fruit snacks. So there is some swing or delta within that mix of kind of fruit specific. So some of it was related to the closing of Santa Maria, some of it was just us continuing to look for optimization opportunities in the other two segments of the fruit business. But not a wholesale shift in kind of any channel strategy. We're really just trying to work to optimize the footprint of the business and the customers that we're serving, so that we're positioned to deliver great cost to them, great service and great quality. And I think the moves we're making in Mexico and diversifying our network, we've talked about that extensively, kind of almost going back to the middle of 2019 about diversification as a core strategy. We're doing a much better job of sourcing fruit out of South America. Mexico will become, as I mentioned, a very significant business for us and California will always be a significant part as well. But again, that's what you're seeing from us on fruit is very consistent with what we outlined as a core strategic driver, which was diversification. Makes sense. Actually, as you were talking, I have to squeeze one more in, if I can. So the base I just want to make sure I get this right. So the base EBITDA for 2020 continuing ops is about 59,000,000 dollars ex the trodden. And then we're thinking we can grow that double digits in 2021. Fair statement? Correct. Okay, terrific. Thanks so much and congrats on a really wonderful year. So talk soon. Thanks, John. Thanks, John. Your next question comes from the line of Mark Smith from Lake Street. Your line is open. Hey, good morning, guys. First, just wanted to talk a big picture about competitive landscape in plant based beverage. Can you talk about how strong your position is today? Or do you really view this as a rising tide that lifts all ships? Or what is your opportunity to really take share? We think we identified 3 core competitive advantages within plant based, which in combination, we think gives us a really strong position. 1st is the strength of our operational and R and technical capabilities that is an absolute differentiator in this plant based co manufacturing space. 2nd is the strength of our strategic partnerships with our customers. We have many, many multi year long term contractual partner oriented agreements. And then the third is relative to many of the people that we compete with, we have a diverse manufacturing network that is East Coast, West Coast and Midwest and in combination that affords us the opportunity to work coast to coast with national customers who prioritize product consistency, product quality and the simplicity of working with 1 partner. So those three things in combination really afford us what we view as a strong competitive moat. Okay. And then back to the mix is today in plant and fruit on branded products? Well, it would be virtually 100% private label and co manufacturing. So and again, the branded push for us is really oriented to being the kick of the spear for driving innovation. And as I indicated, we went out to the market with this organic oak creamer and quickly on the basis of the product was already developed and all the work was done, we quickly signed up a co manufacturing national brand that wanted to launch a similar product as well as a retailer's private label product who wanted to launch a very similar product. So I think you can sense it really gives us speed to market because we know we're going to launch it under our own brand, but we are committed to being agnostic, which means we will share that product innovation with our private label customers and our co manufacturing partners. And if we think the best opportunity to bring an individual product innovation to market is through one of those vehicles or a combination of them, that's how we're going to pursue it. Okay. And then last one for me, just looking at foodservice, you guys sounds like you're pretty optimistic as you look at foodservice primarily in say half of the year. Can you just update us on what you're seeing today in foodservice versus maybe 2, 3 months ago? Pretty similar. If I reflect on the Q4, it was pretty similar to the Q3 just in terms of how that overall channel of foodservice performed. Early days here in Q1, we're seeing some uptick. But I think that channel won't really that's my personal opinion. I don't expect that channel to fully recover until you've got a lot of commuters driving past their favorite coffee shop and picking up their soy milk latte on the way into the office every day. Your next question is a follow-up from Brian Holland from D. A. Davidson and Company. Your line is now open. Yes. Joe and Scott, thanks for taking the follow-up. Just one question as we think about building out this plant based business going forward. I don't know if you characterize it this way, but it looks like within the mix of your business extraction, you might be sort of underway towards extraction looking backwards. If we think about capacity going forward, would you would that be increasingly weighted towards extraction, which again expands the categories it sounds like you can theoretically serve and customers you can serve. But I also think carries a higher margin profile than the packaging side of the business. So could you maybe talk through that? Yes. I think quite a while ago, we articulated that the extraction facility that we built in Alexandria, Minnesota allows us a 4x increase in the amount of basically kind of oat milk or soy milk that we can make out of that. So yes, to the first part of your question, yes, the mix should benefit you should get the extraction side will grow certainly as a percent of the mix relative to say 2020. Just in terms of the margin profile, we don't break out the margin component between the individual lines of business. Okay, fair enough. Thanks for clarifying. There are no further questions at this time. I'll turn the call back to presenters for closing remarks. Okay. Thank you, operator, and thank you everyone for participating in our Q4 conference call. Look forward to speaking to you in the future and appreciate your interest and support in SunOpta. Have a great day. Ladies and gentlemen, thank you for your participation. This concludes today's conference call. You may now disconnect.