Oatly, the popular vegan milk brand with many celebrity fans, received a $200 million equity investment. Private equity powerhouse Blackstone led a group of investors to inject the equity in July 2020. Other investors that contributed to the $200 million stake included Oprah, Natalie Portman, former Starbucks CEO Howard Schultz, Jay-Z’s entertainment company Roc Nation, and Rabobank Group’s investment division. The value of the Swedish oat milk brand is now over $2 billion.
Oat Milk Sales Increasing in United States
Oat milk sales are one of the fastest growing drink segments in the United States. They have grown 470% year over year to mid-March. More broadly, plant-based alternatives have surged in popularity amongst consumers. Companies that offer plant-based meat substitutes, such as Beyond Meat and Impossible Foods, have both also gained prominence. Just a few years ago, vegan consumers composed a small percentage of the overall market. In the last three years, there has been a 600% increase in people identifying as vegans. This trend has benefited brands like Oatly, which put growing pressure on diary-milk producers. Those producers include Dean Foods, which filed for Chapter 11 bankruptcy protection in November 2019.
Consumers are increasingly focused not only on health benefits, but also on a company’s commitment to sustainability. The process of making oat milk requires less water than for making almond milk. Oatly publishes an annual sustainability report highlighting how their production and supply chain process operates to minimize its climate footprint.
With its catchy packaging and strategic advertising, Oatly has been able to expand rapidly. Previously just a Nordic company, Oatly entered the U.S. market four years ago. Today Oatly distributes its products in Northern Europe, the U.S., and China. Upon initial entry into the U.S. Oatly primarily supplied its products to upscale New York coffee shops. Today, consumers can find Oatly products in more than 50,000 locations in 20 countries.
Marketing Efforts Key to Reaching Young, Trendy Oat Milk Drinkers
Marketing efforts focused on young, trendy milk drinkers. Those efforts have been key in driving rapid growth and taking on almond and soy milk incumbents for market share. Oatly redisigned its packaging a few years ago to be more minimalistic and contemporary. With trendy slogans, unique TV ads, and well-positioned advertisements in train stations and city billboards, Oatly’s strategy has paid off.
“There are very few brands out there that have this level of scale globally and yet are still early in their consumer-brand life cycle,” remarked Blackstone Managing Director Ann Chung. Since entering the U.S. market in 2016, Oatly has had to ramp up production by over 1,250% because of consumer demand. The company’s sales roughly doubled from the previous year, reaching $200 million in 2019. It anticipates similar growth again this year.
Oatly Founded in 1990s by Swedes
Oatly began as a small oat milk company in the Swedish countryside. Founded in Sweden in the 1990s by Rick and Björn Öste, the company utilizes patented enzyme technology from researchers at Lund University. CEO Toni Petersson, who joined Oatly in 2012 after stints at liquor and lifestyle companies, revamped the company to expand beyond just Scandinavia. Oatly today is one of the most prominent plant-based brands on the market. Oatly’s headquarters and production still remain centered in Sweden. There are around 550 employees located in Sweden, the U.S., China, Germany, the U.K., and the Netherlands, with the majority based in Sweden.
Oatly’s product lineup includes oat milk, “oatgurts”, and ice cream. In addition to being widely available on store shelves and in cafes, it also offers a subscription service through its website to get regular Oatly product deliveries. Its ice cream pints come in flavors including strawberry, chocolate, coffee, and mint chip. Likewise, there are a number of “oatgurt” flavors to select from and the oat milks come in low fat, chocolate, and barista chilled versions. On Oatly’s packaging, they highlight the fact that all products contain “no dairy, no soy, no nuts, no gluten, no GMOs.”
Oatly’s Plans for Expansion
The company plans to use its new funds to build factories in Europe, the U.S., and Asia. The $200 million investment positions the company to be ready for an IPO in 12 to 18 months if it chooses, as many analysts have already speculated. Alternatively, Oatly could be acquired by a food and beverage conglomerate in the future.
Criticism Over Blackstone Participation
Oatly has received backlash by some activists for accepting an investment from Blackstone. Critics point out that Blackstone’s founder and CEO Stephen Schwarzman is a Trump supporter and that Blackstone has investments in Brazilian firms that contribute to deforestation.
While acknowledging these viewpoints, Petersson has also emphasized that the Blackstone-led investment in a sustainability company like Oatly could encourage other traditional investment firms to put money into green companies. As Petersson said: “Since we re-launched our oat milk brand in 2013, our focus has been to positively impact society by enabling people to change their lives with better, more environmentally responsible food choices, and in so doing, re-shape the food system to better contribute to the future of the planet. We chose to partner with Blackstone Growth because of their tremendous resources and unique reach.”