Oatly prioritizes US production as Europe’s interest in plant-based milk plateaus

Dive Brief:

• Sweden-based Oatly will prioritize U.S. production as the company finds it harder to convert new consumers from dairy to plant-based milk in Europe, said CEO Toni Petersson on a Q2 earnings call.
• An expansion in Landskrona, Sweden, is now targeted for 2023, while a Peterborough, U.K., facility is slated to open in 2024 “to align in timing and production for when we need the volumes,” Petersson said.
• In the near-term, Oatly will prioritize an expansion project at its Millville, New Jersey, facility. “We have adjusted the timing of our investments to prioritize the projects in the regions where the need for additional capacity is most pressing,” an SEC filing read.

Dive Insight:

Oatly’s move to slow expansion comes after the company announced last December it would work to build out its global production capacity “at an unprecedented pace” to address shortages and meet growing demand.

The company is now pulling back in Europe, where it’s acknowledging that “the pace at which we have been able to convert new consumers from dairy to plant-based milk is taking longer than we had hoped for,” according to an SEC filing.

The capacity phasing plan will lower net capital expenditures in 2022 to $220 million to $240 million from the $400 million to $500 million range, “without compromising future expansion,” Petersson said.

Chief Strategy Officer Peter Bergh underscored that the company’s updated plan is not due to weakening demand, but rather the current pace of growth in Europe, which is largely driven by the macroeconomic environment including the war in Ukraine.

Oatly’s larger initiative to expand in-house manufacturing is still on track, and the company plans to add necessary production capacity in the long-term as demand for oat-milk experiences dramatic growth in the U.S.

Overall, Petersson said the company expects to add volume up to 1.2 billion liters exiting 2023, up from its current run rate of 900 million liters by the end of this year.

“We have enough liquidity to support the global growth and expansion of our business for at least the next 12 months,” Petersson said.