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Building An Oat Milk Empire

Published on:

June 9, 2021

Whether you gulp it down by the glass or simply enjoy a splash of it in your breakfast cereal, milk has been a staple in homes around the globe for generations. Now, that seems to be changing. Evidenced by several decades of declining milk sales, consumers seem to be turning their backs on dairy, opting instead for trendy “alternative milk” products made from plants. The latest craze? Oat milk.

As long as you haven’t been quarantining under a boulder this whole time, then you’re likely to have heard of oat milk. Made similarly to almond milk, oat milk is made by soaking whole oats in water, blending them together, and then straining out the liquid. Sure, it’s not exactly “milking,” but the result is close enough for us–a thick, creamy mixture with a pleasant (though undeniably oat-y) taste.

While still outpaced by almond milk sales, oat milk has quickly taken up the second-place position for the milk alternatives market. Today, we’re examining the origin story of this delightful beverage, how it entered the spotlight, and what the future might hold for other plant milks.

Oat Milk’s Swedish Origins

Oat milk owes its beginnings to the inquisitive mind of Rickard Öste, a food scientist at Lund University. Specializing in research on lactose intolerance and sustainable food systems, Rickard was troubled by the fallbacks of other plant milk products. From water waste to over-reliance on pesticides, there were plenty of problems with existing plant milk offers.

Inspired by this discovery, he enlisted the help of his brother Björn to pioneer a more sustainable non-dairy option. In 1994, the pair found their answer in oat milk and founded a company you might recognize, Oatly.

Yep, the same Oatly that made its market debut in 2021 for a whopping $10 billion IPO.

Despite its recent jaw-dropping growth, oat milk didn’t take off right away. In fact, it remained a hidden gem within its home city of Malmö, Sweden, for more than two decades. Then, in 2012 everything changed with new CEO Toni Petersson.

Why Oat Milk, Why Now?

While the Öste brothers can be credited with the innovation itself, Petersson is arguably responsible for bringing oat milk to the masses. Petersson noticed that the plant-based trend was experiencing rapid-fire growth in among US consumers. Seeing an opportunity for US expansion, he got to work reimagining the Oatly brand.

The logo was the first element of the brand to get an update, switching from small, red lettering to a fun, bold, block-and-bubble font featuring their name front and center. The language of the packaging was also changed from Swedish to English as Petersson set his sights on a global audience.

To bring attention to oat milk’s superiority as a sustainable milk alternative, Petersson also commissioned an environmental report comparing its impact to that of dairy. The report claims that substituting a liter of Oatly for dairy milk results in an average of 80 percent less greenhouse gas emissions, 79 percent less land usage, and 60 percent less energy consumption, making it a substantially more sustainable option.

While these efforts certainly helped improve the identity of the brand, things wouldn’t reach a global stage until 2016. In a game-changing strategic move, Petersson brought Oatly to New York City coffee consumers in the form of a special “barista blend” of the product. Unlike other plant milks, oat milk had a texture close to that of whole milk. This foam-able blend was perfect for latte art with a great flavor to boot.

With the baristas on their side, Oatly had effectively inserted themselves into the existing routines of NY’s coffee-loving consumers within the year. The move would pave the way for subsequent growth. By the summer of 2018, Oatly was already a staple of hundreds of craft coffeehouses and had built up an unforeseen cult following for its quirky, likable branding. Consumers liked the product so much, in fact, that there were shortages of oat milk in 2018 and again in 2019 as the company scrambled to keep up with demand.

Oat milk experienced a surge in 2020, jumping up 208 percent from 2019 and amounting in $249 million in retail sales worldwide. Today, Oatly can be found in nearly 20,000 retail and coffee shops in the US, including Starbucks. With no signs of slowing down, oat milk’s market share is expected to continue growth at an annual rate of almost 10 percent through 2027. Talk about “oat-some!”

Sustainability, Healthy Halos & Milk Shame

Long before the adoption of plant milks, dairy milk consumption was experiencing a steady decline. According to the USDA, Americans drank 149 pounds of dairy milk per capita in 2017, down from 247 pounds in 1975. Meanwhile, the global dairy alternatives market is projected to go from $17.3 billion in 2018 to $29.6 billion by 2023, at a CAGR of 11.4 percent. Even as the dairy industry continues to challenge plant milks’ position in the dairy aisle, it doesn’t change that consumers seem to be moving away from cow’s milk.

Driven by health trends and consumer concern for the dairy industry’s effect on climate change, animal welfare, and ethical food production, there are now more reasons than ever for consumers to turn their backs on dairy. Nutrition seems to be a big one.

Milk alternatives like oat milk benefit from a “healthy halo” effect–that is, the perception that a particular food is good for you even when there is little or no evidence to confirm this is true. In comparison to cow’s milk, oat milk generally has more calories and carbs, although it benefits from offering more fiber. Another fallback is protein, which is more prevalent in cow’s milk and other plant milk varieties. Of course, as with most commercial milk products, oat milk may be fortified with specific nutrients during manufacturing.

Another cultural phenomenon stimulating the plant-based trend is “milk shame,” or the embarrassment adults feel in enjoying drinking glasses of dairy milk. From being infantilized for the habit to being told by others that drinking milk is straight up disgusting, the social pressure of milk shame seems to be another driving factor encouraging the shift to plant-based milks.

Of course, there’s still a way to go before we can completely count out milk. While sales of dairy milk have decreased by about $3.4 billion since 2015, consumption is still in first place, followed by almond and oat milks. To put things in perspective, only 1 in 10 consumers use a milk alternative with only 16 percent of those consumers choosing oat milk. So, what’s the outlook for oats?

Pretty good, actually.

As consumer trends favor oat milk and other plant-based milk products, this market will only grow and we’re already seeing the results of that innovation. From oat milk creamer and yogurt to ice cream and RTD coffee drinks, there’s no shame in loving oat milk in all its forms.

Petersson expresses it best–“Wow, wow, no cow!”

If you’ve got a great idea for a commercial drink product, The Beverage Architects at Flavorman can help you bring it to life. Just fill out this web form or give us a call at (502) 273-5214 to get started. Let’s change what the world is drinking, together.

Related Content

“You Can’t Milk An Almond”: The Plant Milk Debate

Consumer Perceptions Every Drink Brand Should Be Aware Of

Here’s The Top 3 Plant-Based Beverages

In Celebration Of Milk

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