Oatly: The Rise (and Fall?) of a Market Disruptor

Oatly, a Swedish oat milk brand, grew from a niche product into a global phenomenon, reshaping the plant-based food landscape. Founded in the 1990s by food scientist Rickard Öste, the company tapped into the rising consumer demand for sustainability and dairy-free alternatives. With quirky marketing, transparent messaging, and a sharp focus on environmental advocacy, Oatly became a symbol of how an innovative product and bold branding can disrupt traditional markets.

However, after going public in 2021 the company struggled to scale effectively running into production issues and fast growing competition in the plant-based sector. In late 2024, the company’s share price fell below the NASDAQ’s minimum requirement of $1 per share and now faces being delisted if they can’t turn things around. So what went wrong?

Early Years

Oatly’s journey began at Sweden’s Lund University, where Öste discovered a process to turn oats into a creamy, milk-like beverage. The company initially operated under the radar, with limited distribution focused on Scandinavian markets. However, in the early 2010s, Oatly found its true calling: not just as a dairy substitute, but as a product embedded with environmental values.

The brand pivoted towards sustainability-focused consumers and began marketing its product to early adopters in niche cafés and plant-based communities, gaining an initial following among vegans and lactose-intolerant consumers.

Expansion to the US

Oatly entered the US market in 2016 with a clever rollout strategy. Instead of immediately launching in major retail stores, Oatly debuted exclusively in specialty coffee shops, including trendy cafes in New York. By building relationships with baristas and café owners, the brand created buzz and scarcity. Consumers who tried Oatly’s froth-friendly milk alternatives in lattes wanted to purchase it at home, building organic demand.

Oatly’s also engaged in some unconventional marketing. The company adopted a minimalist aesthetic and witty advertising with slogans like, “It’s like milk, but made for humans,” and, “Wow, no cow!” This bold, self-aware tone made the brand instantly recognisable and helped it stand out in the crowded dairy and non-dairy markets.

Oatly’s messaging leaned into transparency, with packaging and communications openly addressing sustainability concerns—sometimes humorously, sometimes provocatively. The brand’s ads often appear as cheeky billboards, hand-drawn doodles, and videos where the CEO sings awkward jingles, perfectly aligning with the irreverent, millennial vibe.

Unlike many plant-based brands, Oatly directly links its product to environmental activism. The company champions climate action by framing dairy as a significant contributor to greenhouse gas emissions. Its packaging features lifecycle analyses, showing the water and carbon savings achieved by choosing oat milk over traditional dairy. This messaging resonates with conscious consumers looking to make a positive environmental impact through their purchasing decisions.

Scaling Up: Navigating Rapid Expansion

With the café-first approach proving successful, Oatly scaled up distribution in retail stores and supermarkets worldwide. It diversified its product line, offering oat-based yogurts, ice creams, and creamers to capitalise on the growing appetite for plant-based alternatives.

In 2020, Oatly expanded its manufacturing capacity by opening production facilities in the U.S. and Europe to meet surging demand. Simultaneously, the company partnered with fast-food chains like Starbucks and McDonald's, making plant-based options more accessible to mainstream audiences.

Oatly went public in May 2021, with an initial valuation of $10 billion.

Controversies and Decline

Following the IPO, stock priced at $17 soared to $22 on the first trading day, signaling the triumph of the plant-based giant. However, since then, the stock has plummeted to just over $1 since late 2023 and in September 2024 the company received formal notice it was in breach of Nasdaq’s minimum bid requirement of $1. It now has 180 days to turn things around before being delisted. 

Whereas the main issue appears to have been post-pandemic supply chain disruptions, the challenges faced by the company in recent years are multi-faceted and below is a closer look into each one in more detail. 

  • Supply Chain Disruptions

Oatly’s supply issues reflect a perfect storm of challenges. Droughts devastated oat crops in Canada and the US—Canada’s production hit an 11-year low, while the US recorded its worst yield on record. Complicating matters, Russia’s invasion of Ukraine, a key grain exporter, prompted export bans, deepening shortages. Unpredictable weather also caused rail transport delays, further disrupting logistics.

In response, Oatly sought alternative suppliers, which drove up costs, impacting consumer prices. Although the company announced plans for three new production facilities to stabilise operations, high construction expenses forced them to shelve or delay these initiatives

  • Ad Ban and Greenwashing Allegations

In January 2022, the UK’s Advertising Standards Authority (ASA) banned Oatly ads for misleading environmental claims. One campaign claimed that Oatly’s Barista milk produced 73% fewer carbon emissions than dairy milk, but the ASA found the comparison unclear and potentially misleading.

This setback followed earlier greenwashing accusations, including investor lawsuits in New York. Oatly’s marketing pause in recent years due to supply chain challenges also weakened its brand momentum.

  • Product Recalls

In August 2022, Oatly faced a voluntary recall of five products due to contamination concerns linked to manufacturing partner Lyons Magnus. The recall, which included popular Barista oat milk products, was triggered by potential contamination with dangerous bacteria.

The contamination scandal affected products sold at major retailers like Target and Starbucks and sparked a class-action lawsuit. In a post-pandemic world with heightened consumer awareness of food safety, the recall dealt a severe blow to Oatly’s reputation.

  • Increased competition

Oatly also withdrew its vegan ice-cream tubs from the UK market in early 2023. While the company initially reported success in multiple markets, it acknowledged that UK sales fell short of expectations. Increasing competition from brands like Alpro, Minor Figures, and private-label supermarket products further challenged Oatly’s market position with similar problems occuring in the US. 

This strategic retreat highlights the crowded nature of the plant-based sector, where price-sensitive consumers have plenty of alternatives at lower costs.

  • Controversial PR Campaign

In October 2023, Oatly launched its bold “F*ck Oatly” campaign—a website cataloging controversies and criticisms the brand has faced, from the Blackstone investment backlash to the TikTok uproar over its ingredients. While the campaign emphasised transparency, critics viewed it as petty and lacking empathy.

Although the campaign is designed to embrace negativity as part of the brand's image, some argue that it risks reviving consumer concerns that had faded from memory.

  • Manufacturing Restructuring

Citing Covid-19 restrictions in Asia, manufacturing issues in the Americas, and foreign exchange headwinds, Oatly’s losses were over $108 million in Q3 2022—nearly triple the losses compared to Q3 2021. The losses came despite quarterly sales being up from $171 million to more than $183 million year on year. 

To streamline operations, improve cash flows and lower capital expenditures, the company announced a 25% workforce reduction across Europe, the Middle East, and Africa (EMEA) and a shift toward a “hybrid manufacturing model” in the US, outsourcing part of its production process to a co-packer to handle increased demand.

  • Decline in Asian Markets

Oatly’s struggles are particularly evident in Asia, where sales dropped nearly 15% in Q2 2023. Despite opening new factories in China and Singapore, Oatly blamed the slow post-Covid recovery and fierce competition for its decline. The COO, Daniel Ordonez, noted that the company would halt SKU expansion and focus on key products and partnerships to cut costs and stabilise its presence in the region.

Leadership Changes

n mid-2023 Oatly appointed former Mars executive, Jean-Christophe Flatin as CEO, replacing long time chief Toni Petersson. The leadership shift reflected a pivot from marketing-driven strategies to operational efficiencies in an attempt to turn the company’s fortunes around after becoming a global player.

Speaking to analysts after the group reported its Q1 2024 numbers, Flatin said: “We had a solid first quarter, and the year is off to a good start.” Despite this investors clearly remain wary of the brand. Q1 2024 saw a net loss of $45.8m compared to a loss of $75.6m in Q1 2023. Oatly is forecasting annual revenues will rise 5-10% in 2024 but still estimates an adjusted EBITDA loss of $35-60m vs an adjusted EBITDA loss of $157.6m in 2023.

The Road Ahead

Oatly’s journey from IPO darling to embattled company highlights the challenges of sustaining growth in a rapidly evolving market. Although its recent restructuring efforts and leadership changes reflect a strategic pivot, it remains to be seen if these moves will revive its fortunes. With increased competition and shifting consumer preferences, the alt-dairy giant faces an uphill battle and its future will certainly be interesting to watch.

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