CEO Brian Kocher and Chief Financial Officer Greg Gaba. Thank you. And Senior Director of Finance, Jeff Egan, wherever he is. He's not up here, but he's somewhere in the audience. SunOpta is a better-for-you food company specializing in the production and packaging of aseptic, that is, shelf-stable foods and beverages. The core product offering is in plant-based foods and beverages, primarily plant-based milks, which it makes in a variety of crop forms, including oat, almond, soy, and coconut, and sells through the retail and Food S ervice channels. The company has a balanced go-to-market strategy that includes co-manufacturing for national brands, as well as supplying private label products and making and marketing its own brands at retail. Before handing it over to management to learn more about the story, I have a couple of housekeeping items.
First, we're going to hold the Q&A for the breakout session, and that's gonna take place in the Jenney A room immediately after the presentation today. So again, the Jenney A room. Also, want to inform you that there is a complete list of research disclosures and potential conflicts of interest that can be found on the William Blair website. So thanks for your patience with that. I'm gonna turn it over to Brian.
Thank you, Jon, and thanks for your disclaimers. We appreciate that as well. We're gonna go ahead and go and do our own disclaimer, so there you go. We've covered all the legal requirements for today. Thank you very much for your time today. Greg and I are gonna split this presentation up and talk. In general, for those of you new to the story, we'll very quickly go through a SunOpta overview, talk about where, where we think we have a unique value difference in, in, that warrants an investment consideration, and then give a brief update on financial performance. So that's how we'll spend the next time with you. And then we'll be happy, as, as Jon mentioned, happy to answer questions.
SunOpta is a 50-year-old company that started off in humble beginnings of trying to make food and animal feed from byproducts in production processes. And ultimately, I've seen many different iterations, but as it stands today, we're roughly estimated $700 million business for calendar year 2024, and employ 1,200 employees across North America, making both plant-based beverages, broths, teas, as well as better-for-you healthy fruit snacks. Many iterations over the last 50 years. Some of you who may have been more familiar with the name know that we've done some investment pruning and portfolio pruning over the course of the last couple of years, and now we are a very focused organization.
I won't say simple, but very focused, operating in North America, predominantly in two platforms: aseptic processing for plant-based beverages and broths, including tea, and then better-for-you fruit snacks. As you mentioned, the aseptic network is roughly 85% of our revenue. Better-for-you snacks is growing quickly. The last two quarters, it's grown at 30% each quarter, but again, comprises about 15% of revenue. We do this in a coast-to-coast manufacturing network that provides redundancy for our customers, provides a reduction in food miles, and then certainly allows us to operate across multiple packaging formats and sizes, all in Tetra Pak packaging, but multiple sizes.
Again, I think one of the virtues of our revenue stream is we approach the market in multiple channels: Food S ervice, private label, co-manufacturing, and as Jon said, we even do some of our own brands. I would think of that more as a vehicle to test R&D. We're not a consumer packaged goods company. We are a solutions provider for our co-manufacturing and private label companies. But we do test some things in our own brand and then hopefully roll those out to customers as well. Powered by our winning team, you can see our cultural values. I love kind of the concepts of speed and dedication and problem solver and customer centric.
We boil that down into a phrase that's, "Get stuff done." Usually, I have another word for the S, but "Get stuff done" is where we're focused on. And I think since the beginning, for 50 years, we've been anchored in a commitment to sustainability. The really virtuous part of this is that our business is intertwined with doing good for the environment and doing good for the community that we live and work. We don't have to make sustainability projects or programs. We do right with, for what our business, we do right for our customers, and it ends up meaning we're more efficient, we use less water, we use less energy, but very intertwined, and we're really proud of the impact that we've made on the environment and our sustainability program.
When we talk about investment overview, I wanna talk about five areas, and Greg and I will split this up. But one is a high-growth business. We are in growing categories with winning customers. And if you look at our overall category, we still believe it's growing in the mid-single digits in all of the segments that we serve. We're a competitively advantaged network, which provides us with opportunities to provide redundancies for our customers, to invest in co-development with them, to provide solutions for them. And we have a model that's very flexible in commercial resilience, diversity in product, diversity in channel, diversity in customers, and as a result of that, we can grow in and with our blue-chip customers. And you see that growth in our financial results, and we'll talk about that in a little bit.
Because of the solutions that we provide, we also end up building a moat around our customer relationships. We are co-developing products with our top 10 customers. We have innovation programs with all of our top 15 customers. Those innovation programs go from anywhere from taste profile to caloric intake, to functionality in cold and warm beverages, for instance. But it's a real differentiator for the products and the consumers that we work with. And then, as I mentioned, the portfolio pruning has given us a very focused platform to drive revenue growth in growing categories. Let's talk a little bit about a high-growth business. If you look at the CAGR over the last three years, 13% revenue growth, 26% EBITDA growth.
A lot of that, for those of you who've known the name, maybe wasn't as visible when we had a frozen fruit business, when we had a commodity trading business. This underlying portfolio and platform, it wasn't visible that it was growing at 13% because we had commodity volatility associated with some of those other businesses. But we've done a really nice job of growing. Again, if you look at our guidance for this year, the midpoint in our guidance is ten, eleven percent on revenue and a significant increase in EBITDA again. So revenue growth with EBITDA growth outpacing that. We serve large markets and growing markets. We did a capacity expansion a couple of years ago, a year and a half ago, really, and entered the nutritional beverage space.
We have a relationship that's public with BellRing Brands, and we provide ready-to-drink protein shakes with them. That was certainly a TAM expansion opportunity for us. But even in our existing categories, plant-based beverage, tea, broth, we're growing share with our existing customers, we're growing share by adding new customers, and then our innovation platform continues to broaden the impact that we can have amongst all of our customers. And I think if you look at us in terms of leadership, we're where the category goes to grow. If you look at our customer base, the number one way we grow with customers, our existing customers, the number one way we acquire new customers, is when they say they have a service issue.
Our reliability of our network, our fill rates, our ability to solve for multiple product platform and commodity solutions, provides resiliency of supply for our customers, and that's a differentiator. If you look, we're the number one and primary supplier of plant-based beverages in for the largest coffee company in North America. We're the primary supplier of fruit snacks. We're the largest brand in the club channel. Primary provider of tea. When you're a winning brand, you want to come to SunOpta to help you be successful, and that's our goal. Remember, private label and co-manufacturing, our goal is to ensure that we provide success for our customers. If you look at the categories we operate, there is still significant tailwinds in our plant-based beverage category alone.
If you think about it, usage occasions continue to expand, whether it's cereal, coffee, ice cream now, muffins now in oat-based products. Usage occasions continue to expand. Multiple purchase drivers, if you just look at the United States, the estimates for lactose intolerance are greater than 30% and progressing towards 40%. Taste profiles are different. And then even if you think about some of the other, longer-term profiles, think of, as a sample size of one, my kids don't even know what cow milk tastes like anymore. They've, they've been on plant-based milks for so long, they don't know. What in the world are the chances that their children are gonna have cow milk? It's not gonna happen.
So there are a lot of purchase drivers that are helping support this category, and we, again, we see growth in the future for a long time coming. Let's talk a little bit about our network and why that's different. If you just think of the plant-based beverage, we've got a diamond-shaped network that provides redundancy in supply, variability in format, size, typically, you know, single-serve, multi-use, large sizes, vertically integrated in some of the key areas, oat, soy, tea, so that we can help provide value to those customers. And then I think lastly, this diamond-shaped network really takes a bunch of food miles off the table, so it helps with cost for our customer, and it certainly helps with them telling the story to their consumers about how they're responsibly sourcing.
Then I think the another area that's really important. I mentioned this in terms of diversity. Think about the diversity that we have in path to market. Food service customers, Private Label, co-man, even our own brands, you see that, and that's one of the reasons why we were able to demonstrate growth. They have 14% in Q4 of 2023, 18% in Q1 of 2024, because of that diversity. We also have diversity in the channel. Whether it's coffee shops or club channels or retail, we have access to all, and we're helping our customers succeed in all of those areas.
I think one of the interesting parts is, even if you think about retail, where brands are slugging it out, and the category has felt some softness over the last year, not all brands participate equally in the category. The brands that we support are performing 300 to 400 basis points better than the overall category, and I think, again, that's a testament to R&D, innovation, solutions for our customers to help them grow. And then the other area of that is the stickiness of our relationship. Yes, we have contractual agreements, three to five years, typically. What separates us is we're solving our customers' problems. What's one thing you never want to tell a Food S ervice customer? "Take oat milk off your menu." What do you never want to tell a club channel?
You're out of stock in this brand." We solve problems with assured supply. Our R&D function, as I mentioned, we've got 20 food scientists who are investing time, effort, and energy to help our customers anywhere from taste profile all the way through to performance in beverages and applications. That makes a difference. In many of our customers, we are their innovation arm. We're not co-developing. Some we're co-developing, in many of our customers, we're their actual innovation arm, where they outsource the innovation to us, and then it always is based in quality. We make great products that are consistently meeting the specs and done so in the highest fill rates in the industry. That's where we get resilience, and that's where we get a market-based differentiator relative to our competition. I'm gonna turn the rest of the presentation over to Greg.
He's gonna talk about the fun stuff, and we'll go from there.
Thanks, Brian. All right, so Brian touched on this. Our customers are our key to success, right? Our blue-chip customer base, average tenure greater than 10 years, top three customers greater than 15 years. And why is this the case, right? Brian also touched on this. Service, number one, quality, number two, but also, we have invested in to be a true solution provider to our customers, with over 20 R&D professionals in our facility in Eden Prairie, Minnesota, where we have an R&D lab, where we can come in, help develop products, pilot plant to actually test the products, and to work with our customers interactively within our headquarters to help support innovation, to help improve product quality, as well as help to innovate with new products. We have a proven strategy to deliver sustainable growth.
You know, customer-centric, you'll notice that we've talked about this multiple times, right? Focused on execution, focused on best-in-class fill rates, as well as to support customer-led innovation. That is what has allowed us to continue these long-term relationships with our customers and to continue to grow with our customers. We like to view it as win with the winners, right? We have these blue-chip customers who continue to grow. We're there to help support their growth and help provide those solutions for them. In addition, we have enhanced productivity levels. So you'll notice that we have targets out there, and we'll get into this in a bit, of the continued improvement in our gross profit. Well, it's the revenue growth, but it's also our productivity that's helping drive this gross profit growth. We have heavily focused on operational excellence.
We're putting these programs in place, currently investing in that, which will help drive the gross profit improvement in the future quarters and future years. In addition, we work on our competitive advantages, right? So we do have leadership and plant-based networks. You know, Brian covered this off earlier. You know, we estimate we're close to 70% supply of shelf-stable, plant-based beverage, and we have an advantage manufacturing network. In addition, we offer all of our value-added services. And finally, to shape our portfolio, we talked about our divestitures that we've done to allow us to focus on the new SunOpta, which is our core plant-based beverages, as well as our fruit snacks, and this is allowing us to really shape the portfolio and really drive profitable, sustainable, long-term growth. This is my favorite slide in the deck.
So, as Brian mentioned, right before, and finally, we're able to print a 10-Q that shows this, a 10-K that shows this part of me. We are a growing company and have delivered results. The new SunOpta has delivered results. You know, our results in the past had frozen fruit, had our commodities in there, and people weren't able to see this. But if you look at this chart here, based on the center cut guide for 2024, revenue from 2021 to 2024, 40% revenue growth and EBITDA, 80% growth, so significant result, at the same time, improving our leverage. How did we do that? $230 million investment into the future of this business from 2020 to 2023, which has helped us drive these results and has runway to continue this growth.
We have guided to midterm EBITDA run rate of $125 million, which we expect to be at by the end of 2025 or early 2026. This is all from that $230 million investment. So the results have been there, and we expect future results to be there from this $235 million investment, which will also generate significant cash flow as we start to really fill up those assets that we've spent the money on. And then the last part of this slide here is the deployment of cash. So what are we gonna do? So number one, we've guided that our goal is to be under 3x levered by the end of this year.
We see a clear path to be there, and then from there, it's what are we gonna do for our capital allocation priorities, right? So to continue to grow at greater than 10%+ investment opportunities, right? There's a lot of investment opportunities. We have a great pipeline, whether that's in plant-based beverage, protein shakes, or fruit snacks. Great opportunities there, and we'll have to make the decision once we're under 3x levered. Or we can return some capital to shareholders through a share buyback program. We wanted to share with you some of our long-term targets as well, right? So we are a growth company. W e just showed it on the previous slide, what we've been able to accomplish with the new SunOpta. We view our annual growth rate to be 10%+.
We also see our gross margins getting back over 20%. The last time we were actually full, before we did this $230 million investment, we were at 20% gross margin. There is no reason why we can't get back to that 20% gross margin, and I actually believe there's upside to that with the operational excellence program and investment that we're putting in today to be 20% + as we get the network full here. That rolls down into Adjusted EBITDA margin of greater than 15%. Key takeaways, to conclude, three things: We're a growth company in growing categories with blue-chip customers. Again, winning with the winners. We've made the investment, the $230 million investment, to double our network and to underwrite our future success.
With that, we've raised our 2024 guidance, and we've reaffirmed our midterm strategy and midterm target of $125 million adjusted EBITDA. And longer term, we have the right capabilities with the right portfolio and right network to continue to drive success and drive significant value creation. With that, thank you for your time today, and thank you for your support in SunOpta.
Sure.
Questions?
Absolutely.
Yeah, absolutely.
So you restructured the portfolio. As it stands now, are you anticipating in the next couple of years, some further changes you would make some additions to the portfolio?
We're excited about the portfolio we have now. We're excited about our, our new business, R&D, new customer pipeline. Frankly, we, we have enough of a pipeline that we need to execute well, leverage the assets that we deployed over the last years, and, and that will help us achieve our growth targets for the, let's say, through the end of 2025, beginning of 2026. Yes, sir.
What are your future plans for... Do you have a leverage target, you know, on paying down debt? Where are you trying to get to?
Absolutely. So we have a leverage target of 3x based on the current interest rates, and we expect to be there by the end of this year. Longer term, I also think that's a pretty good target for us, being a growth company and wanting to grow at 10%+ per year. That will require some investment. So, you know, could we be under 3x? Sure, but not if we wanna continue to grow at 10%+. So we view that as a very reasonable target for us.
How expensive is the debt right now?
Weighted average debt for us, about 8.2%.
Yes, sir.
You mentioned that the gross margins are getting back to that 20% level and potentially higher. Is it just right there why it's below where it was? Is that just the capacity that's still running?
Yeah, so we've put a lot of this capacity in, right? And we've been ramping up those lines. With that, we're inefficient. Until we get running at a higher rate and running at the investment level thesis, we're gonna have that inefficiency. So you get that fixed, fixed coverage absorption, right, as we start to ramp up the lines. And with that, you know, if you look at our 2023 results, you saw a lot of startup costs, some of those inefficiencies, so we brought in the concept of adjusted gross margin to show you more where we were really running at without that lag. But yeah, the once we get fully operational at all of our facilities, we don't see that there's any reason why we shouldn't be back to 20%.
I think that that's the real story for us: we've got an end-to-end program all the way from long-term supply forecasting through distribution to customers to try to improve every phase of effectiveness. You know, the fact of the matter is, in Q1 of 2024, we increased output at our plants more than 20%. We produced 20%+ more units in Q1 of 2024 than we did in Q1 of 2023. We still have an opportunity to drive efficiency, both on the output side as well as per-unit costs, such as labor, waste, water, those types of things. So that's a combination of ramping the investments we've made up to speed, as well as driving operational improvements that you should expect in any supply chain.
When you say that your customers are performing or growing, I guess as an aggregate, 300 to 400 basis points faster than the same category. Are you talking about a specific channel of trade of retail, or is that across the business?
Well. Look, we grew at 14% in Q4 and 18% in Q1. We're estimating that the category is growing mid-single digits. So already we are growing with our customers, and again, private label and co-manufacturers, we can't grow unless they grow. We're already growing 3x the category. That specific statistic I was mentioning is that the brands that we support are performing 300 to 400 basis points better in retail than the retail category. Now, i f you, if you look at it overall, collectively, our customers are performing much better than the category.
I guess what I mean, a lot of investors I hear from, what they struggle with is, you know, we all get these, you know, bi-monthly reads of what's happening based on the channel, and the volumes don't look great in plant-based milk, for example.
Sure.
and then, you know, one of your largest customers in Food Service is having softer traffic of late as well. And so how, how are you bucking the trend? Number one, maybe it's more addressing more of the Food Service side because that's a large customer, Food Service. And, and when you guide, can you again explain to us the level of visibility you have?
Yeah.
And how you bring a measure of conservatism or whatever it is, you know, reality to the guidance?
Yeah, Jon, so Jon, I'm glad you ended with the last half of your question, 'cause the first part wasn't too positive. And I, you know, I just wanted to sort that out. Look, the fact of the matter is that the category, you have access to certain public data.
What I'm suggesting is it can be true that there's some softness in Food Service traffic, foot traffic, while also simultaneously being true that our R&D efforts are allowing us to mix up in that customer. Go to your favorite coffee store. You will find their limited time offers, their seasonal promotions are either plant-based beverages or have plant-based ingredients, and that's a result of our efforts to work with them and co-develop solutions for them. Remember, with our top 10 customers, we're having monthly, at least monthly, oftentimes weekly discussions on two things, and this answers the second part of your question. One is on innovation. Where is their next promotions coming from? And it's not next week; it's 12- and 15-month plans that we're working on.
Not all of those come to fruition, but again, you work on various things with customers with a long horizon. So one is, I always go back to, we grow share with existing customers, we acquire new customers, and we invest in TAM expansion, and that's why we posted growth of 14% and then 18% when we think the category is growing mid-single digits. As we look at guidance, the other thing that, and we said it multiple times during our Q1 call, is we have a communication philosophy on communicating what we see, not what we hope. So we're talking existing customers with existing products and existing outlook from our customers. Remember, the other thing we talk to our customers about monthly and some weekly is: What's your inventory position? What's your order volume?
What's your outlook for orders? We're constantly working with them. There is nothing that we've seen in the public market over the last 90 days that has been a surprise to us with respect to foot traffic data or sales data. I mean, we're working with our customers all the time on their sales planning. I guess when we talk about communicating guidance, we're talking about what we see, not what we hope, and we're very excited about our new business development plan. But you're gonna hear about our new business development plan when you see it show up in the financials, and we adjust our guidance for it. We're not gonna talk about hoping that it comes through. Hopefully that answers the two questions. On a positive note, there you go. Thank you all for your time today.
Thank you.