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Oatly Milk Alternative in an effort to become a $ 10 billion brand

Oatly Milk Alternative in an effort to become a $ 10 billion brand

Swedish brand Oatly surprised Americans in February with eccentric Super Bowl ad the chief executive sang lustily “Wow, no cow” was playing an electric piano in a field.

This year, the plant’s milk manufacturer is expected to flash it on another set of screens He anticipates the New York list the group could be worth $ 10 billion.

Once the niche brand’s intentions have created eyebrows in the food industry, an executive has called it “plant-based bitcoin”. The group’s sponsors have stressed the shift in organic products among consumers who drive sales in Oatly, which is trying to conquer Chinese and US markets.

Oatly was founded in Sweden in the 1990s, but growth accelerated after CEO Toni Petersson took over and reviewed it in 2012, picking up struggles with the dairy industry for sustainability. In 2016 he achieved international follow-up after entering the US, basing his “barista edition” on coffee shops, which looks like cow’s milk foam made from cappuccinos.

It caused a stir around the brand deficiencies in cafes In 2018, but after the pandemic, it focused on e-commerce and now sales are expected to double by $ 800 million this year.

Petersson described the rise in oat milk “at the beginning of the curve” and told the Financial Times last year that he would have a greater ability to buy the basics of his basic Z generation and millennial consumers within five years.

Oatly is one of the best-selling oats among sellers in the US, Sweden, Germany and the UK, and oat milk contributes to being the second best-selling vegetable milk in the US after almond milk. Nielsen and SPINS.

Oat milk is the second most popular plant-based milk in the United States

But as demand has grown, so has competition, and some executives and analysts have questioned whether Oatly can keep up the momentum.

There are currently “hundreds of brands” piled up, said Camilla Barnard, founder of London-based plant milk manufacturer Rude Health. “The [market] it is crowded. There seems to be a new brand of oat milk every day. “

In addition to the newly created livestock, international food groups have included, among others, the French Danone, owner of the company Alpro, and Nestlé, the world’s largest food producer, which has put its finger in the water with Brazilian products.

A director of a multinational food group has highlighted the difference between Oatly’s potential valuation and the low multiples that are paid in between approximately three times the revenue from food and beverage companies. Oatly losses of $ 10 billion “seem like almost plant-based bitcoin,” the executive said.

Plant milk will also face competition from new technologies: entrepreneurs produce synthetic animal-free milk and dairy products using modified copies of cow DNA.

There are also questions about the nutritional value of plant milk. U.S. medical and nutrition groups, including the American Academy of Pediatrics, have said that most children under the age of five should not be given milk plants because most — not just a fortified soy drink — lack essential nutrients from milk.

David Julian McClements, a professor of food science at the University of Massachusetts, said dairy milk has a “very good nutritional profile.” Plant milks try to simulate the appearance, texture and appearance of real milk but often lack the nutritional properties. ”

As technology improves, plant milks will incorporate more nutrients, but they do not contain the essential amino acids currently found in dairy milk, while sugars in vegetable milk often have different effects from cow’s milk lactose.

Diagram of US sales columns ($ m) shows increase in sales of oat milk

Oatly’s growth is based on funding agreements that critics believe go against his role.

A joint venture between state-owned China Resources conglomerate and Belgian family investment group Verlinvest bought a majority stake in 2016, Swedish media reported complained Oatly citing the history of hypocrisy, China’s environmental and human rights.

But Oatly’s sponsors point to the growth opportunities that China Resources brings, thanks to the ownership of thousands of stores and cafes. “The big push will be in China,” one said.

Daisy Li, the associate director of the Mintel consumer analyst group in Shanghai, said the Chinese market for vegetable milk – which is healthy, low in fat and high in fiber – has grown rapidly. As in the U.S., Oatly has grown through coffee shops, but “has had excellent sales performance on ecommerce channels,” he said.

Recently, the company reacted against social media while consumers opposed the $ 200 million fundraiser Blackstone led, attacking the sustainability record of the private equity group and the support of CEO Stephen Schwarzman to Donald Trump.

Fredrik Gertten, a filmmaker from Malmo, headquartered in Oatly, criticizes the company “for exhausting its values.” “Malmo is a small town. Everyone knows them, I know them. I feel proud of the company of my people. . . [the funding is] very disappointing, ”he said.

Oatly’s aides say the discussions have not affected sales. After Blackstone’s investment, the company told critics, “The most important thing we can do for the planet is to help focus the vision of massive capital on sustainable perspectives.”

Oatly’s VC sponsors remain enthusiastic. The company is increasing production, with three plants out of three countries, with two more opening this year – including one in Singapore – and one in the UK in 2023.

Myrthe van Bijsterveld, CEO of Rabo Corporate Investments, said Rabobank will remain an investor after the float. “[Oatly’s growth] it will really be like ties with Starbucks and like growth in the US and China, ”he said.

For now, the company, which also includes Oprah Winfrey and Jay-Z’s Roc Nation as investors, may have low value in the stock markets.

Beyond the flesh, which They floated in 2019, David Gowenlock, a financial adviser at ClearlySo, a London-based financial adviser on environmental, social and ethical investments, is missing from major plant-based protein companies. He said: “Investors can’t afford other technological foods, high milk brands, so Oatly will be in high demand.”

At the time of Blackstone’s support, Petersson admitted that “there will be some controversial things in the future,” but said Oatly was reluctant to imitate the big food companies. He added: “We put ourselves out there, challenging the dairy industry, questioning how companies should think, without being the perfect company… [but] those are the real values ​​we have. “

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