OATLY Lost Nearly $400 Million Last Year: Are Plant-Based Milk Coffees Losing Their Appeal?

Recently, OATLY, the "pioneer" brand of oat milk, released its financial performance report for the full year and fourth quarter of 2022, with a net loss of nearly $400 million.

According to the performance report, OATLY achieved revenue of $722.2 million in 2022, a year-on-year increase of 12.3%. Compared to the total loss of $212 million in the same period of 2021, the loss expanded to $396 million last year. Affected by the pandemic, revenue in the Asian market declined by $800,000 in the fourth quarter of 2022.

Contrary to the decline in OATLY's Asian market revenue, the market size of China's oat milk industry is showing an upward trend. Asia is OATLY's third-largest revenue source, with China's business accounting for 93% of the Asian market, having a significant impact on Asian market revenue.

Financial report data shows that OATLY's sales volume in the Asian market increased throughout 2022, with a year-on-year growth of 32%, reaching revenue of $152.8 million. OATLY stated at its performance conference that this year, the Asian market, primarily China, will continue to be a key area for the company's expansion. On the same day as releasing the financial report, OATLY also announced it had secured $425 million in financing commitments and will continue to expand the domestic oat milk market in the future.

OATLY's Market Position in Asia

OATLY's fourth-quarter financial report shows that approximately 69% of its major revenue in Asia comes from foodservice channels, with other contributions from e-commerce retail channels. Foodservice channels, mainly coffee shops, were OATLY's primary entry point into China, leveraging major coffee and restaurant brands to shape public perception of oat milk.

Success Factors and Market Challenges

Since 2018, OATLY quickly "went viral" through the oat milk latte created in partnership with Starbucks, positioning itself as a "new coffee companion." Its signature product "Barista Edition" pioneered a fresh combination of oat milk and coffee, successfully making its way onto the permanent menus of many coffee shops. With the first-mover advantage of oat milk coffee, OATLY became the exclusive supplier for well-known chain brands such as Starbucks, COSTA, Tim Hortons, and Manner, soaring to an IPO in just a few years.

OATLY's success mainly stemmed from filling the market share gap in domestic plant-based milk, while also being driven by the concept of healthy eating. Therefore, when the hype around the concept began to fade, consumer power significantly weakened. As for the development of the domestic oat milk market, it currently remains in the stage of following new concept trends, with innovative combinations not making much impact.

Market Competition and OATLY's Response

While the role of supplying to coffee channels is certainly important, in the past two years, many emerging oat milk brands such as Xiaomai Ouye, Plant Label, and Wild Plants have emerged. Chinese consumers' acceptance of oat milk is not as high as that of cow's milk, and with its higher price, it is more likely to be replaced. Therefore, OATLY has had to launch a richer lineup of new products.

Riding the wave of milk tea and ice cream trends, OATLY has launched new products such as "Tea Master Oat Milk" and plant-based ice creams, and plans to launch ready-to-drink oat milk tea in collaboration with Xiangpiaopiao Lanfangyuan. Additionally, OATLY intends to introduce products in new packaging specifications, hoping to tap into more consumer groups.

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