Oat milk maker Oatly to raise $1.4b in IPO

Oatly the world’s largest oat milk company, will raise $1.4 billion in an initial public offering Thursday on the Nasdaq stock exchange.

Oatly priced its shares at $17 apiece ahead of the IPO, giving the company a valuation of nearly $10 billion. It will trade under the ticker symbol “OTLY.”

It’s the latest milestone in the rapid rise of oat milk, which is winning consumers __ and famous investors like Oprah Winfrey __ with the message that it’s healthier and more environmentally sustainable than cow’s milk. Once a niche product designed for people who were lactose intolerant, Oatly oat milk is now on the menu at Starbucks in the grocery aisle at Target and sold online by Alibaba in China

And Oatly, which is based in Malmo, Sweden, thinks oat milk has a lot more growth ahead. Global sales of plant-based dairy products reached $18 billion in 2020, or just 3% of the $600 billion dairy industry, according to Euromonitor.

“The plant-based dairy market is still in its infancy,” Oatly said in a government filing ahead of its IPO.

Like the flexitarians who have fueled the rise of plant-based meat __ and the successful 2019 IPO of Beyond Meat __ Oatly says more and more consumers are trying its oat-based drinks, yogurt and ice cream a try. In the last three months, between 35% to 40% of adults in the U.S., the United Kingdom, Germany, China and Sweden purchased plant-based milk, Oatly said.

Oat milk’s growth is surpassing other plant-based drinks. U.S. sales of oat milk jumped 131% over the last year, to $304 million, according to Nielsen. U.S. sales of soy milk, rice milk and coconut milk fell over the last year, while almond milk sales rose 9%.

Competitors have been watching closely. Greek yogurt maker Chobani began selling oat-based yogurt, oat milk and other products last year. Nestle recently launched a milk made from peas.

Cara Rasch, an analyst with the market research company Packaged Facts, said oat milk’s mild and pleasant flavor __ which blends well with coffee __ is one reason for its success.

Rasch said many consumers also see it as a healthier alternative to dairy milk. One cup of Oatly whole milk has fewer calories, less fat, lower sodium and lower cholesterol than a comparable serving of whole cow’s milk. But cow’s milk has higher protein, lower carbohydrates and more naturally occurring vitamins and minerals.

Oat milk takes less land and energy to produce than dairy milk, and emits fewer greenhouse gases. But it also beats other plant-based milks in its environmental impact, according to a 2018 Oxford University study. Rice farming leads to more fertilizer runoff than oat milk, for example, and almond milk requires more water because almond trees are primarily grown in drought-prone California.

Oatly’s roots date to 1995, when a group of scientists at Lund University developed the world’s first oat milk. The group began selling its milk under the Oatly name in 2001 and gradually added other products, like ice cream and yogurt.

The company grew slowly until 2012, when it appointed a new management team led by Toni Petersson, an outsider who had led several startups. Oatly entered the U.S. market in 2017 and China in 2018.

In 2020, Oatly’s revenue more than doubled to $421.4 million. But its net loss widened to $60.4 million __ from $35.6 million in 2019 __ as it spent heavily on marketing and increasing production. Oatly currently has four manufacturing plants worldwide, with three more planned or under construction.

A total of 84.4 million Oatly shares were offered in Thursday's IPO. Oatly offered just over 64 million shares, while some of the company's shareholders offered the rest.

Last July, Oatly sold a 10% stake in the company for $200 million to a group of investors led by Blackstone Group. Among those investors are Winfrey, actress Natalie Portman, former Starbucks CEO Howard Schultz and Roc Nation, Jay-Z's entertainment company.