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Jean-Christophe Flatin and Toni Petersson at Oatly
Jean-Christophe Flatin (left) will succeed Toni Petersson (right) as CEO on June 1. Image credit: Oatly

Oatly posts reduced losses in Q1, appoints new CEO: ‘We’re ready to play offense in 2023’

May 10, 2023

Oatly says it is “ready to play offense in 2023” with a new CEO, a return to promotional activity, and sequential improvements in its gross margin, which fell to 2.7% in 2022, crept up to 17.4% in early 2023, and is expected to reach the “high 20s” by the year end.

The Swedish oatmilk maker, which started trading on Nasdaq in May 2021 at $17 per share, has had a bumpy ride over the past couple of years dogged by supply chain issues. Yesterday, it closed at $2.19 per share.

While Oatly is still losing money, net losses fell from $87.5 million in the first quarter (Q1) of 2022 to $75.6 million in the first quarter of 2023.

Net revenues increased 17.7% to $195.6 million in the first quarter of 2023, said CEO Toni Petersson, who will move into the role of co-chairman on June 1 when global president Jean-Christophe Flatin takes over as CEO.

Speaking on the Q1 earnings call yesterday, he said: “We made progress against each of our key 2023 priorities: accelerate top line growth globally, continue to make improvements in the supply chain, and drive towards profitability, which we continue to expect to reach in 2024.”

“We expect to close the year enabling us to achieve a positive adjusted EBITDA on a full year basis in 2024,” added CFO Christian Hanke, who recently raised $125 million via a guaranteed term loan B credit agreement and $300 million from selling convertible notes.

Since then, Oatly has also struck a deal with an affiliate of Hillhouse Investment Management Ltd. to raise an additional $35 million through the sale of convertible notes to provide liquidity as it approaches “financial self-sufficiency.”

Oatly field marketing
While Oatly is still losing money, net losses fell from $87.5 million in the first quarter of 2022 to $75.6 million in the first quarter of 2023. Image credit: Oatly

Increased promotional activity

Having held back on promotional activity over the past couple of years due to supply chain problems, “We started to increase our promotional rates in the last few weeks of the quarter,” added Petersson.

“This also sends an important signal to our retail customers that we are confident in our supply chain stability and ability to service demand.”

In Europe, the Middle East, and Africa, he said, “Oatly is continuing to grow at a double-digit rate on a year over year basis and our key markets of Germany, the UK and the Netherlands continue to post very strong market shares. We’ve also continued to sign up new customers in foodservice.”

In the Americas, where Oatly has partnered with Ya YA Foods at plants in Utah and Texas, “We are now able to be more aggressive on the commercial side,” said Petersson.

“The transition to Ya YA [which turns Oatly’s proprietary oat base into finished products] is going very well… we’re pleased with the progress and see that our service levels have remained in the mid-90s.”

In China, he said, “We have a very strong brand position, especially when it comes to the coffee shop channel, the tea shop channel, and QSRs, and we’re building our way into retail now.”

Analyst: ‘Encouraging’ sequential improvements in EBITDA

Brian Holland, managing director at TD Cowen, said the sequential improvements in earnings before interest, tax depreciation and amortization (EBITDA) were encouraging.

The transition from a “marketing-focused CEO (Petersson) who helped build a global brand” to a more “operations-focused” leader (Flatin) also “increases our confidence in the path towards EBITDA positive results in full year 2024,” he added.

Before joining Oatly last year, Flatin spent more than 30 years at Mars in a range of senior roles, including global CEO and president of the Royal Canin petfood business.

“We believe the runway for the oat-based segment is significant,” said Holland. “Oatly is punching above its weight based on our analysis of scanner data, and is only being dragged down by capacity constraints. As incremental production volume comes online over the next several months, sales, share, and profits should inflect in kind.”

Plant-based milk by numbers, US retail ​

  • Plant-based milk is a $2.83bn category in US retail, according to SPINS data shared with AFN for the 52 weeks to March 26, 2023.
  • Dollar sales were up +9.3% while units were down -3.7%, with a +5.4% increase in unit sales of shelf-stable products offset by a -4.9% drop in unit sales of refrigerated products.
  • Over the 52-week period, all of the growth in volume came from refrigerated oat milk ($+24.2%, units +8.1%), shelf-stable oat milk ($+44.8%, units +31.7%), and shelf-stable coconut milk ($ sales +53.2%, units +39.9%).
  • Dollar sales of almond milk, the largest segment of the category, were up +3.8% (refrigerated), and 4.7% (shelf-stable); while units were down -8.2% (refrigerated) and -6.4% (shelf stable).

*Source​​​​​: SPINS natural enhanced and conventional (IRI multi-outlet) channels, 52 weeks to March 26, 2023, excludes Whole Foods, Trader Joe’s, and convenience stores.

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