Chances are if you’re going to a fancy coffee shop, you’ll have the option to swap the cow’s milk in your latte for almond, soy, or oat milk.
If you haven’t heard of the last option, you’re kind of behind the times (don’t worry, that was me until recently). Oat milk is on a path to soon usurp almond milk as the top alterna-milk in coffee shops around the U.S. According to Nielsen, oat milk sales grew by 50 percent from 2017 to 2018, while almond milk sales grew only 11 percent.
Oat milk lovers can thank one company in particular for kickstarting the oat milk craze to the U.S. Ironically, they’re from Sweden.
Founded in 1994 in Malmo, Oatly was developed by brothers Bjorn and Rickard Oste, who were looking for a sustainable alternative to dairy milk. They began experimenting with oats and later patented their oat milk production process. In 2001 they launched a consumer-facing brand.
Oatly may have been around quite a while, but recently it has been experiencing meteoric growth. When I spoke to Bjorn Oste on the phone (who’s now on the board of Oatly’s parent company), he told me it took the company 18 years to reach a billion kronor (~$104 million) in sales. In the past year, they’ve doubled that number.
Oatly’s sales really started to climb when they made their way into the U.S. in 2016. They originally started out in coffee shops, but now their business is split 50/50 between cafés and retail. Oatly products are now in over U.S. 1,500 grocery stores including Whole Foods and Target. It’s also in over 2,500 coffee shops.
Unsurprisingly, Oatly’s explosive uptick in sales has brought its fair share of problems. The company is currently struggling with product shortages. To address this demand, Oatly — which is so secretive about its technology it doesn’t like to outsource production to copackers — recently cut the ribbon on a plant in New Jersey: its first in the U.S. They’re already building another plant in Utah set to open early next year.
“When we launched [in the U.S.] it was very hard to predict growth,” said Oste. “It’s been a shocking reception.” In fact, Oste told me that the non-dairy market is actually bigger here than in Oatly’s native Europe.
Photo: Oatly.
Oatly’s entrance into the U.S. was also strategically timed to take advantage of the growing alternative protein market. “We’re seeing a paradigm shift towards plant-based consumption,” Mike Messersmith, General Manager of Oatly, told me over the phone. He explained that Oatly waited to enter the U.S. until they thought that the market was strong enough to support their product.
And strong it is. Nielsen data indicates that sales of plant-based milk beverages rose 9 percent in 2017-18 and took in $1.6 billion. This growth is driven by flexitarians who are eschewing dairy milk for health or environmental reasons. Oatly is lactose-free and also friendly for those with nut allergies. It’s also markedly more sustainable than dairy from a cow and also takes much less water than almond milk, which attracts ethically-motivated Gen Z and millennial consumers.
As always in the alternative protein space, taste is king. A product can be sustainable as all get out, but if it doesn’t taste delicious in your coffee or poured over your cereal, it’s not going to make it. “Customers want to choose plant-based options without feeling like they’re compromising,” Messersmith said. With its creamy, latté art-friendly milk, Oatly seems to have nailed the taste and texture aspects.
Other companies are quickly trying to cash in on oat milk’s popularity. PepsiCo launched its own line of the beverage through Quaker Oats, and major brands like Califia Farms are also selling the oaty drink.
I haven’t taste tested every oat milk out there, but judging purely from what I’ve seen Oatly truly does seem to have at least the coffee shop market cornered (when it’s in stock). According to Oste, they have an advantage because unlike other companies, they have complete control of the entire production system. They even have founded a company which creates new non-GMO oat varieties that have higher protein and fat contents.
Oatly doesn’t seem to have any interest in making an “Almondly” or “Soyly,” either. Oste told me that over the years retailers had asked them to expand their repertoire and branch out into other milk alternatives, but he wasn’t tempted. “Pretty much anyone can make soy or almond milk,” he said. But when it comes to oat milk, “[we] own the space.”
For now, that might be true. Now Oatly has to ramp up production to maintain customer loyalty. With their first U.S. factory newly up and running and their second underway, it seems like they’ll be able to.
Next up, Oste hinted that the company might bring some of their other oat-filled products — like ice cream, savory spreads, and heavy cream — to the U.S. With the dairy-free ice cream market alone projected to hit $1 billion by 2024, I’d say that’s a pretty smart move.
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