SunOpta Inc. announced that the formation of the SunOpta Fruit Group, based in Los Angeles, has been completed. The SunOpta Fruit Group will be a supplier of frozen fruit-based products to the private label, foodservice and industrial markets in North America. The newly formed Fruit Group, consisting of the combination and integration of Organic Ingredients Inc., Cleugh's Frozen Foods Inc. and Pacific Fruit Processors Inc., all based in California, will generate total annualized revenues of approximately $100 million.

Sergio Varela, president of the SunOpta Fruit Group, said, "The integration of these three established businesses will enable us to become a dominant player in the natural and organic North American frozen fruit market. This is a large and rapidly growing market, driven by consumers that are dedicated to making nutritional choices that will improve their health and their quality of life. With industry analysts estimating that the U.S. natural and organic food markets will reach $14.5 billion this year and will grow to $30.7 billion by 2007, this integration provides us the opportunity to become a leading competitor in this exciting market."

Organic Ingredients Inc., a supplier of organic private label products with significant expertise in sourcing fruits and vegetables worldwide, has experienced annual revenue growth in excess of 75% since SunOpta's acquisition of 51% of the company in September 2004. (SunOpta acquired the remaining 49% of Organic Ingredients in April 2005.) The company's growth is being driven by the addition of a number of new private label contracts, including contracts to supply organic fruit juices to several major retailers in the U.S. which are expected to generate approximately $5 million in annualized revenue. Organic Ingredients is also planning to launch a new line of natural and organic Italian-style sparkling sodas and flavored waters for the branded and private label markets in North America.

Cleugh's Frozen Foods, a supplier of frozen fruits to the private label, foodservice and industrial markets, with annualized revenues in excess of $50 million, is also experiencing significant growth in the private label sector. Anticipating additional growth, the company recently installed new polybag packaging equipment to improve yields and increase polybag capacity by 30%. In addition, the company is implementing a number of efficiency measures and assessing expansion projects to better serve its customers.

Pacific Fruit Processors, a supplier of fruit bases for the dairy, bakery and beverage markets, with annualized revenues of approximately $20 million, has recently completed the expansion of its frozen storage capabilities. The newly built 10,000 square foot freezer is expected to generate considerable savings related to freight and third party warehousing. Over the past few months, Pacific has been experiencing significant growth in a number of applications for its fruit bases, including yogurts, smoothies and bakery products, with particular focus on organic products.

SunOpta Inc. also announced it has completed the transfer of its three organic and specialty food distributors into its 135,000 square foot state-of-the-art distribution center in Toronto.

As a result of this amalgamation, SunOpta anticipates annualized cost savings of $2.0 million, all of which will be achieved by year end. In addition, since SunOpta can now offer national distribution in Canada, the company has been successful in adding a number of new product lines, many on an exclusive basis, which can be expected to add $7.0 million of annual revenue by year end. The company expects that these programs will have a beneficial impact on the financial results of the company beginning in the upcoming fourth quarter.

Jeremy N. Kendall, chairman and chief executive officer of SunOpta, said, "We are pleased to complete this strategic consolidation of operations. This consolidation will yield significant cost savings, and it will provide us the ability to increase the number of product lines distributed in the Canadian market, which we anticipate will accelerate top-line growth and provide a good deal of operational leverage. We are dedicated to improving operational efficiency throughout all of our business segments, with the goal of driving improved bottom-line results in the most responsible manner possible."