Oatly’s Strategy, 5 Reasons it Has Taken Off
Do you believe it’s possible to become an overnight success? By all accounts Oatly is an overnight success. Its oat milk landed in coffee shops in the United States in 2016 and by 2018 its was so popular there were shortages of it across the United States. But as any “overnight” success will tell you their success is always years, or in the case of Oatly, decades in the making.
Oatly opened for business 29 years ago in Sweden where it was a household name long before its products entered the United States market seven years ago. Once Oatly’s creamy oat milk hit the shelves in America in 2016 it didn’t take too long for the product to take off. By 2019 Oatly was available in 7,000 stores and coffee shops across the United States including places like Whole Foods and Target. Oatly has so effectively captured the hearts and minds of consumers that it has attracted the attention of high-profile investors including Oprah Winfrey, Roc Nation which is owned by Jay Z and Blackstone which is a private equity company. Oatly is now valued at $1.3 billion.
Since success is never an accident it is worthwhile to take a look at how Oatly has been able to shake up the market for dairy alternatives by looking at five critical elements of Oatly’s strategy.
1. The ability to see and act on emerging trends. Hindsight is 20/20 isn’t it? Oat milk is now part of the daily caffeine fix for millions of people around the world. But in the early 1990s if you heard a conversation between two people talking about turning oats into milk you would have laughed. But at that time a food scientist at Lund University in Sweden named Rickard Öste noticed a few trends. He saw that many people were lactose intolerant. Today that number stands at about 65% of the world’s population. He also thought sustainability was important and wanted to create a sustainable milk alternative. Sustainability is on our minds today but it is not something that captured the attention of the general population 25 years ago.
With these trends in the back of Öste’s mind he created a patented process that uses enzymes to liquefy raw oat kernels. Using this process to make oat milk, Oatly was launched in Sweden in 1994. By 2019 the global market for milk alternatives reached an estimated $18 billion. But perhaps the real indicator of the market potential for oat milk is the size of the milk market which will reach an estimated $331.8 billion this year.
When creating Oatly Öste didn’t just focus on making another milk alternative he focused on creating something that was better than what was on the market at the time. Part of the appeal of Oatly is that it’s creamy like cow’s milk and tastes more like milk than other milk alternatives. It also froths better than other non-dairy milks making it a better choice for a latte than almond milk. On top of that it is healthier than other milk alternatives.
What’s remarkable about this story isn’t the market potential for oat milk or how great it tastes. Clearly Öste sensed there was potential for his idea or he wouldn’t have pursued it. The lesson is that you should take your ideas seriously. Everyone sees trends including you. Sometimes they are subtle thoughts like the one Indra Nooyi, former CEO of PepsiCo had when she said that over 20 years ago most people at a PepsiCo team meeting would have consumed sugar laden beverages, then 10 years ago they shifted to diet drinks like Diet Pepsi now most people grab a bottle of water before a meeting begins. Just by looking at what people were drinking in team meetings Nooyi could see a shift in drinking habits.
Now the hard part begins. You have identified a trend like Oste, now you have to have the courage and resilience to do something about it especially in the beginning if the only person who sees the potential of your idea is you.
2. Walking off the beaten path. Imagine running a business that’s over 20 years old. You have had success in your home market and now it’s time to expand into a new market, the United States. The first question many brands facing this opportunity will ask is how are we going to market our product in America? Do we need to set up a marketing arm overseas? Do we need a Chief Marketing Officer?
If you are Oatly you go in a completely different direction. When Oatly entered the United States market in 2016 it didn’t have a Marketing department much less a CMO. "We don't follow the traditional playbook, we don't even have a traditional marketing department," said John Schoolcraft, Oatly’s chief creative director. "Our secret sauce is that we're inconsistently consistent."
Oatly’s aversion to doing what everyone else is doing didn’t stop there. Instead of flooding the market with Instagram and Facebook ads Oatly employed an entirely different approach. Oatly conducted painstaking research to identify a set of coffee shops in the United States that could serve as informal brand ambassadors for its product.
Oatly didn’t choose any coffee shops but high end shops that roast their own beans and are local favourites. The process took several years and resulted in Oatly selecting ten coffee shops in major cities in the United States.“If you’re going to get people to try oat milk for the first time, you want to make sure that first trial is the best possible situation,” says Schoolcraft.
After selecting the ten coffee shops Oatly sent a sales rep to make a quick sales pitch at each location and left the baristas with free samples of Oatly. At first the baristas resisted but who doesn’t like trying something that’s free (think free samples at Costco). The strategy worked and Oatly’s product spread through coffee shops across the United States. By the end of Oatly’s first year in America its oat milk was in 1,000 coffee shops across the United States. "They developed a really strong alignment with baristas, roasters and coffee shop owners — the ultimate influencers for devotees of specialty coffee," said Lori Bartle, former 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 could teach a class on how influencing actually works. While brands have success with influencers on social media most people realize their favourite YouTuber doesn’t always use the product they are promoting on a regular basis. Instead Oatly selected high end coffee shops because those are the true taste makers. If you see a carton of Oatly in your favourite coffee shop a level of trust is established. This approach also led to product discovery amongst consumers in a more organic way. You see a barista using a carton of Oatly and you wonder, what’s that? Then a conversation begins.
When lululemon came on to the seen in 1998 it followed a similar strategy. The company didn’t have enough money for traditional marketing. Instead it gave its clothing to yoga instructors. Those instructors wore lululemon clothing while teaching yoga classes. As people attended the classes they saw the clothing and thought if that’s good enough for my instructor it’s good enough for me. Without a large marketing budget at the time, lululemon like Oatly grew by word of mouth.
3. A unique approach to packaging and marketing communications. If you have ever seen products by The Ordinary or Apple you will know what the current trend in packaging is all about, minimalism. The Ordinary launched in 2016 the same year Oatly launched in the United States and has had breakout success. If The Ordinary is about minimalism Oatly is the antithesis of that.
Oatly’s packaging and marketing messaging is bold. It’s quirky and it captures your attention. Some of Oatly’s marketing messages include: “if you don’t read this ad, no worries,” “someone else likely will.” “Like milk, but made for humans.” “You actually read this? Total success.” Speaking about messaging like this Schoolcraft says: “it’s not your typical Swedish perspective in that there’s a lot of sarcasm.” “The most important thing is that we treat the consumer with respect. If you’re going to interrupt the consumer’s life with an ad, it has to be something that makes them laugh or keeps them interested. Otherwise, what’s the point.”
If you do not have a lot of money to spend on ads then why not wrap your product in packaging that sells itself? Oatly’s packaging almost screams: DON’T IGNORE ME! Learn more about me! Oatly’s marketing campaigns often focus on low cost high traffic mediums like outdoor billboards, buses and subway platforms. Relative to other companies Oatly has spent little on advertising and at one time about 60% of Oatly’s marketing budget went to outside of home advertising.
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4. Being disciplined. It’s never been easier to start a new business, enter a new market or get your message in front of an audience. But easy is not the same thing as effective. Many direct to consumer brands talk about the early days of Facebook when it was easy to reach a wide audience at a low price. But as the success of Facebook advertising grew so did the competition and many companies found they were spending millions of dollars on ads that weren’t as effective as they used to be.
So the question becomes how do you reach people? If you present this question to someone the quick answer is often…tweet! Post on Instagram! Create a YouTube video! These channels have made companies and some individuals very successful but sometimes lost in the ease of creating a simple Facebook campaign is the discipline it takes to have above average and long lasting success. The reason why most brands do not do grass roots marketing like Oatly did is because is because it’s harder. You have to do painstaking research, there is no instant gratification in terms of likes and you are not even sure it’s going to work because no one else is doing it.
But Oatly has this discipline and it’s what allowed it to succeed in a market filled with all sorts of competition. The “easy” thing is often what people turn to because, well, it’s “easy.” But to achieve something no one else has achieved you often have to do something that no one else is doing and that takes discipline.
5. Waiting for the right time. Oatly entered the United States market in 2016 at a time when many trends converged to propel its success. More and more people were turning to dairy alternatives for health reasons. There was and continues to be a growing affinity towards social causes like protecting the environment in the United States. It takes one sixth the amount of water to produce oats than it does almonds. Oatly’s oat milk also has a low carbon footprint compared to milk. For people concerned about the environment that matters. Then another milk alternative, soy, had already had its heyday with sales peaking in 2008 at $1.2 billion. There was also very little competition at the time.
You can’t predict timing but sometimes you have to wait on it, getting better and better until the time is right and your hard work pays off. While consumers in the United States thought Oatly was the hot new thing when it entered the United States in 2016 that thing was 22 years old by then. Often a great idea takes time to come to fruition meaning that patience is often the key ingredient to success.