How Oatly Took Oat Milk From Trend to World Domination

Michael Beausoleil

The American diet is changing. Each year we see new options popping up in our grocery stores, many of them reflecting dietary needs and trends. One of the newest items seeking world domination: oat milk.

For the past decade Americans have been incorporating milk substitutes into their diets. Lactose intolerance has been a factor for many, as has the vegan lifestyle, but others have embraced the alternatives due to preference. Almond milk, coconut milk, and soy milk have become staples of grocery store coolers, but the new contender is rising in popularity. In fact, Oatly took a unique approach to introduce oat milk into our cuisines, and it appears to have worked.

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(picture via Oatly)

Traditional cow milk continues to be the king of the “dairy” industry, but there has been a decrease over the past decade. Analysts anticipate this decline will continue while the inverse will happen for dairy substitutes. Forecasts predict non-dairy milks will see a 108% increase in sales by 2023 when compared to 2013. Even if predictions are correct non-diary sales will amount to a fifth of the predicted diary sales, but this still makes non-dairy a multibillion dollar industry.

Oatly wants oat milk to be the preferred substitute, and their attempt to expose the public to the drink has required a creative approach to infiltrate a saturated market. Other milk substitutes cater to lifestyles, but Oatly inserted itself into the trendy world of coffee. They might be able to bring more awareness to the oat milk industry, and we have some crafty product placement to thank.

Oats & Coffee: The Perfect Combination

In 2017, non-diary milk was rising in popularity. Oat milk was entering a growing market, but the consumers already had established preferences. Non-dairy milk also had its shortcomings, but Oatly saw this as their key to success.

The Swedish company knew where trends start in the United States, and that’s the big cities. Specifically, they put their products in New York coffee shops. If anyone was going to adapt to the new product it would be the young, coffee-drinkers of the world. This demographic is accustomed to embracing new trends, many people incorporating more plant-based foods into their diets as part of a vegan lifestyle.

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(picture via Oatly)

When entering the US market, Oatly knew they were competing for dollars in a market where oat milk didn’t exist. This meant their product would get overlooked in large supermarkets, but it could get noticed in trendy coffee shops. They also knew Oatly had the consistency other milk substitutes didn’t. Almond and soy milks didn’t produce a “creamy” beverage when steamed, so they couldn’t mimic drinks made with real dairy. Oat milk, on the other and, was able to recreate that consistency.

The funny part of Oatly’s integration into the US market was its deliberately slow pace. In Europe they’d already been making products like chocolate milk, store-bought creamers, and yogurts. In the US, they were limited to coffee shops. In fact, they produced a special blend specifically for baristas to steam. New York baristas would quickly see the appeal of oat milk Swedes has known for years.

Oatly’s plan worked, and they began to offer their product at more coffee shops in New York. Then they moved to other big cities like San Francisco while coffee shops in New York struggled to keep the product in stock. Gradually grocery stores would start stocking oat milk and Oatly would be included in this integration. The drink became a hit, but there’s no guarantee customers would have embraced a new milk substitute if Oatly launched straight in the grocery stores.

Sustainability & Sustaining Growth

Oat milk has enough popularity that it can survive on store shelves. Many Americans are still unaware of the drink, but it’s profitable enough that grocers want to provide it to customers.

Now that Oatly has gone mainstream, they have other convincing reasons for customers to drink their oats. When serving an environmentally-conscious crowd, oat milk has proven to be more eco-friendly than alternatives. Compared to growing almonds, oats take six times less water. Soy milk emits more greenhouse gases and requires more land to grow than oat milk. In fact, oat milk requires less land the traditional cow’s milk. You could build a case for oats being the most eco-friendly of all the “milk” options out there.

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(Graph of milk impacts via vinepair)

Nutritionally, oat milk has its pros and cons. It’s higher in fiber and carbohydrates than other options. It’s lower in protein but it also offers a sweet flavor. It’s not an awful choice, but the nutritional benefits of oat milk vary from person to person.

For the eco-consious, oat milk has its place in the market. Oatly knows this, as they’ve existed in Sweden for over two decades. They needed to find more novel ways into other markets and coffee shops were their entry point into the United States. In 2019 there were over 2,500 coffee shops serving Oatly, not accounting for other oat milk brands. Retailers like Whole Foods and Target stock the brand, giving them a national presence. As a consumable brand, they’ve gone mainstream.

There’s nothing more mainstream than seeing the brand pop up in Starbucks. Perhaps this isn’t a huge surprise given Oatly success in smaller coffee shops, but partnering with Starbucks is a guaranteed way to increase exposure. Oatly entered 2020 with the goal of doubling or tripling its distribution. The first step was getting into Starbucks, and this partnership could prove to be very lucrative.

Oatly has become part of Starbucks’ meatless expansion into the Chinese market. While Oatly had some presence in China, mostly in local coffee shops and grocery stores, their partnership with Starbucks will be their biggest for of growth in the Asian market. Oatly became available in over 4,300 Chinese Starbucks locations virtually overnight. That’s a lot more people who know about oat milk and associate Oatly with the beverage.

Future expansion looks promising, as markets embrace Oatly. They’re planning to open another factory in Asia. Despite many businesses struggling during this time, Oatly has a reason to stay focused on growth.

Is Oatly Here to Stay?

Coffee shops have become essential to Oatly’s growth. First entering the US market in smaller shops, then expanding into Asia with the help of Starbucks. So long as coffee remains popular, Oatly should see similar growth.

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(Photo via livekindly)

So far, this marketing tactic has worked. Oatly planted their product into a trendy industry and successfully made their product part of the trend. This has left consumers excited to try the product and convinced people they ought to try oat milk.

We live in a world were milk alternatives are common, so highlighting the traditional benefits would make Oatly unremarkable. Sure, it’s dairy free and vegan, so is soy milk. This would not convince people to change their habits. But can soy milk be steamed into a creamy latte? Not in the same way oat milk can. Oatly knew what made it unique, so they showed people they’re worthy of a place in the market.

The major concern for Oatly may be a pending decline of artisan coffees and craft beverages. If we enter a recession, people will save money on their morning caffeine and steer away from the fancier beverages. Should this be the case, Oatly still has traditional benefits to highlight. They can also emphasize the fact that oat milk cheaper than other non-dairy alternatives. If people can’t afford steamed beverages, they might save a few cents replacing almond milk with oat milk.

Oat milk is poised for success, and Oatly is likely to become the go-to oat milk brand. Their crafty product placement was a risk, but one that paid off. They relied on a trendy market, grew their popularity, then proved they’re more than just a trend. Oat milk has unique benefits and now obscurity is not a barrier in the American market. Thanks to their marketing efforts they’re moving to China and getting ready to take on the rest of the world.

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