SunOpta food scientists were testing an experimental batch of pumpkin oat milk last week when the top boss walked into the spacious new research and development center in Eden Prairie.
The question: If they changed an ingredient, would it taste the same?
Chief executive Joe Ennen couldn't tell the difference — a relief for the team preparing for potential supply chain disruptions.
SunOpta, a leading plant-based milk producer that supplies Starbucks and major retailers, moved its headquarters from Edina to Eden Prairie this winter. The $20 million expansion embodies the company's ambitions: doubling sales of its plant-based products by 2025.
"When we evaluate the return on investment of this building, it very much pivots around the speed of innovation," Ennen said. "New products, new customers, new capabilities and new categories are going to be paramount in driving that growth."
The move completes SunOpta's transformation into a Minnesota-based food maker after executives moved from Toronto to Edina in recent years and the company sold its commodity-trading business in 2020.
The company's research and development space has grown from about 3,000 square feet to 36,000 square feet. It includes a pilot plant where workers can test products without having to stop manufacturing lines at their processing facilities.
Connected to the lab and test kitchen is a wide-open office layout with sustainability features galore — and a few ficus trees growing under skylights.
Ennen acknowledged that building a big new headquarters is antithetical to the current trend of companies scaling back their office space following two years of employees working from home.
But the goal of bringing SunOpta's more than 150 Twin Cities employees together at least a few days a week is also tied to the company's vision for growth.
"It was easier to manage the base business with everybody remote than I would have guessed. And it's much harder to problem-solve, innovate and collaborate than I would have guessed," Ennen said. "It works if your growth ambition is 3%. It doesn't work if your growth ambition is 15-20%, because there are too many problems to solve."
Riding plant-based wave
An imitation coffee shop greets employees and visitors as they enter the new SunOpta offices on Shady Oak Road.
The largest share of the company's business is making plant-based milks for Starbucks, which accounted for nearly $150 million in sales last year, Ennen said. So having a place to test how the final product will be used — from the flavor profile in lattes to making sure cartons fit in fridges — was a key element for the new space.
"It's about us being in touch and in tune with our customers," Ennen said. "That's how we're going to win long term, being focused on the end consumer."
Plant-based milk accounted for 16% of all U.S. milk sales last year, according to a recent report from market research firm Spins, and 42% of households purchased plant-based milk at least once last year.
Almond milk leads the category, with oat milk quickly rising to second as soy continues to decline from its once-dominant position.
"Overall, plant-based food retail sales grew three times faster than total food retail sales, with most plant-based categories outpacing their conventional counterparts," the report said.
SunOpta has seen major growth in oat milk; in just two years, it has risen from a negligible business to nearly 10% of sales.
In addition to plant-based food and beverages, SunOpta makes and sells fruit-based foods, which Ennen said has "always been a challenging part."
The company had $813 million in total revenue last year, but inflation and supply chain slowdowns resulted in a $4.1 million loss.
SunOpta sold its organic commodity business in 2020, lowering annual revenue, but stock analysts predict the company will again surpass $1 billion in sales this year and turn a sizable profit in 2023.
With demand for plant-based milk expected to continue its rapid rise, SunOpta invested in a 285,000-square-foot Texas manufacturing facility that's expected to open at the end of the year. Ennen said the plant will be a "growth engine" for reaching more customers.
"The whole industry is capacity-constrained and has been for at least half a decade," Ennen said. "There aren't a lot of people investing in the category right now, oddly, and we want to be that supplier that has the capacity for customers to grow."
Consumer first, brand second
Though the SunOpta name may not be familiar to most consumers, it is the manufacturing force behind a range of familiar plant-based milks made at facilities in Minnesota, California and Pennsylvania.
"We manufacture a significant percentage of the brands you would see on the store shelf," Ennen said. "Whether it's oat milk or almond milk or coconut milk, we do them all."
Private label (store brands) and co-manufacturing for name brands remains the company's main focus, with branded products accounting for just 6% of SunOpta's business in 2021.
Last year SunOpta acquired Dream and Westsoy, two early players in the non-dairy milk market. Both will see rebranded packaging hit shelves this fall, and Westsoy has been renamed West Life.
Instead of leaning heavily on its own brand names, Ennen said the company is focused first on what consumers want and then on how it reaches them.
That has been the case with OatGold, a baking product made from the high-fiber, high-protein leftovers from oat milk production.
"We create the product, then we figure out how to bring it to market," Ennen said.
The CEO said SunOpta is rooted in sustainability through its products. The company wanted that to be reflected at the Eden Prairie headquarters, with its bamboo flooring and soon-to-be-installed solar panels.
"That core sustainability of the products — organic foods, clean-label products, plant-based — that's what we're really proud of."
