Six learnings from last week’s big drinks industry IPO for wine producers who want to replicate the success of the world’s largest oat milk brand
How do you make your drinks brand worth USD 10 billion? Thanks to Toni Petersson, CEO of Oatly, the Swedish company that is world leader in the production of oat milk, we have some answers this week. Oatly successfully listed on New York’s Nasdaq stock market last week, and shot up 18% in initial trading. At first glance it looks like another chapter in an emerging story of the new environmental movements in food which are revolutionising consumer behaviour, making entrepreneurs large paper fortunes, and grabbing the headlines. It is also about disruption in long-established beverage categories, fuelled by the changing consumer values of the 21st century. But how relevant is the Oatly story to the wine category? Is there strategic crossover from one mature, agricultural-based, drinks sector to another?
First, a quick recap of the back story. Oatly makes a milk substitute product by soaking oats in water and straining the resulting liquid off. The result is a drink that, to its consumer adherents, tastes a lot like full cream milk, but with a lot less fat, cholesterol, carbs and lactose. The litre of oat milk also takes around 90% less water and land to produce than an equivalent litre of cow’s milk, and has substantially lower carbon emissions as well. It has been around since 1994, and, until around 5 years ago, was a relatively small player in a niche category. However, under Petersson, who has been CEO since 2012, the brand has grown significantly in the large and influential US market, and has gained celebrity investors such as Oprah Winfrey and Jay-Z. Last week’s headline-grabbing IPO caps a remarkable decade of growth for the company.
So what lessons can the wine category learn? Here are 6 thoughts on how the Oatly story can be relevant.
- Taste matters. One of the fundamental reasons why Oat milk appears to be gaining users and cheerleaders is that it is actually a pleasant-tasting drink, with some natural sweetness and a mouthfeel more akin to whole / full cream milk. Coffee shop baristas (see also below) particularly appreciate it because it froths up much better than other milk substitutes for cappuccinos and the like.
- Focus on a ‘lighthouse’ market. Oatly quite deliberately invested heavily in the US market, building distribution through coffee shops and specialty stores, buying heavily in online, billboard and eventually television advertising (including an eccentric 30 second spot in this year’s Superbowl featuring Petersson himself, filmed singing a jingle in an oat field while playing the organ). Why? Because the US market has the largest addressable market opportunity for alternatives to milk, and is also a market that is setting the trends in plant-based food
- Recruit the supply chain to be your ambassadors. One of the key strategic shifts under Petersson was to target coffee shop baristas with Oatly’s products, including producing a special ‘barista blend’ and providing a countercultural, rebellious and avant-garde marketing narrative that aligned with the worldview of the baristas themselves.
- Be patient – your moment will come. Oat-based milk alternatives have been around since the early 1990s and have only started to become more widely known in recent years.
- Invest in packaging. One of the big changes of the past decade has been in the way Oatly’s products look, and what they say. Previously the product was conventionally packaged and obeyed the rulebook of the milk alternatives category – heavy on technical, not much fun. Oatly’s creative team upended this and offered a more light-hearted and visually distinct look and feel on the packaging, and the same design ethos pervaded everything from billboard ads to the company’s environmental audit report.
- Pick your information battlefield. The brand has been disclosing a wide variety of information about how its products are made, its environmental impact, including its carbon footprint. It has done so in an overtly transparent way, but has carefully picked its battles. Advertising a carbon footprint on the front of its packaging might be seen as a brave thing to do, except when you know that in this measure you are four times better than anyone else – so when retailers insist that everyone follows suit, you end up looking the best.
If some of these lessons seem, well, obvious to us in wine, it may be because the playbook isn’t that different. Wine producers wondering how to demonstrate their sustainability credentials, or trying to explain why biodynamic wine is actually worth the extra money, may find it useful to do their own “Oatly audit” to see what they can learn.