Brand I'm Watching: Oatly
A $2 Billion Dairy Challenger
Oatly first caught my attention when I learned that it secured $200 million from an investment group led by Blackstone and some major celebrities including Oprah, Jay Z, and Natalie Portman. The investment represents a 10% stake in the company, which gives the plant-based dairy disruptor a valuation of around $2 billion.
The brand is upfront and unapologetic about its mission to take on the nearly $700 billion dairy industry, as they state in their Instagram bio: “We exist to make it easy for people to eat better and live healthier lives without recklessly taxing the planet’s resources in the process.”
If you are like me and late to join the oat milk trend, it may seem that Oatly popped up overnight. But the company has been manufacturing its products since the 90s. It’s gained popularity since it entered the US market in 2017 and as consumers become more educated about the repercussions of dairy consumption.
Dairy milk requires 10 times more land than what is needed to produce oat milk. 200 mL of dairy milk needs 120 L of water to be produced and causes 0.6 kg of carbon emissions. The same amount of oat milk needs just 5 L of water to be produced and emits half the amount of carbon emissions. When considering that US consumption of dairy milk is about 65 L per capita, the environmental impact of dairy milk is staggering. That’s before we even start thinking about other dairy products like yogurt, cheese, and ice cream. Also, it turns out another popular plant-based alternative, almond milk, isn’t nearly as eco-friendly as it significantly depletes water resources.
It’s pretty clear that for the eco-conscious consumer, oat milk is a must-have staple on their weekly grocery list. And Oatly is aiming to be the number 1 brand to fill that need.
What Makes Oatly Stand Out
The number of oat milk options available are steadily increasing, including brands like Silk (Oat Yeah), Califia Farms, Planet Oat, Elmhurst 1925 and Pacific Foods. However, Oatly seems to stand out from the pack.
A key strategic advantage the company has is its obsessive focus on a single ingredient – oats. Where other companies like Silk have built expertise in other plant-based alternatives, Oatly has devoted the last twenty years to perfecting an enzymatic process that turns oats into milk. That expertise has allowed them to make a superior oat milk and extend their product lines into yogurts and ice creams.
Oatly doesn’t stand out just because of its well-known creamy texture and thoughtfully sourced ingredients, but because of how the brand presents itself to consumers. Not only is the company unafraid to call out the dairy industry’s “reckless” business practices, they even publicly highlight their own faults and areas of improvement.
For example, the company released its 2018 Sustainability Report and on the front page is a call-out: “Slightly Worse than Last Year!” The report goes on to explain that from a numerical standpoint, the company did not reach its goals in terms of key metrics of like greenhouse gas emissions. However, the company also dealt with unexpected growth in 2018 which proved challenging in attaining its sustainability goals. Here’s an excerpt:
“We can summarize our sustainability performance for 2018 in three words: not so great. At least if you look at the numbers from a purely numerical perspective where a worse number is just a worse number. On the other hand, if you consider the fact that in 2018 we increased our turnover by 65% and our workforce by more than that, while at the same time delivering our oat products to far more people around the world than ever before, well then, the numbers mean something else entirely.”
The report goes on to describe their shortcomings in detail, and how the company plans to deal with those in the next year. Importantly, they remind customers (and investors) that every liter of oat milk that replaces a liter of dairy milk is a win in and of itself.
This type of no-nonsense transparency is also evident on the individual product pages of the brand’s website. Next to each item there is a description of “What’s Amazing” and right next to it a description of “What Might Be Less Amazing”. For example, the Oatly Barista edition is a premium, great-tasting product that foams up just like real milk, making it ideal for crafting your favorite latte sans milk. But to make that foamy magic happen, Oatly has to add something called dipotassium phosphate, a safe but sometimes inflammatory food additive.
Increasingly conscious consumers are starving for this type of authenticity and transparency, and Oatly isn’t afraid to give it to them. Oatly deeply understands that it exists in a world where it is more important but harder than ever to earn a customer’s trust. As the CEO Toni Petersson says, “If you’re going to be an ethical company, you need to back up every claim you make, and every day... I think that’s what needs to happen in order to generate trust of younger people.” As I’ve talked about before on the blog, he’s absolutely right.
“If you’re going to be an ethical company, you need to back up every claim you make, and every day... I think that’s what needs to happen in order to generate trust of younger people.”
Oatly’s Innovative Brand Tactics
Oatly knows that customers are smart and doesn’t want to sell to them with a false narrative that oat milk tastes exactly the same as dairy milk. The company knows that oat milk isn’t for everyone and acknowledges this through self-deprecating and sarcastic marketing language. It even ran an ad that featured feedback from one person that said the oat drink “tastes like sh*t!” The ad explains that taste is personal, and some people simply don’t like the taste of oat milk, but many people that try it end up loving it. Funnily enough, by recognizing that it isn’t a product for everyone, Oatly is compelling non-users to try it and see for themselves.
Oatly Ad, B Direct Marketing
Oatly uses its eye-catching and comedic-yet-informational packaging to further convey its pursuit of a plant-based society, proclaiming: “It’s like milk, but made for humans!”
According to Creative Director John Schoolcraft, the company viewed packaging as their main owned media channel since it didn’t have a large advertising budget. Here’s an excerpt from an interview regarding the packaging strategy:
“If you look at the dairy alternative packaging on shelves; the liquid is always shown, it usually pours from the right-hand side, everything is color coded to a pattern that exists in the design world. There are so many conventions. The aim was to get customers to pick it up out of curiosity, so we intentionally made these look like we’d just made these in the basement at home. We thought that every side of the packaging there should be something interesting to read. The legal side on the back we refer to as the boring side. We know that once we’re in people’s hands, they read the copy, try us, and tend, in great numbers, to like the taste.”
Oatly Packaging, Dieline
Oatly is a great example of a brand with an unrelenting sense of who they are and what they stand for. Every facet of the business is aligned to their brand mission- from their supply chain, to their website, packaging, and advertisements. They leverage their brand expression through packaging and advertisements to ignite interest in a greater cause, rather than just as a vehicle for sales. Even as more rival oat milk brands are certainly on the way, I’ll be watching Oatly as the one that will challenge the entire dairy industry.
The views in this article are purely my own. In no way is this article related to, informed by or endorsed by my employer.