Can Oatly reinvigorate slowing oatmilk category sales with launch unsweetened, clean-label options?
While plant-based milk is a “quiet superstar” in the broader plant-based category with the Plant Based Food Association reporting household penetration of plant-based milk upwards of 40% in 2023 with a repeat purchase rate of 75%, the category saw sales slide in 2023. According to Circana, plant-based milk gallon sales fell 7.2% in the year ending Dec. 3, 2023 with soy and almond dropping just over 9% each and oat eking out a 0.9% increase.
The drop has been attributed in part to price hikes related to inflation but also rising consumer perceptions that plant-based milks are high in sugar and made with long lists of unfamiliar ingredients that don’t fit into the growing “clean” food movement.
To address these concerns and bring “more great-tasting oat-based products to more people,” Oatly created its new Unsweetened Oatmilk, which touts zero-sugar and only 40 calories per serving thanks to a new proprietary oat base, and Super Basic Oatmilk, made with just four ingredients, including upcycled citrus zest fiber to deliver the “creamy boost” consumers want without added oils, fortifications or the nine major allergens, according to the company. Both options will be available in coming months at retailers nationwide for a suggested price of $5.99 for 64 ounces.
Oatly President Mike Massersmith shared with FoodNavigator-USA more about the inspiration for Unsweetened Oatmilk and Super Basic Oatmilk, where they sit in the competitive landscape, how they complement the company’s existing portfolio and how the company is working with retailers at a time when many are rationalizing SKUs. Finally, he shares where he sees the biggest challenges and opportunities for oatmilk and plant-based milk more broadly going forward.
The following interview has been lightly edited for clarity and space.
FoodNavigator-USA (FNU): When Oatly first launched in the US, you had three SKUs and oatmilk was relatively unknown here. Since then, oatmilk has become a staple in many homes that purchase plant-based and a go-to non-dairy option in many cafes and foodservice. I’d love if you could set the stage for the launch this week of two new types of Oatly Oatmilk but first describing the current landscape and how it has evolved since Oatly first came to the US. Share with me the inspiration for Oatly Unsweetened Oatmilk and Oatly Super Basic Oatmilk and how they stack up to the competition?
Mike Massersmith (MM): We’re really excited about these new innovations - the first additions to our core fluid portfolio in five years! In many ways, Oatly created the oatmilk category. When we first arrived in the US by way of the coffee community with our signature Barista Edition, oatmilk wasn’t necessarily a product on people’s radar. When demand in the coffee channel proved our thesis - that people were looking for a delicious plant-based milk alternative that delivered on both taste and performance - we quickly ramped up our presence in retailers across the country and are now a staple item at Walmart, Target, Whole Foods, Alberstons, Publix and nearly every other major grocery chain. Oatmilk now accounts for 22% of the entire plant-based milk category in the US. Today, Oatly’s existing portfolio of fan-favorite oatmilks includes the No. 1 velocity oatmilk SKU in the US, according to Nielsen1. And as you mention, oatmilk is very much now a household name and staple. We’re proud of having introduced a category to US consumers and to see the overwhelmingly positive response to our products.
It’s been a while since we’ve launched new fluid innovations, so we knew we had to be thoughtful about what we introduced next. It was also vital to have our supply chain in a place to be able to really expand our beverage portfolio. We worked hard to get to a place where we can now lean on that.
With these new SKUs, we focused on developing products that bring both depth and breadth to our oatmilk range for both existing customers and as we continue to reach new people and expand our distribution footprint as well. The launch of Unsweetened and Super Basic reflects our continued growth and unwavering commitment to furthering the plant-based movement through delicious innovation that caters to even more people – in this case, reaching those seeking products with less calories, less ingredients, or no sugar.
[1] Nielsen; Total US XAOC; Velocity 12 weeks ending Nov. 4, 2023
FNU: Looking at the Nutrition Facts panel for Oatly Unsweetened Oatmilk, I can see that this product not only doesn’t have added sugars or sweeteners like some traditional plant-based milks, but it doesn’t appear to have any sugar at all? How is this possible, as the traditional enzymatic process that Oatly historically has used to create its base oatmilk “creates sugar in situ” by breaking down oat starch into simple sugars?
MM: That’s correct. The sugar in our other oatmilks is produced during our enzymatic production process. We use natural enzymes to liquefy our oats, which enables us to create a really creamy product that retains a lot of the nutrition from the original oat. As part of this process, the enzymes break the starches in our oats down into smaller components, including simple sugar. It’s comparable to how the human body uses enzymes to break starches down into sugars during digestion.
In the US, FDA guidance on sugar labeling now requires that any sugar created during a product’s production process should be categorized as 'added', which is why these sugars are listed as 'added sugar' on our nutrition labels in the US.
Unsweetened utilizes an entirely new proprietary oat base (our main ingredient) specially developed by our global team of food scientists for nearly a year to deliver on the 0g of sugar formulation of this product. This new oat base enables the product’s lighter texture and zero-sugar content, while still providing the same delicious Oatly taste consumers know and love. This innovation is a really big step for us that we’re proud to bring to market.
FNU: How does the new unsweetened version taste compared to traditional Oatly milks, which as the company explains on its website are sweetened naturally via the breakdown of oat starch into smaller components, like maltose?
MM: Due to this product’s lighter and less caloric formulation, Unsweetened does offer a slightly different experience than our more textured oatmilks, like Oatly Original. However, as with all our innovation at Oatly, we were committed to developing a product that doesn’t sacrifice great taste and meets our sensory standards. We’re excited for people to test out the product themselves, and we’ve found Unsweetened shines best when used in items like smoothies or overnight oats, as it’s incredibly balanced and smooth.
FNU: Oatly Super Basic appears to be an answer to the “clean label” movement and criticism that plant-based milks more broadly have long lists of ingredients, many of which may not be familiar to consumers, or are ultra-processed. How would you characterize the clean label movement and consumers’ understanding of or engagement with it?
MM: We stand 100% behind our ingredient decks for all of our products, but also understand that they might not work for everyone. The development of these two products are direct examples of how Oatly’s innovation team is driving the brand’s core mission – bringing more great-tasting oat-based products to more people.
Some inspiration for Unsweetened and Super Basic came from hearing from passionate brand fans that love Oatly but were looking to tick other nutritional boxes, like less sugar, less calories, or a simpler ingredient list. Super Basic’s development also stemmed from the rise of DIY on social, where we saw people were starting to make their own oatmilk at home.
As a result, we felt like we could deliver something to each of these groups that catered to their needs more easily without sacrificing taste – a non-negotiable principle we approach all innovation with at Oatly. The track record we’ve built with our fluid range makes us really excited about these new SKUs. We don’t want to just take up space with new launches, we really want to innovate in a way that meets consumer needs and expands the category.
FNU: With such a short ingredient list, to what extent was the company able to maintain the same mouthfeel and texture in Oatly Super Basic as in original Oatly products, and how is this possible?
MM: Super Basic is made with Oatly’s original proprietary oat base found in many of our products people already know and love - plus three more ingredients, including upcycled citrus zest fiber that is sourced from the peel byproduct of a variety of citrus fruits used in the juicing industry. Citrus zest fiber’s great texturizing and stabilization capabilities is what enables Super Basic to deliver on that great taste and mouthfeel people expect from Oatly.
FNU: More broadly, how does Oatly plan to support the launch of Super Basic and what are the key marketing messages on which the company will lean?
MM: We’re excited to engage with people in new ways with these launches. Oatly started in coffee shops, we moved into kitchens with our Will It Swap? series, and as we continue to grow, we’re committed to showing up in novel ways and places. Watch out for more from us in the coming months as we launch campaigns to support these products.
FNU: Many retailers have been rationalizing SKUs across categories in recent years. At the same time, the plant-based milk set has continued to grow. What is Oatly’s distribution strategy and what case is the company making to ensure shelf space in a highly competitive category?
MM: These new SKUs marked a concerted effort from Oatly on both the commercial and manufacturing fronts. We were strategic in our timing for these launches to align with our partners’ timelines and reset windows to ensure a successful national roll out. The introduction of Unsweetened and Super Basic also add both depth and breadth to our approach, increasing footprint with existing retailers excited about expanding our assortment, while also meeting new consumer and partner needs.
We’re focused on continuing to expand our distribution across retail and out of home channels and introduce new products that fit well into people’s daily lives in the US (this also includes some upcoming innovation catered to coffee lovers). We continue to be encouraged by the momentum and enthusiasm for our products – with new partners like The Coffee Bean & Tea Leaf, Stop & Shop, Costco, and by growing doors with existing partners like Target, Walmart, and more.
FNU: Stepping back from these new launches, what are the top challenges in the plant-based milk category that Oatly sees for the industry at large and how is it responding?
MM: The greatest impact we can have as a company is to convert cow’s milk drinkers users into Oatly consumers. We’re approaching this head on and driving greater category growth and adoption with these new innovations by making them both delicious and readily available. We plan to continue furthering this effort by offering people more options and use occasions from Oatly. You can start changing hearts and minds by showing up in these nooks and crannies of consumption, and continued conversion is key for our category.
FNU: On the other side of the coin, what does Oatly see as the biggest opportunity or unmet need and how might those opportunities continue to reshape the plant-based and dairy cases?
MM: The biggest opportunity for us is to convert cow’s milk drinkers into Oatly consumers. If we take a look at the world around us, we know that we’re in a climate emergency. Our existing US lineup of non-dairy milk alternatives, including Oatly Original, Full Fat, Low Fat, Chocolate, and Barista Edition oatmilks, all have the same creamy taste, frothy feel, and functionality as cow’s milk, while generally having a lower environmental impact. We see this resonating. A recent Oatly flash poll on US consumer milk preferences illustrates interest in dairy milk is indeed waning and plant-based alternatives are increasingly preferred. More than half (54%) of Gen Z and almost half (49%) of Millennials polled prefer plant-based milk to cow’s milk2.
Additionally, a good portion of the population suffers from lactose intolerance. Yet, another reason to make the switch to oatmilk.
It’s for these reasons, and by continuing to educate about the ingredients and benefits of our products, we’re confident that the opportunity ahead of us still remains massive.
[2] Oatly partnered with independent research firm Researchscape International to conduct an online survey of 1,178 U.S. teens and adults aged 14 and up, which was fielded from April 29-30, 2023. The data was weighted to match the U.S. population by nine demographics.
