Oat Milk Coffee No Longer Trending? Coffee Shops No Longer Promoting, Oatly's Net Loss Exceeds 4.4 Billion Yuan!

Professional Coffee Knowledge Exchange

For more coffee bean information, please follow Coffee Workshop (WeChat official account: cafe_style)

For more specialty coffee beans, please add FrontStreet Coffee's private WeChat, ID: qjcoffeex

Oatly's Massive Losses: The Rise and Fall of the Oat Milk Phenomenon

The oat milk brand Oatly, once immensely popular due to hype in the coffee industry, recently disclosed in its 2022 financial report that the net loss attributable to Oatly's parent company shareholders reached $392.6 million (approximately 2.7 billion RMB), nearly doubling from the net loss of $212.3 million (approximately 1.46 billion RMB) during the same period last year...

And this data comes despite Oatly's Asian market (primarily China) achieving sales growth throughout 2022. In fact, from 2019 through the 2022 financial report, Oatly has accumulated losses exceeding $641 million (approximately 4.41 billion RMB). One reason for such losses is the limited marketing space for oat milk. Oat milk has always targeted the B2B market (business users) because its performance in the B2C market (consumer market) would be relatively weak. Although there are oat milk products targeting the B2C market, their prices are relatively high, so sales volume falls far short of the B2B market.

For brands, the B2B market, while stable, can mean "no worries about food and drink" when done well, but once encountering irresistible factors, it can be completely wiped out. For example, the COVID-19 pandemic in recent years delivered a heavy blow to Oatly, which had successfully brought "plant-based" products to consumer markets in various countries through the "coffee + oat milk" model. Because cafés worldwide were closed for extended periods, even after reopening, cafés dared not stock up on high-cost oat milk, as after years of pandemic, consumers developed different attitudes toward coffee consumption, preferring more affordable and practical products.

Therefore, many cafés no longer stock large quantities of oat milk, instead using more conventional milk or other plant-based alternatives to create more affordably priced products. Oatly's significant losses in 2022 were partly because the company didn't "learn its lesson," and partly because in 2021, it bet heavily on the Chinese market, making Chinese consumers aware of oat milk through Starbucks China. However, Shanghai's lockdown controls in 2022 directly panicked Oatly's CEO, who stated: "In China, our team is going through a very difficult environment. We have a large 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 in the first quarter of this year due to lockdown requirements."

Meanwhile, in the Chinese market, the population with lactose intolerance is not very large. Most people choose oat milk out of curiosity, while a small portion does so because plant-based milk is considered "healthy" and "environmentally friendly." However, in the retail market, a single bottle is not inexpensive, so when the B2B market faces crisis, few consumers in the B2C market choose Oatly oat milk.

Controversial Marketing Strategies

Beyond the sales model being unsuitable for transitioning from B2B to B2C markets, Oatly's series of questionable moves after incurring losses have increasingly irritated the coffee industry, and many consumers have grown tired of Oatly's promotional methods for oat milk. Initially, oat milk promotion focused on environmental and vegan themes, promoting through environmental journals that oat milk is more environmentally friendly than cow's milk because it reduces environmental pollution, decreases carbon dioxide emissions from cattle respiration, and conserves water. Simultaneously, it approached cafés as coffee enthusiasts, constantly shuttling between high-end American cafés, finding different baristas to chat with, promoting how healthy and environmentally friendly oat milk is...

However, oat milk's texture and flavor are somewhat monotonous, and it doesn't blend well with many additional flavorings and ingredients. After an initial wave of consumer enthusiasm and tasting for a period, attention to oat milk declined due to lack of novelty. Coupled with the pandemic, Oatly grew anxious. To get the coffee market to pay more attention to their oat milk, in 2022, they attempted to register the word "barista" as a trademark. In September 2022, Oatly submitted an application to register the "Barista" trademark with the New Zealand Intellectual Property Office, but Bidfood immediately objected. Bidfood stated that the term "Barista" has been used on various plant-based milk products in the country for nearly a decade and is considered a generic term, with no company having previously registered it as a trademark.

But Oatly argued that "Barista" is not a generic term, because over the years, when people see "Barista," they immediately associate it with their company's oat milk rather than other plant-based milk/dairy alternatives.

By October 2022, Oatly published an open letter on its official website stating that the rule in WBC competitions requiring contestants to use only cow's milk was outdated! This could be seen as openly challenging the Specialty Coffee Association.

The brand believes that oat milk coffee products are now widely loved and welcomed by general consumers in cafés, and modern consumers are increasingly embracing oat milk. As a globally recognized specialty coffee association, the SCA's mission, purpose, and core values include the concept of "sustainability."

Furthermore, in 2021, they invested in a movie, inviting vegan actors to star in a film called "The Coffee Wars," which was released on multiple online platforms on March 7th.

The plot involves a barista who becomes impoverished because he insists on opening a café that only uses oat milk, which is not understood or accepted by the mainstream. However, the protagonist refuses to give up and forcefully brings oat milk to barista competitions, hoping to prove that plant-based milk can also deliver exceptional performance through competition.

But this series of operations has also annoyed many coffee enthusiasts. Whether it was the public challenge that sparked widespread discussion among netizens, or the new movie that very few people watched—partly because it was paid content and partly because, besides very dedicated plant-based coffee enthusiasts and professionals, it couldn't attract mainstream audiences.

Future Challenges and Market Realities

After releasing the 2022 financial report, Oatly's CEO stated that with the lifting of pandemic restrictions, the company is prepared to aggressively attack the market again in 2023. He also announced the latest strategy for the Asian market: expanding distribution, launching new products, and improving efficiency. However, Asian consumers today have significant demand for flavor innovation, and monotonous textures and tastes cannot satisfy consumer preferences for long. Additionally, whether plant-based milk is truly healthy remains controversial, because to make oat milk taste good, large amounts of vegetable oil and sugar need to be added for formulation—both of which are often root causes of obesity.

This has also led the public to become cautious about whether oat milk is truly healthy and whether it can "replace milk" as oat milk brands claim.

Image source: Internet

Important Notice :

前街咖啡 FrontStreet Coffee has moved to new addredd:

FrontStreet Coffee Address: 315,Donghua East Road,GuangZhou

Tel:020 38364473