Oatly business story

No Dairy, No Problem: How OATLY Is Crushing the Competition

 

Do you dislike soy or almond milk? And certainly don’t want to drink an entire glass of cow’s milk? If so, you’re not alone. The disdain and need for dairy-free milk led a food scientist from Sweden to develop something new: oat-based milk.

OATLY was launched in 1994 and now generates over $200 million in sales each year. So, how did a Swedish scientist start a business that revolutionized the dairy alternative market?

He created an alternative that actually tastes seriously good. However, there is so much more to the story than just great tasting vegan milk..

 

 
oat milk Talkroute

Academic Research Led to a Breakthrough

 

Back in the early 1990s, food scientist and chemistry teacher Rickard Öste was completing academic research on lactose intolerance. He knew that existing dairy alternatives were not very appealing to most people. He also grew up in Sweden, which is the second-highest consumer of milk after Finland.

Dairy-free milk is often too thin, bitter, or packed with artificial ingredients to improve its taste. Some of the ingredients used are also potentially harmful to the environment. For example, the most popular dairy-free alternative is soy, which requires a substantial amount of water to harvest.

Öste wanted to find a more sustainable source for milk that could also closely match the taste of cow milk. Oats are a common crop for Swedish farmers, making oats a natural choice. At Lund University in Sweden, Öste began work on an enzyme that could liquify oats without stripping the food of nutrients. Sometime between 1993 and 1994, Öste perfected his enzyme and began developing a buttery-tasting milk alternative.

Several additional natural ingredients are used, including a plant-based canola oil that is used to adjust the fat content of the milk. Öste formed a new company to start producing and selling his new creation. He named the company “OATLY.” While the name may not be particularly original, it is recognizable, short, and related to the products that it sells.

Öste established his company’s headquarters in Malmo and set up the production center in nearby Landskrona. The company remained under the radar for the next 18 years. Before 2012, it’s unlikely that many people outside of Sweden had ever heard of OATLY.

 
dairy free milk

OATLY Brings in a New CEO to Shake Things up

 

In 2012, OATLY hired Toni Petersson as its new CEO. Petersson was already an established entrepreneur with a long track record. He had successfully started and sold several businesses, including an alcohol distribution company in Japan.

Petersson saw the value in the OATLY brand. The company had a quality milk alternative with several unique selling points:

  • OATLY milk comes closer to tasting like cow’s milk
  • It’s made using natural, vegan ingredients
  • It involves using more sustainable production processes
  •  

    Petersson used these selling points to craft a new image for OATLY. He wanted to give OATLY an anti-establishment makeover, which included bringing in a new creative director, advertising firm, & artist.

    The packaging of OATLY milk was updated to include hand-drawn-style imagery with bold letters. However, it was the phrases on the packaging that stood out the most. “It’s like milk but made for humans.” & “No milk. No soy. No badness.”

    The first phrase landed OATLY in hot water with the Swedish dairy lobby.

     

    OATLY Gets Sued by the Dairy Industry and Gains Recognition

     

    The Swedish dairy lobby LRF Mjolk sued OATLY for disparaging its products. The group took OATLY to court and won. OATLY had to pay about £100,000 and was banned from using the phrase in future marketing material.

    After the court verdict, Petersson took out a full-page advertisement that appeared in the major Swedish newspapers. The advertisement delivered a defiant message, with Petersson stating that the company will never stop fighting for what it believes in.

    Petersson claims that the advertisement led to a 45% increase in sales. Instead of hurting OATLY, the dairy lobby helped one of its fastest-growing competitors. They gave OATLY the recognition that the company needed to branch out to new territories.

    While OATLY was banned from using the phrase in Sweden, the company was still free to use it in other regions.

     

    OATLY Expands its Market Reach and Product Line

     

    After Petersson became CEO, OATLY quietly expanded through Europe and parts of Asia. However, the lawsuit gave the company an opening to expand its reach.

    In 2018, OATLY spent £700,000 on an advertising campaign in the UK that used the same slogan that led to the lawsuit. The advertising campaign included billboards across the London underground stations, newspaper ads, television spots, and podcast sponsorships.

    By the end of 2018, OATLY’s annual revenue had grown from about $1.5 million to a little over $15 million. The company was producing over 80 million liters of oat beverages each year. To keep up with demand and continue growing, OATLY opened production facilities in Asia, the Netherlands, and the United States.

    OATLY products are now found in over 20 countries throughout Europe, Asia, and North America. The product line has also expanded and now includes:

  • Flavored oat drinks
  • On-the-go oat drinks & coffee drinks
  • Oat-based yogurt alternatives
  • Cooking cream alternatives
  • Oat-based spreads & Oat-based ice creams
  •  

     
    oat milk background

    Carbon Footprint Awareness and Attracting More Customers

     

    The packaging for OATLY products still includes hand-drawn-style lettering and images. However, the company also started printing the carbon footprint for each product. As with the nutritional content, the carbon footprint appears on the side of the package.

    The carbon footprint is listed in carbon dioxide equivalents (CO2e). The CO2e expresses the amount of CO2 it would take to produce the same greenhouse effect. Based on calculations from OATLY, replacing one liter of cow milk with a liter of OATLY saves 1160 CO2e, which is the equivalent to the CO2 produced driving the average gas-powered car about six miles.

    As OATLY attracts more customers, the dairy industry continues to fight for its existence. The European Dairy Association helped launch a campaign to pass Amendment 171 in the European Union, which would prevent OATLY and other plant-based dairy alternatives from using dairy descriptors, such as “dairy,” “creamy,” or “does not contain milk.”

    The amendment was approved by the European Parliament in October 2020 and may be implemented by the end of 2021. However, OATLY continues to grow in regions outside of the reach of the European Union. About 80% of specialty coffeehouses in China offer OATLY. The company is also reaching much more customers in the US & gaining popularity fast.

     
    oats graphic

    The Biggest Food Companies Start Imitating OATLY

     

    When companies start imitating your products, you know that you have created something special. As OATLY began expanding across the seas, the biggest food companies started to take notice of the plant-based milk alternative.

    Before long, Quaker Oats launched a new oat beverage. HP Hood, which is one of the largest dairy companies, established the “Planet Oat” brand to sell its new oat-based milk. Companies are starting to copy OATLY’s formula, as they see the demand for plant-based alternatives to cow milk. However, OATLY still has several features that help it stand out.

    Despite its growth, OATLY remains committed to its socially conscious roots. The company continues to provide complete transparency surrounding its operations, ingredients, and carbon footprint.

    While other companies may try to cash in on the oat-based milk craze, OATLY is still leading in a big way. It even partnered with Starbucks, the largest chain of coffeehouses. You can now go into almost any Starbucks and order a pumpkin spice latte with OATLY milk. Quite the accomplishment given the amount of competition currently in the space.

    Once again, it just goes to show how years of perseverance does truly pay off..

     

     
     

    Stephanie

    Stephanie is the Marketing Director at Talkroute and has been featured in Forbes, Inc, and Entrepreneur as a leading authority on business and telecommunications.

    Stephanie is also the chief editor and contributing author for the Talkroute blog helping more than 100k entrepreneurs to start, run, and grow their businesses.

    StephanieNo Dairy, No Problem: How OATLY Is Crushing the Competition