How Oatly Went from Obscurity to IPO Stardom—and Fell Back Again

Oatly’s story is a case study in turning a niche idea into a global phenomenon, only to grapple with the challenges of rapid growth. From its roots as a small Swedish brand to a $10 billion IPO, and now to a market valuation of approximately $362.97 million, Oatly’s journey highlights the highs and lows of scaling a consumer brand.

Here’s how Oatly rose to prominence—and the lessons learned from its setbacks.

The Humble Beginnings in Sweden

Oatly was founded in Sweden in 1994 by brothers Rickard and Björn Oeste. Rickard Öste, a food scientist, had been researching milk alternatives to address lactose intolerance.

After years of research, he discovered a breakthrough and created an oat-milk alternative.

Initially, Oatly wasn’t a consumer brand; it operated behind the scenes, selling its milk alternative as an ingredient to food manufacturers.

A partnership with Danone in the late 1990s seemed like Oatly’s big break. Danone used Oatly to launch an oat-based yogurt. The Oeste brothers thought they hit a home run, but it turned out to be a false start.

The Danone oat-yogurt flopped after a year for a variety of reasons - it wasn’t that good and Danone had conflicting interests. The Danone team felt they couldn’t fully market the yogurt as a dairy alternative gives its strong ties to the dairy industry.

The Oeste brothers decided to go all in and create their own brand.

They launched Oatly in 2001.

Early Branding Struggles

The road wasn’t easy. At first, consumers confused oat milk with goat milk. It was a lesson in branding: introducing something entirely new to the market takes time, effort, and a clear message.

Oatly adopted what Björn Oeste called the "bowling pin" strategy, targeting niche audiences first. They planned to win over a new niche audience one-by-one.

They decided to start by being hyper-focused on families with children suffering from milk protein allergies—a group representing 1.5–2% of children globally.

By targeting this niche audience, Oatly built a loyal following that gave them the foundation to expand further.

The Toni Petersson Era: Reinvention Begins

In 2012, Oatly brought on Toni Petersson as CEO. A self-described outsider to the consumer goods industry, Petersson had a colorful background running a restaurant, nightclub, and dabbling in real estate. He joined forces with John Schoolcraft, Oatly’s CMO, to reimagine the brand.

The timing was perfect. Conversations about animal agriculture’s impact on climate change were gaining traction, spurred by a 2013 UN report that attributed 14% of global greenhouse gas emissions to livestock, with cows being the biggest culprits.

Oatly leaned into the environmental message, positioning itself as the go-to milk for the “post-milk generation.” Petersson and Schoolcraft revamped Oatly’s packaging, adding humorous and quirky messages that stood out on store shelves. Without a big advertising budget, the cartons themselves became Oatly’s medium to connect with consumers.

Cracking the U.S. Market

Oatly’s U.S. expansion began with Mike Messersmith, now President of North America at Oatly. The strategy? Focus on coffee shops with the Barista Edition Oatly Milk. Baristas loved its creamy texture and frothing capabilities, and environmentally conscious coffee drinkers were drawn to oats as a more sustainable crop compared to almonds or soy.

Most of these coffee shops were small, independent stores with loyal customers. Messersmith and his won each coffee account one by one.

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This tactic paid off. In 2018, Oatly was in thousands of coffee shops across the US, and they were making headways in grocery.

Oatly’s cult following skyrocketed during the “Great Oat Milk Shortage” of 2018, when demand outpaced supply, driving cases to sell for up to $200 on Amazon.

By 2019, the brand’s web traffic had grown over 500% year-over-year. At this time, Oatly was reportedly in 5,000 grocery stores and 7,000 shops in the United States making $204 million in revenue.

What were the ingredients that made it easy for Oatly to sell into these store?

High quality product + consumer demand + data story

Does your company need help perfecting its sales formula? Talk to Pantry AI to learn how we can help you build your data story and sell more. 

Oatly Ready to IPO

The pandemic only amplified this growth. Between March and June 2020, oat milk sales surged 300% as people stocked up for lockdown. Investors took notice. That year, Oatly secured a $200 million investment from a group led by Blackstone and including Oprah, Jay-Z, Natalie Portman, and Starbucks founder Howard Schultz.

In March 2021, Oatly became available at Starbucks joining soy, coconut, and almond milk as a plant-based option. By May 19, 2021, Oatly went public with a $10 billion IPO under the ticker symbol “OTLY.” The stock peaked at $28.73.

From Boom to Bust

Oatly’s aggressive expansion plans soon ran into trouble. Supply chain issues and manufacturing delays led to missed opportunities. The company overextended without fully understanding the unique dynamics of its sales channels, resulting in oversupply in some areas and unmet demand in others.

Today, Oatly’s stock trades for less than $1. Its valuation now hovers around $362.97 million—a far cry from its IPO heights.

Lessons from Oatly

Oatly’s journey offers key takeaways for entrepreneurs and marketers:

1. Niche to Mainstream: Start small with a focused audience before attempting to conquer the mass market. Read more about the power of niche to mainstream here.
2. Branding Matters: A great product can fail without effective messaging. Oatly’s packaging and quirky tone made it stand out.
3. Sustainability Sells: The brand’s alignment with environmental concerns helped it resonate with younger, eco-conscious consumers.
4. Understand Your Sales Channels: Scaling too quickly without clear visibility into demand dynamics can create costly inefficiencies. Tools like Pantry AI can help brands align inventory, production, and sales across diverse channels to scale responsibly.

While Oatly’s current challenges are significant, its story remains a testament to the power of innovation, branding, and persistence in a competitive market. Whether it can regain its footing remains to be seen, but its journey so far has been nothing short of extraordinary.