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

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

The oat milk brand Oatly, once immensely popular on the back of hype in the coffee industry, recently disclosed in its 2022 financial report that the net loss attributable to its parent company's 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) in the same period the year before.

That figure came even though Oatly's Asian market, primarily China, achieved sales growth throughout 2022. In fact, from 2019 through the 2022 financial report, Oatly accumulated losses exceeding $641 million (approximately 4.41 billion RMB). One reason for those losses is the limited marketing space for oat milk. Oat milk has always targeted the B2B market, meaning business users, because its performance in the B2C, or consumer, market would be relatively weak. Although there are oat milk products aimed at the B2C market, their prices are relatively high, so sales volume falls far short of the B2B market.

For brands, the B2B market is stable, and when done well it can mean never having to worry about food and drink, but once it hits an irresistible factor it can be wiped out completely. The COVID-19 pandemic in recent years delivered just such a blow to Oatly, which had successfully brought "plant-based" products to consumer markets in various countries through the "coffee plus oat milk" model. Because cafés worldwide were closed for extended periods, and even after reopening dared not stock up on high-cost oat milk, consumers emerged from years of the pandemic with different attitudes toward coffee, preferring more affordable and practical products.

As a result, many cafés no longer stock large quantities of oat milk, turning instead to more conventional milk or other plant-based alternatives to create more affordably priced products. Oatly's significant 2022 losses 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. Shanghai's lockdown controls in 2022 then directly panicked Oatly's CEO, who said: "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. In the retail market, however, a single bottle is not inexpensive, so when the B2B market faces a crisis, few consumers in the B2C market choose Oatly oat milk.

Controversial Marketing Strategies

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

Oat milk's texture and flavor, however, are somewhat monotonous, and it doesn't blend well with many additional flavorings and ingredients. After an initial wave of consumer enthusiasm and a period of tasting, attention to oat milk declined for lack of novelty. Coupled with the pandemic, Oatly grew anxious. To get the coffee market to pay more attention to its oat milk, in 2022 it tried 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 objected immediately. Bidfood stated that the term "Barista" had been used on various plant-based milk products in the country for nearly a decade and was considered a generic term, with no company having previously registered it as a trademark.

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

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

The brand believes oat milk coffee products are now widely loved and welcomed by general consumers in cafés, and that modern consumers increasingly embrace 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 the company invested in a film, inviting vegan actors to star in a feature called "The Coffee Wars," which was released on multiple online platforms on March 7th.

The plot follows a barista who becomes impoverished because he insists on opening a café that uses only oat milk, something the mainstream does not understand or accept. The protagonist refuses to give up, though, and forcefully brings oat milk to barista competitions, hoping to prove through competition that plant-based milk can also perform exceptionally well.

This series of operations annoyed many coffee enthusiasts as well. Whether it was the public challenge that sparked widespread discussion among netizens, or the new film that very few people watched, partly because it was paid content and partly because, apart from 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 pandemic restrictions lifted, the company was prepared to attack the market again aggressively in 2023. He also announced the latest strategy for the Asian market: expanding distribution, launching new products, and improving efficiency. Asian consumers today, however, have significant demand for flavor innovation, and monotonous textures and tastes cannot satisfy them for long. Whether plant-based milk is truly healthy also remains controversial, because to make oat milk taste good, large amounts of vegetable oil and sugar must be added to the formulation, and both are often root causes of obesity.

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

Image source: Internet

FrontStreet Coffee Recommendation

Oat milk rose to fame as a partner for espresso, and if you enjoy milk coffee at home, the bean you choose matters just as much as what you pour into it. FrontStreet's Classic Blend is the first choice for milk drinks: it was designed specifically for espresso and moka pots, and its biggest strength is a rich, creamy crema that even a beginner can pull on a non-professional home machine. A latte, cappuccino, or dirty all depend on good crema, and this blend delivers it, with a mellow, gentle body that both veterans and newcomers find easy to accept.

If you want the classic café-latte flavor, FrontStreet's Fine Blend has been the shop's longest-serving espresso blend, used for close to a decade for Americanos and espresso lattes. It pairs Brazilian Cerrado with Colombian Huila beans for a familiar, well-rounded profile that works equally well at home or in a café.