food and beverages

Facing Supply Issues, Oatly Rules Out A Merger To Increase Scale

Some marketers of plant-based meat alternatives would love to be in Oatly’s position—even if it still means losing money.

While too many meat alternatives chase too few consumers, Oatly hasn’t been able to keep up with demand due to production issues.

In terms of profitability, the producer of oat-based beverages, desserts and yogurt is still many quarters away, based on Q3 financial results announced on Monday.

While Oatly Group AB’s global revenue rose 7% in the quarter ended Sept. 30, its net loss was $267.4 million compared to $132.6 million in the prior-year period.

The company attributed some of the negative results to continued COVID-19 restrictions in China.

In the Americas, Q3 revenues were up by 28.3% even as the company faced production issues at its facility in Ogden, Utah.



“It has since been resolved. Our production is stabilizing so we can start rebuilding inventory,” CEO Toni Petersson said on Monday’s earnings call. “However, we are still limited by supply.”

Oatly also is expanding its production line in New Jersey while it works on a new manufacturing center in Forth Worth, Texas.

Bank of America’s Spillane asked Oatly executives whether they’ve considered merging with a company that has greater scale so they can meet demand.

“I mean, there's a little bit of like the dog caught the car here—like you've got the growth, but really having a difficult time scaling up to sort of service that growth,” said Spillane.  “So in the range of possibilities, it is that something you've considered”?

Responded Petersson: “No. It's a good question and the answer is no. We're not exploring that path.”

Asked to elaborate, Petersson added “We see velocity strength. We see market share gains. We see us expanding across regions. So the confidence level is high.”

Oatly’s latest consumer promotion is timed with Thanksgiving.

Called the Oatly Emotional Support Hotline For Plant-Based Eaters, the initiative consists of phone number people can call to hear positive messages to help them “get through the season and difficult conversations and questions about their food choices.”

The company says that on Thanksgiving Day, “plant-based experts will be operating the hotline in real time” for seven hours “answering questions and calming the nerves of those calling in.” 

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