Plant-based food and beverage company SunOpta (NASDAQ: STKL) announced better-than-expected revenue in Q1 CY2025, with sales up 9.3% year on year to $201.6 million. The company’s full-year revenue guidance of $796.5 million at the midpoint came in 0.7% above analysts’ estimates. Its non-GAAP profit of $0.04 per share was $0.03 above analysts’ consensus estimates.

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StockStory’s Take

SunOpta’s first quarter results reflected steady volume-driven growth across its core categories, with management attributing the performance mainly to increased production capacity and customer demand in plant-based beverages, fruit snacks, and broth. CEO Brian Kocher emphasized, “Our top five customers delivered year-over-year growth in Q1,” and highlighted the company’s ability to unlock capacity in its manufacturing network, especially in the aseptic and fruit snacks facilities. While gross margin faced some pressure from investments in talent and temporary inefficiencies at the Midlothian plant, Kocher noted that the outperformance in the quarter was “more on the capacity creation side than the demand side,” underscoring the operational improvements that enabled SunOpta to fulfill rising customer orders.

Looking ahead, SunOpta’s updated guidance is built on expectations of continued category growth and a robust sales pipeline, which management says now represents approximately 25% of annual projected revenue. Kocher pointed to ongoing product and channel diversification as key factors supporting “a high degree of confidence in achieving our long-term revenue growth target of approximately 10%.” The company’s margin outlook hinges on further unlocking manufacturing capacity, improving production yields, and executing a four-point operational plan to drive sequential margin improvements throughout the year. CFO Greg Gaba cautioned that while tariffs are a fluid risk, SunOpta intends to pass through incremental tariff costs, stating, “We expect to substantially pass on all the incremental costs to our customers.”

Key Insights from Management’s Remarks

Management tied first-quarter growth to expanded capacity and broad demand across its product portfolio, while highlighting operational initiatives and external factors shaping profitability.

• Capacity unlock drove growth: Management cited increased production in both aseptic beverages and fruit snacks as the main contributor to volume gains, with Q1 output rising over 6% sequentially in the beverage network and 7% year-over-year in fruit snacks using existing equipment.
• Category and customer strength: All core categories—including plant-based beverages, fruit snacks, broth, and protein shakes—reported growth, with club channel and foodservice customers particularly outperforming. Kocher highlighted that “each of our top five customers delivered year-over-year growth.”
• Operational challenges at Midlothian: The company is addressing a temporary bottleneck at its Midlothian facility due to a subscale wastewater system, which is limiting output and incurring excess costs. Management expects resolution by mid-2026, with continued reliance on other plants to meet demand until then.
• Margin improvement initiatives: A four-point operational plan is underway to boost gross margins, focusing on fixed cost leverage, production yield, labor productivity, and resolving technical bottlenecks. These efforts are expected to drive sequential expansion in gross margin for the remainder of the year and into 2026.
• Tariff cost strategy: SunOpta has begun communicating with customers to pass through new tariff-related costs on imported ingredients and products, aiming to minimize the impact on gross profit and adjusted EBITDA. Management does not expect a material hit to profitability, though revenue and margin rates may be affected by the pass-through approach.

Drivers of Future Performance

SunOpta’s outlook is anchored by category growth, an expanding sales pipeline, and operational initiatives to improve margins and productivity.

• Sales pipeline momentum: Management identified a business development pipeline amounting to roughly 25% of annual sales, double the level of 15 months ago. This pipeline is diversified across categories and channels, and while not all will convert immediately, Kocher said it “provides confidence in our long-term revenue growth target.”
• Operational execution risks: While the company anticipates sequential margin improvement from fixed cost leverage and yield initiatives, execution risks remain around fully realizing productivity gains and resolving the Midlothian bottleneck, which is expected to persist into mid-2026.
• Tariff and cost environment: The company expects to pass through most incremental tariff and raw material costs to customers, but acknowledges a timing lag and the possibility of short-term revenue and margin rate fluctuations due to evolving trade policy and input cost volatility.

Catalysts in Upcoming Quarters

In coming quarters, the StockStory team will track (1) the pace of gross margin expansion from ongoing operational initiatives, (2) progress on resolving the Midlothian facility bottleneck, and (3) sustained customer and category momentum reflected in pipeline conversion. Monitoring the effectiveness of SunOpta’s tariff pass-through strategy and its impact on both revenue and margin rates will also be important.

SunOpta currently trades at a forward P/E ratio of 29.8×. In the wake of earnings, is it a buy or sell? Find out in our full research report (it’s free).

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