“Here comes the post milk generation” is the slogan emblazoned on the side of the electric trucks of the alt-milk brand Oatly. We will soon find out if that’s true as the Swedish oatmilk juggernaut heads towards a mega US stock exchange listing.
The Swedish company said this week it had begun work on a flotation in New York which some analysts think could value the fast-growing business at as much as $10bn (£7.1bn).
Oatly is following the money to the US where investors have poured cash into companies such as Beyond Meat and Impossible Foods, which have helped plant-based nourishment enter the mainstream thanks to high-profile deals to supply McDonald’s and Burger King, respectively, with vegan burgers.
After the upheaval of the pandemic some business leaders think 2021 could be a watershed moment for plant-based foods. Oatly, with the might of the US private equity firm Blackstone behind it, perhaps thinks so too.
The consumer trends are clear. In the UK, sales of plant-based foods broke through the £1bn sales barrier last year, with 13 million shoppers buying meat-free substitutes and alt-milk, according to the grocery market analysts Kantar. And despite the hardship of lockdown, nearly 600,000 people around the world attempted Veganuary, up from about 400,000 in 2020.
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Unilever, the FTSE 100 company behind brands such as Hellmann’s and Marmite, now says expanding its vegan range is a top priority, with its chief executive, Alan Jope, describing plant-based foods as as an “inexorable” trend.
“We are seeing in every single country in the world shift towards more plant-based diets, even in emerging markets,” said Jope who is pushing the company to turn out vegan versions of its well-known products, ranging from mayo to Magnum ice-creams.
Morten Toft Bech, the founder of the Yorkshire-based Meatless Farm, which is one of the UK’s fastest-growing plant-based meat brands, says if a company wants to “make it big” it has to go to the US because of the “tremendous” valuations that businesses achieve there.
Beyond Meat, which has had a rocky ride as a listed company, has a market value of $9bn, compared with $1.5bn when it listed almost two years ago.
Meatless Farm’s sales are on course to hit £50m this year and Toft Bech hopes it too will become a “unicorn” – a City term used to describe young firms valued at more than $1bn – like Oatly.
Food companies that crack the US can grow very fast, Toft Bech said. “A lot of the US investors I speak to about Meatless Farm are so focused on the US they hardly understand anything else, because they don’t need to. The US [alone] has enough sales to become a unicorn.”
Toft Bech said the prize for alternative meat brands is 50 times bigger than for dairy, given a $1.2tn global meat market. “You don’t need to produce more than burgers and a few sausages like Beyond Meat are doing to be big,” he says. “It’s so humongous that even with 1%, you are a huge company.”
US consumers spent about £1.6bn on plant-based milks in 2020, which was about 25% more than in 2019. In UK supermarkets, sales of plant milks have increased by 16% to £278m in the past year, according to the data firm Nielsen. Within that, oat milk sales more than doubled to £73m (although a reality check should be provided in the £3.5bn of cow’s milk sold).
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Over the past decade Oatly’s chief executive, Toni Petersson, has given the company, which had spent several decades in the Swedish wilderness, a makeover which has managed to make oats appealing to under-40s trying to make sustainable food choices.
When one first-time drinker said “it tastes like shit!” the company printed the view on its cartons to start a conversation. Petersson has also featured in Oatly’s ads, including standing alone in a field with a synthesiser, singing “Wow, no cow!” The company has also moved into yoghurts, spreads and ice-cream.
Last summer, Oatly sold a 10th of the company to a group of investors that included Blackstone, Oprah Winfrey and Jay-Z in a deal valuing the business at $2bn. The change in its ownership triggered a backlash from climate and political activists who object to the presence of Blackstone, headed by the Trump donor Stephen Schwarzman.
An interesting road now lies ahead for Oatly as it is forced to toe an increasingly corporate line to raise the cash needed to build a global network of factories.
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Emma Clifford, an analyst at the market researchers Mintel, says one barrier to the growth of plant-based foods is the price as they generally cost more than what they are trying to replace. However, with the pandemic fuelling a sustainability kick, she thinks the environmental benefits will “become an even more persuasive selling point”.
Consumers have certainly got a taste for oat milk and as Oatly starts meeting potential shareholders it will become clear whether investors are thirsty too. The naysayers argue we are less than five years away from peak plant milk. While oat milk sales are booming, the demand for soy and almond milks has already plateaued in the UK.
Petersson told the Guardian last year that oat milk was not a fad. “Ten years from now, when generation Z and millennials have the strongest spending power globally I don’t think anybody is going to say, ‘Why don’t we start consuming more animal-based products?’”
