Shanghai Coffee Shops Under Siege: Is the Oat Milk Supply Chain in Crisis?

The Rise and Challenges of Oat Milk in the Coffee Industry

Oat milk has seemingly become a standard in the coffee world, both domestically and internationally. In almost any coffee shop, we can easily find oat milk offerings. This plant-based milk, originally created to allow lactose-intolerant people to enjoy a drink with milk-like texture but without dairy components, remained relatively unknown for decades. However, in 2012, when OATLY's newly appointed CEO labeled it as "environmentally friendly" and "healthy," it instantly caught the attention of a new generation of consumers.

At that time, OATLY's new CEO seized upon the two most active topics in America: environmental concerns & veganism, along with people's tendency to share news. He promoted environmental awareness through word-of-mouth marketing. On one hand, he promoted oat milk as more environmentally friendly than dairy through environmental journals, highlighting how it reduced environmental pollution, decreased carbon dioxide emissions from cattle respiration, and conserved water usage.

On the other hand, he approached coffee shops as a coffee enthusiast, constantly traveling to high-end cafes across the United States, engaging different baristas in conversation and promoting how healthy and environmentally friendly oat milk was... Then when baristas chatted with their peers, they would also mention oat milk, and through this word-of-mouth effect, it gradually became popular among cafes. Starting in 2013, coffee shops in the United States and other European and American countries began offering oat milk options to consumers, with Starbucks being one of the first chain coffee shops to provide oat milk.

Oat Milk's Entry into the Chinese Market

The sudden popularity of oat milk beverages in China's coffee circle was also driven by Starbucks. Before oat milk became popular in China, a small number of domestic cafes had already begun offering oat milk options, but at that time, there weren't many people demanding oat milk, so it wasn't widely adopted. Until 2020, when Starbucks China launched oat milk lattes under the theme of "Starbucks Dietaryism," oat milk overnight became synonymous with healthy new eating habits.

Subsequently, many independent coffee shops and chain coffee brands in China began using oat milk. Walking into any coffee shop, you could find products containing oat milk. Thanks to the widespread use in the coffee industry, OATLY oat milk sales skyrocketed like a rocket. Other brands subsequently launched their own oat milk products, and their sales also rode the wave of this trend.

Market Challenges Amidst Pandemic

However, the seemingly smooth-sailing oat milk market recently began experiencing sales emergencies due to the "pause" in coffee shops in Shanghai and Beijing.

According to OATLY's latest financial report, affected by the pandemic, this star oat milk company is encountering "China troubles." During the financial report meeting, OATLY CEO Toni Petersson stated: "In China, our team is going through a very difficult environment. We have a significant portion of our business in Shanghai. Among the retail and food service stores in China where OATLY is present, more than 17,000 stores had to close due to lockdown measures in the first quarter of this year."

OATLY has always led the oat milk market, and its "braking" also means other brands of oat milk are following suit. This is because oat milk is not a necessary consumer demand, but rather a product stacked with marketing concepts such as premium and healthy. Therefore, there's sufficient marketing space for development in the B2B sector, while the B2C sector is relatively weaker. Although there are oat milk products targeting B2C customers, their prices are also relatively high, so sales are far below those of the B2B market.

Market Positioning Challenges

Also because of being "too" focused on the B2B market, the sudden "shutdown" of cafes caught the oat milk market unprepared... The "shutdown" of cafes is just a light blow, because the oat milk market still faces more challenges. If we start focusing on the B2C market now, the positioning of oat milk becomes an awkward situation.

In China, the group of people with lactose intolerance isn't very large. Consumers have been drinking milk for decades, and consumption habits are difficult to change in the short term. Additionally, oat milk is significantly more expensive than cow's milk, so wanting to position it as a replacement for milk still faces many difficulties to overcome.

If it's positioned as a beverage, there's still room for improvement in terms of taste. Product upgrades and iterations are also important. Furthermore, oat milk's marketing and promotion in the B2C market haven't achieved widespread coverage. For a new category to quickly occupy consumer awareness, it requires explosive exposure in a short period, but currently, various brands are still investing relatively little in promoting oat milk in the B2C market.

Nutritional Analysis of Oat Milk

Is oat milk really healthy? Let's first look at this table: (The following data doesn't refer to any specific brand of milk and plant-based milk)

Per 240ml: Fat, Protein, Fiber, Sugar
Whole Milk: 8g, 8g, N/A, 11g
Soy Milk: 4.5g, 8g, 2g, 6g
Oat Milk: 7g, 3g, 3g, 7g
Almond Milk: 2.5g, 1g, <1g, 7g

(This data doesn't refer to any specific brand of milk and plant-based milk) From this nutritional table, we can see that although the fat content in oat milk isn't the highest among these four options, it's also not the lowest. Many people think that the lower the fat intake, the more beneficial it is for weight loss. Actually, this isn't necessarily true. Increasingly, research shows that fats can be divided into high-quality and low-quality, and moderate intake of the right fats has positive effects on weight loss.

Next is protein. From the table, we can see that the protein content in milk and soy milk is 2 to 3 times that of oat milk. Protein is an important component of human bones and muscles. Judging by the content, relying solely on oat milk for protein supplementation is far from sufficient.

So, if you don't have lactose intolerance concerns, milk is nutritionally the best choice. If you have lactose intolerance, soy milk is the best option.

Quality and Application Considerations

Previously, our coffee workshop also evaluated various oat milk products on the market (link available). Some products contain added vegetable oil to give the plant-based milk a better texture. Some oat milks have a noticeable sweet taste, but no sugars are listed in the ingredient list. Some oat milks feel even richer than fresh milk after consumption.

As for whether it's healthy, our team hasn't conducted further research and has only provided personal sensory descriptions. However, one thing is certain: not all oat milk can make delicious coffee, and not all coffee is suitable for adding oat milk.

Image source: Internet
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