Consumers are increasingly adopting oat milk as their default choice, particularly in the northern hemisphere. Can you explain the key factors driving this trend and how Oatly fits into it?
Consumers are increasingly adopting oat milk as the default milk, from China to the US and Europe. Despite this, the category is still in its infancy with oat milk household penetration under 30% and total plant-based milk household penetration reaching only up to only 40%. This indicates substantial room for growth while cow’s dairy continues to decline everywhere. Our mission is relevant to consumers for two underlying reasons: our unique products and our generational brand. We provide an easy, tasty, no-compromise alternative to dairy. Oatly has become an iconic brand that has built a fan base with the younger generations.
This unique combination has allowed us to scale effectively while maintaining our insurgent and mission-led identity. This has created a bright outlook for both Oatly and the oat milk category. Oatly is driving the oatmilk category forward, gaining market share in established regions like the US and Europe, as well as emerging markets in Asia, demonstrating our broad and growing consumer appeal.
Given your strong product and branding, how has this translated into financial performance over the past few years? Can you share some insights into your growth narrative and strategic decisions?
The past two years have been years of profound transformation for this business. Oatly has demonstrated significant brand power and category creation since 2012, however we faced challenges in scaling our supply chain at the same speed to meet the demand we had created. This isn’t surprising when you look at the data, with Oatly more than tripling in revenue since 2019. So in 2022, we undertook bold actions to stabilize and improve efficiency within our production capabilities to ensure we are operating in the realm of capacity we need, hence switching to a more dynamic asset-light production model. The other actions we took were to recalibrate our organizational size and fiscal structure globally. This approach has helped us reinject simplicity and agility into the business as we continue to grow.
Our efforts are beginning to yield results. In 2023, we achieved an 8.5% growth compared to 2022 and reduced our losses by $110 million. We aim to replicate this success in 2024 guiding to a further reduction of another $110 million. Our north star is profitable growth, as it enhances our impact. By growing sustainably, we can reinvest in our mission of promoting healthier choices for people and the planet. This balance of purpose and performance is crucial, as our financial health enables us to scale our operations effectively and drive greater impact.
You've highlighted the importance of purpose and profitability. Can you explain why oats are particularly suited for your mission and how they contribute to both sustainability and nutritional value?
Oats are remarkable for several reasons: their impact on nature, including soil health and climate benefits, and nutritional value. In terms of nature, oats require significantly less water compared to crops like almonds and have a better ability to sequester nitrogen, reducing the need for fertilizers. This makes them a crop of choice for regenerative agriculture, enhancing soil quality with each crop rotation.
From a climate perspective, our life cycle analyses for the currently available Oatly drinks in key markets have a substantially lower carbon footprint compared to cow’s milk, reducing climate impact by 44% to 80% depending on the market.
This means choosing oat milk over cow’s milk can significantly decrease an individual’s environmental footprint from dairy with minimal effort. Nutritionally, oat milk offers a good source of fiber and essential nutrients without the high glycemic load associated with some other alternatives. This combination of benefits underscores why oats are central to our mission of providing a sustainable, healthy food option.
What are the current challenges and opportunities in making oat milk a mainstream choice?
Scaling oat milk to replace a significant portion of the global cow’s milk consumption is indeed a considerable opportunity. Currently, global cow’s milk consumption stands at around 600 billion liters, in the last year while we produced about 520 million liters of oat milk. This gap illustrates the vast journey ahead of us. However, the uptake is promising, with the category growing rapidly in established markets like the UK, where oat milk consumption has multiplied tenfold in six to seven years.
The primary challenges include changing consumer behavior and increasing awareness about the benefits of oat milk. Many people are still unaware of the significant climate impact of their food choices. Our global food system is responsible for around one-third of total human-caused global greenhouse gas emissions, with around half of those coming from the animal-based sector. Our mission involves educating consumers and making the switch to oat milk as easy and informed as possible. This includes ensuring our products are delicious and convenient, thus encouraging lasting behavioral change. We believe that by making oat milk a delightful and informed choice, we can drive substantial growth and impact.
What strategies are you implementing to drive this behavioral change and increase oat milk adoption?
Our approach to driving behavioral change is rooted in behavioral science, which tells us that changes must be easy, simple, delicious, and informed to be lasting. Firstly, our products must be easy to access and use. Secondly, the choice should be simple; consumers should not need extensive knowledge to make the switch. Thirdly, it must be delicious; if oat milk doesn't taste great, people won't stick with it. Lastly, we inform consumers about the climate impact of their choices. We publish the product climate footprint on our packaging, run campaigns to encourage transparency in the dairy industry and beyond and advocate for mandatory climate labelling for food and beverage in key markets.
Additionally, we aim to reach a broad audience, and we don’t want to be an exclusive club or just for vegans. We welcome everyone,and engage with the masses to drive widespread change. Our partnerships and market strategies are designed to maximize penetration and impact, including introducing new products that hack more occasions and expanding into new markets, ensuring that we continue to drive the category and fulfill our mission.
How do you balance being a mainstream brand while maintaining your mission-driven identity?
Staying young. Staying agile. Staying fearless. Continuing to disrupt ourselves, as much as we will continue to disrupt the dairy industry. Driving trends as opposed to following them. Not letting size, scale, or success get into our heads. This deserves a great exercise of humility and dogmas-avoidance, which is very hard for a small true mission-lead organization. Our biggest fear is to drift into being “any other food company”.
Our mission is timeless. We owe it to the younger generations that believe in the Oatly brand. We have a lot of work to do, and it’s very exciting!
