Please READ the following case and answer the questions

The 2021 Super Bowl commercials brought some old favorites like Bud Light and some new

entrants. Among the latter was Oatly, the Swedish oat milk company. The 30-second TVC

featured the firms CEO Toni Peterson playing a keyboard in a wheat field while singing Its

like milk, but made for humans and wow, wow, no cow.2 As he sang, he wore a T-shirt

reading no artificial badness. The reaction on social media was a mix of hilarity and contempt

for Oatly with tweets like I dislike Oatly now and That commercial was so bad that Ill never

buy Oatly milk ever. The company was also selling T-shirts allowing you to express hatred for

the ad. They sold like hot pancakes.

It is no longer enough for food to be healthy and taste good. People increasingly want to make

sure the food they consume will not help to melt polar ice caps. Food production is a leading

contributor to climate change, especially when animals are involved.3 Milk substitutes made

from ingredients like soybeans, almonds, rice and oats have mushroomed.

One leading milk substitute brand is Oatly which as its name suggests is based on oats. Oatly

was founded in 1994 by Rickard Oste, a Swedish professor of food chemistry and nutrition, and

his brother Bjorn Oste. Unlike other milk alternatives, Oatly achieves dairy milks creaminess

without the usual cloying sweetness of substitutes made with soy or almonds. In 2016, a joint

venture between Verlinvest, a Belgian investment firm, and China Resources bought a majority

stake. That new financing helped Oatly to expand into Europe, the United States, and China,

where many people cannot tolerate cows milk. Asia accounted for 18 percent of Oatlys sales in

2021Q1. Other investors included Blackstone, the private equity firm, and a slate of celebrities,

including Oprah, Natalie Portman, and Howard Schultz, the former Starbucks CEO. Oatlys IPO on the NYSE took place on May 20, 2021 with shares priced at $17 or an implied valuation of

$10 billion.

In the United States, milk substitutes made up a $2.5 billion industry in 2021 and were expected

to grow to $3.6 billion by 2025. Worldwide, the $9.5 billion milk substitute industry was

expected to grow to $11 billion. Once a niche market, the industry had become mainstream.

Oatly sold its milk drink in multiple flavors. It also sold dairy free alternates for yogurt, ice

cream, and cream cheese.

Through the years, the company thrived with splashy campaigns. It was targeted by leading dairy firm Arla which ran ads discouraging people from buying milk substitutes with a fake brand

named Pjolk.

In response, Oatly trademarked fictitious brands like Pjlk and Slk and began

using them on its packaging. Oatly also successfully ran a petition campaign called Are You

Stupid against the European Parliament to withdraw Amendment 171

(In the United States, milk substitutes made up a $2.5 billion industry in 2021 and were expected

to grow to $3.6 billion by 2025. Worldwide, the $9.5 billion milk substitute industry was

expected to grow to $11 billion. Once a niche market, the industry had become mainstream.

Oatly sold its milk drink in multiple flavors. It also sold dairy free alternates for yogurt, ice

cream, and cream cheese.

Through the years, the company thrived with splashy campaigns. It was targeted by leading dairy

firm Arla which ran ads discouraging people from buying milk substitutes with a fake brand

named Pjolk.https://www.oatly.com/int/stop-plant-based-censorship) .4 5 That amendment would have banned

dairy free or creamy as labels for plant-based drinks.

While the company saw encouraging signs in the West with people switching toward vegan diets

or cutting meat consumption, challenges remained in other parts of the world. Oatly-

commissioned research in Hong Kong revealed the dominance of dairy food consumption and a

low awareness of plant-based alternatives (see Table 1)

Table 1

When respondents see the word

milk

2% said plant-based

milk comes to their

mind first

96% said cows milk

comes first to their mind

When being asked why drinking

cows milk is mainstream

81% agreed we are

being educated by

teachers or parents to

drink cows milk

91% agreed cows milk

is good for human body

86% said they hope

theres more

information about plant-

based milk

If they knew more about why

plant-based milk is better for the

human body and environment

73% would consider

switching from cows

milk

At the same time, big multinational incumbents like Nestl and Unilever were planning to enter

the space of milk substitutes. Nestl already had dairy-free versions of Nesquik drinks and

Hagen-Dazs ice cream. In May 2021, the firm unveiled Wunda, a pea-based milk substitute

which was higher in protein than oat milk. It planned to sell Wunda initially in France, Portugal, and the Netherlands.

Nearly six months after its IPO, Oatly had failed to impress investors. Oatlys share price had

dropped about 50% since hitting a high in June 2021. Still, Toni Petersson, Oatlys CEO,

remained optimistic. In an interview with Bloomberg he noted that in Oatlys five key market

(the U.S., U.K., Germany, Sweden, and Asia), up to 40% of the population are buying plant-

based milks: There is a massive exploration happening there. A lot of people who care about

sustainability still havent tested our products. One challenge Oatly faced was a supply

shortage. Petersson observed: During that period [of supply shortage], we know from the

biggest retailers that 30% of our consumers moved back all the way to dairy. They didnt pick a

competitive oat milk brand or soy milk. When were on shelf again, people are coming back to

us.

QUESTIONS:

Oatly and other milk alternate brands are now facing the challenge from the giant food

firms like Unilever and Nestl the typical David versus Goliath battle. For instance,

Nestl, the worlds biggest producer of packaged food, unveiled its own milk alternative

in May 2021 (when Oatlys shares started trading on the NYSE) based on peas. What are

the competitive strengths and resp. weaknesses of Oatly vis--vis these big players?

2) Whom should Oatly target? Should the target market be adjusted depending on the

market (e.g., established ones like Sweden versus newer ones like Hong Kong)?

3) What are the positioning alternatives for Oatly?

4) What positioning strategy should Oatly pursue? Would it depend on the geography (e.g.,

Europe versus China)?

5) Oatly has pursued some unconventional communication strategies. Even when using a

conventional platform like the 2021 Super Bowl it took a rather unusual track. How

would you assess this strategy? Does it always work? Any possible risks?