Lassonde Industries is a leader in the manufacture and sale of food and beverages in North America. The company is one of the two largest manufacturers of private label, shelf stable fruit juices and beverages in the United States and the largest producer of fruit and vegetable juices and beverages in Canada. Almost 40% of Lassonde’s sales are in Canada and 60% in the United States

The company operates in two market segments: the retail segment (which accounts for nearly 87% of the company’s sales) and the food service segment (13%). There is only one reportable operating segment, which is the development, manufacture, and marketing of a wide range of ready-to-drink juices and beverages, fruit-based snacks, frozen juice concentrates, and specialty foods. Lassonde operates through four subsidiaries and 18 plants in Canada and the United States

Lassonde was founded in 1918 and is a leading name in the agro-food industry. The company trades in specialty foods, fruit and vegetable juices and wines. It is also a major producer of cranberry sauces.

The company operates through specialized subsidiaries such as Apple & Eve, Arista Wines, Lassonde Pappas and Company, Old Orchard Brands and Lassonde Specialties. and Sun-Rype Products more than 25 well-known brands in Canada and the United States

Some of the best known brands are Oasis, Rougemont, Del Monte, Everfresh, Graves and Fruite, etc. The shelf-stable Old Orchards brand ranks first or second in many major markets in the Midwest and South Central America.

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Investment data

Sales growth and market exposure

Lassonde is engaged in the production and sale of fruit and vegetable juices and drinks. The company’s customer base is diverse and includes supermarket chains, independent grocers, superstores, warehouse clubs, large pharmacy chains, online sales, hotels, hospitals, schools and wholesalers.

Lassonde is focused on product innovation and developing private label customers and has seen an increase in sales driven by private label products. The company is expanding its product portfolio to accommodate the consumer shift towards healthy and nutritious foods. The company continues to invest in new technology to provide more flexibility and more container options.

Lassonde’s acquisition of Old Orchard Brands (OOB) has expanded its portfolio of ready-to-drink fruit juices and beverages in the central United States. The acquisition of Sun-Rype has strengthened its position in northwest North America and its strategic positioning in Canada’s national branded juice and beverage industries.

The company’s third quarter revenue of $ 495 million increased 17% year over year, and Sun-Rype contributed $ 47 million. Gross profit also improved due to higher sales volume, a decrease in the cost of certain raw materials and an improvement in the production rate at one of Lassonde’s plants.

Lassonde sales have increased 12% CAGR over the past decade. The company had higher quarterly sales due to the acquisition of Sun-Rype and increased consumer purchases during the COVID-19 crisis. The company saw a significant increase in retail sales of juice and beverages and a decrease in sales in the food service segment.

Lassonde expects sales in 2020 to be higher than in 2019. A consumer-centric product offering, longstanding relationships with key stakeholders, a diverse customer base and a leading brand reputation make Lassonde a clear winner.

Dividends

Lassonde’s dividend streak has been pretty impressive. The company has seen dividend growth of ~ 10% CAGR per year over the past five years. At the same time, the result has increased by more than 10% per year.

Lassonde currently has a dividend yield of 1.6% and a very reasonable payout ratio of 18%. Lassonde paid around 13 million dividends in the first nine months of 2020. The company recently increased its dividend by more than 9%. In addition, the company resumed its share buyback program in 2018.

Lassonde’s investments in building additional capacity for specialty food products, improving the flexibility of its fruit juice and beverage manufacturing capacity in the US, and updating its ERP software in Canada are expected to position the company well for further growth in the future. Lassonde Specialties’ additional manufacturing capacity is expected to increase sales by 25% to 30% upon completion of the project.

The company assumes that the Sun-Rype combination will lead to considerable economies of scale and a bundling of logistics and sales capacities. Lassonde seeks organic growth by innovating national brands and developing new solutions for customers through private label.

Lassonde aims to grow organically, expand its presence in new markets and segments, and expand capacity to improve overall profitability. The company should benefit from the strong demand for specialty foods, falling raw material costs, the acquisition of Sun-Rype and synergies from the OOB integration. Lassonde continues to make good progress on Lassonde Specialties’ three year investment program of $ 30 million.

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competition

Lassonde Industries operates in the processed food category. The food industry in the US market is highly competitive. Lassonde Industries faces intense competition not only from traditional retailers, but also from growing online and discount retailers. Tropicana, OceanSpray (PepsiCo), and Minute Maid (Coke) are the top competitors.

Lassonde also competes directly with Cott Corp., a leading provider of carbonated soft drinks with sales in North America, Europe and the UK. The competitive environment for private label products in the United States remains difficult. However, the company’s ongoing differentiation of products and packaging gives it a competitive advantage over its competitors.

Bottom line

In the last 100 years of its existence, Lassonde Industries has succeeded in driving geographic expansion and entering the untapped market segments. Lassonde is a leading name in ready-to-drink juices and beverages with popular brands and the largest producer of fruit and vegetable juices and beverages in Canada.

The company is in a good position to meet the growing demand for beverages and beverages supported by strategic acquisitions such as OOB and Sun-Rype. The company anticipates that demand for its products will increase due to changes in food habits related to the effects of COVID-19 and the strong demand for specialty and private label products.

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