Putting growth investments ahead of profitability
Oatly Group’s revenues increased by 50% in the second quarter because to the growing demand from consumers for dairy substitutes, especially in cafes and restaurants.
After successfully completing its IPO in May, the business now projects full-year revenues of over $690 million, a 64% rise over the previous year.
Oatly is expanding its manufacturing capacity using the proceeds from its initial public offering (IPO) in response to the growing demand for its plant-based milk substitutes worldwide. The company has increased capacity at its factory in the Netherlands and built two new locations in Ogden, Utah, and Singapore. It is currently investing in a 50% increase in the Utah plant’s oat base capacity, and later this year, a second manufacturing facility in Asia is anticipated to open in China. 2023 will see the completion of two more facilities in the UK and the US.
The volume of finished goods produced in the second quarter reached 106 million liters, a 43% increase from 74 million liters in the same period last year. By the end of the year, the company hopes to have doubled its output.
In a conference call with analysts on August 16, Peter Bergh, the chief operating officer of Oatly, stated, “Production capacity has been a major constraint on our growth. We have made substantial investments to scale our production capacity and address supply shortages due to the massive demand for our products globally.”
The company’s second-quarter losses increased to $59.1 million from $4.8 million in the same period last year, indicating that its expansion has not come cheap. The second quarter ended June 30th saw a 53% growth in revenues from $95.3 million to $146.2 million.
The chief executive officer, Toni Petersson, stated, “We continue to prioritize growth investments over profitability to best position Oatly to serve customers and consumers alike.” “We think these initiatives are essential to speeding up the transition from the worldwide dairy market, which we estimate to be worth approximately $600 billion in the retail channel alone as of 2020.”
According to him, about 40% of adults in important marketplaces purchase milk substitutes, and 70% of them have done so in the previous two years.
According to Mr. Petersson, “this conversion demonstrates the category’s accelerating trajectory and growth potential for further penetration.” “We think that most of the market is up for grabs, and the shift to plant-based alternatives is about to happen at a significant tipping point.”
Oatly is using a foodservice-led approach to increase conversion that aims to create demand naturally through restaurant trials. The company’s alliance with Starbucks Corp., which serves as the coffee chain’s sole US supplier of oat milk, is crucial to this approach.
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In the second quarter, 27% of the company’s sales came from the Starbucks agreement.We changed the volumes last year.retail instead of foodservice,” Mr. Petersson remarked. “In order to encourage consumer trial and brand awareness, we were able to strategically increase sales into the foodservice industry this year. This helped us to create an acceleration in conversion across all sales channels, not just foodservice.”