Oatly: Supply Chain Strategy Shift Drives Q2 Volume Growth, Margin Improvements
Oatly saw volumes grow in all segments during Q2 and credited its shift to an asset-light supply chain model as the key driver, allowing the brand to reduce its cost structure and focus on more efficient execution, per an earnings report this morning.
Revenue increased 3.2% year-over-year to $202.2 million in the quarter ended June 30. Volume growth (up 8.3%) in North America helped drive revenue in the segment up 9.7% ($6 million) – more than half of which came from retail.
To drive further U.S. retail growth, the company appointed CPG veteran Christopher Link to the post of chief customer officer and EVP of retail last month. This is a new role for the company and Link, who previously held positions at BlueTriton Brands and Nestlé Waters. He will be responsible for the oversight and collaboration with U.S. retail customers to support the expansion of Oatly’s dairy alternatives.
“These segment Q2 results are a direct result of discipline execution throughout the entire organization and staying true to our north star of profitable growth,” CEO Jean-Christophe told investors during today’s call, adding that the North America segment saw its first full quarter of positive adjusted EBITDA.
Supply chain efficiencies in the North America and Greater China divisions are fueling strong margin gains: gross profit margin was 29.2% in the second quarter, an increase of 1,000 basis points compared to the prior-year period, with gross profit up to $59 million ($37.7 million in Q2 2023).
Net losses ($30.4 million) also improved in the quarter, down from $86.7 million in the prior-year period. The improvement was primarily a result of higher gross profit and lower selling, general and administrative expenses across all segments. Adjusted EBITDA loss was $11 million, compared to $52.5 million in Q2 2023.
Meanwhile, the company’s R&D expenses increased $5.6 million to $10.9 million ($5.3 million in Q2 2023) due to expenses related to a new product launch in North America after the company determined it was not up to Oatly’s standards. The company didn’t name the product in its earnings report, but recent releases include a line of Oatmilk Creamers and two new Oatmilk varieties.
The alt-dairy company also continues to employ off-the-wall marketing tactics to grow brand awareness, last month crashing the International Dairy Food Association’s Capitol Hill Ice Cream Party with a “Dairy Deprogramming” truck that served plant-based, “propaganda-free” soft serve.
According to Oatly, the stunt gave the brand a national stage to expose a number of “dark truths” Big Dairy loves to hide, including the fact that 144 gallons of water are used to produce just one gallon of cow’s milk in the U.S.
Looking ahead, the strong Q2 results pushed the alt dairy company to upgrade its full-year constant currency revenue growth (now 6% to 10% versus 5% to 10%) and adjusted EBITDA (now: a loss of $35 million to $50 million) 2024 outlook while lowering its guidance for capital expenditures to below $70 million, versus the prior expectation of below $75 million.
“In the second half of the year, our priorities will be completing our work on calibration of resources, investing in high-return demand generating investments, and maintaining our north star target to drive the business toward structural, consistent profitable growth,” said Flatin in a statement.
