Oatly: Production Challenges Hit Revenue Targets in Q3
Shares of Oatly fell by over 20% earlier today after the Swedish oat milk maker downgraded its revenue growth targets for the rest of this year.
Oatly, BevNET’s Brand of the Year winner for 2020, has been at the forefront of helping expand non-dairy milk category, one of the major drivers of explosive growth within plant-based CPG. The success of its flagship product, seeded mainly through coffee shops in the U.S., has helped Oatly widen its presence into 18,000 retail doors and 34,000 foodservice locations nationwide, while also driving its expansion into adjacent product categories like ice cream and coffee creamers.
However, after going public on the New York Stock Exchange in May at a $10 billion valuation, the company has struggled to overcome a crippling combination of supply chain challenges, depressed production and rising inflation.
As a result, actual Q3 revenue came in below internal expectations, rising 49% year-over-year during the quarter to $171.1 million, up from $114.7 million last year, but below projections of 55% growth ($178 million). That in turn will impact estimates for Q4 and the full year 2021: the company’s new projections are down from 78% ($226 million) to 40% (around $178 million) and from 64% ($690 million) to 51% (around $635 million) for the latter.
That’s well below projections from Credit Suisse: citing “pervasive supply chain bottlenecks and rising costs” across industries and a lack of clarity from the company on its timeline for ramping up production, the bank lowered its expected full-year 2021 revenue for the Swedish company from $694 million to $685 million in late October.
In its earnings presentation, Oatly cited different challenges the company faced in the three regions where it is sold. In the Americas, mechanical and automation issues choked output out of the company’s Ogden, Utah production facility last August, pushing revenue down by $3 million. Elsewhere, foodservice locations in Asia shuttered by COVID regulations had a further $3 million hit to revenue, while the opposite happened in EMEA (Europe, Middle East and Africa), as eased lockdown restrictions hurt the food-at-home retail space.
In addition, Oatly is “currently investigating a quality issue it identified at one of its production facilities that will probably result in the destruction of inventory and corresponding lost sales in the EMEA region.”
Even as countries begin to get a grip on COVID, Oatly is projecting its Q4 numbers will be taking an even bigger hit. Lingering uncertainty over when and by how much the company can resume full expansion opportunities in EMEA is expected to wipe $31 million from the company’s quarterly growth, while in the Americas, supply chain gridlock and drops in production and sales will represent a $13 million hit.
“Global consumer demand for our products continues to be strong and grow as we expand production and increasingly scale our operations,” said Toni Petersson, Oatly’s CEO, in a press release. “The robust third quarter revenue increase reflects broad-based growth across geographies and sales channels. We’re pleased with our ability to continue to be a leader in driving growth and sales velocity for the plant-based milk category within our key markets.”
