'It's nonpareil': How Swedish oat-milk brand Oatly became the undisputed king of a burgeoning $29 million market through its quirky, grassroots approach to marketing
- Started in 1994, Sweden's Oatly has soared in popularity since it came to the US in 2016.
- The brand has elbowed its way into the burgeoning alt-milk market with grassroots and word-of-mouth marketing that uses quirky and irreverent messaging.
- Oatly has also benefitted from the rise of alternative-milks and plant-based foods that have taken off for environmental and health reasons.
- But as US retail sales of oat milk continue to climb, the small Scandinavian brand has to contend with more players as well as increasing demand.
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A year and a half ago, Tim Gilligan chanced upon a new oat-based drink at his local café and decided to give it a try. He had a growing sensitivity to lactose, and his partner had a nut allergy, which had him looking for alternatives to almond milk.
Now, Gilligan, a product manager at Capital One in New York, is an unabashed oat-milk enthusiast. He seeks out Oatly - the breakthrough Swedish brand that has become the face of oat milk - wherever he goes, even planning his travel around its availability.
"I was an early adopter for sure, and my friends looked at me like I was crazy when I would trek across town to the only café that had Oatly," Gilligan told Business Insider. "It is the Kleenex of oat-milk. It's nonpareil."
Gilligan is hardly alone. Started in the mid 90's, the Swedish brand has soared since it came to the US in 2016, spawning legions of fans and at least one Slack channel dedicated to it.
US retail sales of oat milk have risen from $4.4 million in 2017 to $29 million, and Oatly says it represents nearly one half of that, its revenue hitting $15 million in 2018. Oat milk represents a tiny fraction of total US plant-based dairy sales, but Oatly accounts for 36.4% of the category, according to IRI.
"Oatly has the wind in their sales," said Erich Joachimsthaler, founder and CEO at branding firm Vivaldi Group. "It's a combination of excellent timing, knowing how to tap a discerning target market, a niche marketing strategy, and being razor-focused."
The company has taken a grassroots approach to branding
Oatly's rise has come despite doing no traditional marketing. The 50-person company has a small marketing budget and no CMO. A small creative team works on everything from package design and product.
With those limitations, Oatly has leaned on quirky and irreverent messaging and a grassroots and word-of-mouth tactics. Oatly wouldn't say what it spends on media but said spend had risen "exponentially" in the US. Spending on a current outdoor campaign in New York, San Francisco, Chicago, and Los Angeles totaled $1.2 million, according to the company.
"We don't follow the traditional playbook, we don't even have a traditional marketing department," said John Schoolcraft, Oatly US's creative director. "Our secret sauce is that we're inconsistently consistent."
When CEO Toni Petersson started in 2012, he and Schoolcraft cooked up their rebranding strategy themselves on the latter's kitchen table before hiring the Swedish ad agency Forsman & Bodenfors to carry it out. And when Oatly came to the US in 2016, it had its sales reps give away cartons of Oatly at indie coffee shops and encourage baristas to try it themselves, leading some to become ambassadors for the drink.
"They developed a really strong alignment with baristas, roasters and coffee shop owners - the ultimate influencers for devotees of specialty coffee,"said Lori Bartle, president of ad agency MeringCarson. "That's serious word-of-mouth, as these are the people who are more likely to recommend it not as a trend but as a lifestyle choice."
Oatly's quirky creative helped it stand out
Oatly's quippy slogans and use of outdoor advertising has also helped it stand out. When the brand relaunched in 2014, it ran ads in Sweden poking fun at the dairy industry with phrases like "Wow no cow" and "Like milk, but made for humans." Petersson touted it playfully in TV ads.
That tone carried over to the US, where Oatly uses self-deprecating phrases in block-lettered font like "You actually read this? Total success." and "We made this mural instead of an Instagram post." While other challenger brands rely heavily on social and digital channels, more than 60% of Oatly's budget goes to out-of-home advertising, said Schoolcraft.
"Their ads are creative and straightforward, and are all tied to their value-proposition and product claims," said Mike Stevens, executive director, strategic planning and account service at ad agency GYK Antler. "They strongly communicate who they are and what they stand for in a straightforward way that starts with their packaging and continues into digital, bringing their brand personality to life through content."
Oatly also uses its packaging to promote the product and pitch itself as good for the environment.
"We are honest, sarcastic, personable, and not afraid to poke fun at ourselves - we don't take ourselves too seriously," said Schoolcraft. "But that's because what we are fundamentally trying to address is so serious: That we are for everyone who cares what they put in their body and about having a planet in the future. How do you make nutritional health interesting without scaring people?"
Oatly's competition is quickly heating up
Fans have compared Oatly's taste to real milk, and baristas have praised its ability to foam the drink for use in coffee. But Oatly has also benefitted from timing.
People are buying more alternative-milks and plant-based foods for environmental and health reasons. Sales of plant-based milks are up more than 61% since 2012, according to the Plant Based Foods Association, and the category is expected to reach $41.06 billion in sales by 2025, according to Grandview Research.
"They found the perfect time to do what they do, and couldn't have rebranded at a better time," said Joachimsthaler. "Customers today are environmentally conscious and are willing to pay a premium, they probably wouldn't have been as successful if they did it 10 years ago."
Oatly is now available across 7,000 stores and coffee shops, per Bloomberg, including Whole Foods and Wegmans. It was mentioned more than 90,000 times online since January 1, 2018, with nearly all sentiment-categorized mentions about it being positive, according to data crunched by Brandwatch.
But as the product's popularity climbs, Oatly's competition is heating up. Giants like Silk, PepsiCo's brand Quaker Oats as well as Califia Farms, HP Hood and smoothie brand Innocent have all rolled out oat-based milks.
Oatly is responding by ramping up production (it opened a processing plant in New Jersey and has another coming online in Utah), and branching out to yogurt, or "oatgurt," and a frozen product similar to ice cream. But it's already faced one mass shortage.
"Managing this growth will not be easy, and scaling nationwide will be a big problem because the big corporations come armed with better supply chain, logistics and distribution muscle," Joachimsthaler said.
Schoolcraft acknowledged one of the company's biggest challenges has been meeting demand. But he said its commitment to its mission would help it stay on track.
"We see ourselves more as a company working on societal change than an oat milk company," he said.
