Oatly IPO: 5 factors to know about the plant-primarily based dairy enterprise right before it goes general public

Oatly
OTLY,

has set a goal of raising $100 million, typically a placeholder total that is afterwards amended.

There are nine guide underwriters for the submitting: Morgan Stanley, JPMorgan, Credit Suisse, Barclays, Jeffries, BNP Paribas, BofA Securities, Piper Sandler and RBC Capital Markets.

Oatly is backed by personal-fairness team Blackstone Group, as very well as celebrity names like Oprah Winfrey and Jay Z who invested $200 million in the business very last summer. That investment decision valued the enterprise at $2 billion at the time, in accordance to The Wall Avenue Journal.

Based in Malmö, Sweden, Oatly has been in the oat milk small business for 25 years. The company’s product lineup now also involves frozen desserts and “oatgurt,” an different yogurt.

Toni Petersson has been Oatly’s main executive given that 2012, and will be a part of the board the moment the business is publicly-traded.

Christian Hanke, a previous Nasdaq Stockholm govt, has served as Oatly’s chief fiscal officer due to the fact March 2020.

The enterprise is heading public at a time when climate transform and sustainability challenges are prime of intellect for quite a few buyers, notably youthful ones.

“Generation Z and Millennials will develop into the dominant global generations in the coming several years, bringing to the industry a new set of values and anticipations,” the organization reported in its prospectus.

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“These combined factors are driving a crystal clear rapid, accelerating development and inflow of new individuals to the plant-primarily based dairy industry.”

According to the Plant Based mostly Foods Association and Excellent Foodstuff Institute, plant-dependent-foods income achieved $7 billion in 2020.

Shopper Insights data quoted in the prospectus claims the plant-primarily based milk category will increase 20% to 25% around the upcoming three years.

Oatly is centered on its position in assisting to completely transform the foodstuff marketplace in get to be superior for the atmosphere and satisfy the health needs of its prospects. The organization details out that substituting a cup of Oatly for a cup of cow’s milk reduces greenhouse fuel emissions, land use and strength use.

Tastewise, which supplies meals and beverage knowledge and intelligence, explained in a December 2020 report that “plant-dependent everything” will be one particular of the major 10 U.S. traits for this year.

“The range just one rationale customers transform to plant-dependent foodstuff and beverage? Wellbeing,” the report explained.

“Plant-based is no lengthier just an ‘alternative’ to meat, but fairly a considerable
class in alone.”

Oatly’s vital markets are Sweden, Germany and the U.K., while its products were obtainable in 60,000 retail retailers and 32,200 espresso retailers around the planet as of December 31, 2020. Amid the places where by prospects can obtain Oatly is Starbucks
SBUX,
+.40%,
in which demand from customers was so superior there was a shortage shortly soon after the espresso chain launched beverages built with the item.

COVID-19 has impacted Oatly’s small business as lockdowns all over the entire world minimal obtain to restaurants, bars and other dining establishments.

See: Starbucks oat-milk scarcity comes as product sales of plant-based meals soar

In 2020, Oatly experienced profits of $421.4 million, up from $204. million the year before. Nonetheless, the enterprise claimed a reduction of $60.4 million “reflecting our ongoing investment decision in creation, brand recognition, new markets and item enhancement,” the prospectus reported.

Oatly is categorized as an “emerging advancement business,” which usually means it does not have to make the same disclosures required of even bigger public organizations. A business continues to be an rising development corporation till it reaches a variety of milestones, which include yearly profits of more than $1.07 billion.

Oatly warns that it has documented losses about the previous “several” a long time and expects functioning and money fees to rise “substantially.”

“Our expansion endeavours may get for a longer time or establish a lot more costly than we foresee, especially in mild of the COVID-19 pandemic, and we may perhaps not be successful in rising our profits and margins adequately to offset the expected better expenditures,” the company claimed in its prospectus.

“We incur sizeable costs in researching and creating our impressive items, setting up out our generation and producing services, obtaining and storing elements and other items and marketing and advertising the products and solutions we supply.”

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Listed here are five additional things to know about Oatly ahead of its public debut:

Oatly will not fork out a dividend for the “foreseeable long term.” The firm plans to use the proceeds from the presenting as operating funds, for incremental growth, which include expansion, and other typical functions.

Espresso supplied a gateway for Oatly in the U.S. Oatly arrived in the U.S. in 2017. The corporation says it “focused on focusing on coffee’s tastemakers, qualified baristas at unbiased espresso shops” as a way to enter the market place.”

By December 31, 2020, Oatly was in more than 7,500 retail outlets and 10,000 coffee shops in the U.S. Income in 2020 totaled $100 million in the U.S.

Oatly can also be observed in 11,000 espresso and tea stores in China, and at additional than 6,000 retail and specialty retailers throughout the region, like thousands of Starbucks locations.

Minimal oat supply could have a monetary influence. Oatly relies upon on five suppliers for the oats it uses, getting this component via millers in Sweden, Denmark, the U.S. and Belgium.

“We have in the earlier knowledgeable interruptions in the provide of oats from just one supplier that resulted in delays in shipping to us,” the corporation said, noting that its oat source is also susceptible to pure disasters these as drought or floods.

“We could experience similar delays in the long term from any of these suppliers.”

The business also is dependent on pick out suppliers for enzymes, which includes one supplier that gives an enzyme for some of Oatly’s items, together with Barista Version oat milk.

The most important elements of the company’s solutions are made in 4 key services as of March 2021, which could also be a trouble if a thing considerable transpires at any just one facility.

The dairy industry is extremely aggressive. Oatly identifies conventional dairy firms, which includes Dean Foods Inc.
DFODQ,
-1.12%
and Lactalis as competitors, as effectively as the escalating array of plant-based dairy alternate corporations that are coming into the industry, which include soy, almond, hemp and cashew milk brand names.

All of these organizations are competing for a finite variety of retail outlets, coffee retailers, foodservice consumers and buyers.

“In buy for us to not only keep our sector placement, but also to continue on to improve and receive much more buyers, some of which may possibly be switching from standard dairy to plant-based mostly alternate options, we will have to go on to supply delectable, substantial-good quality items, and people ought to consider in our vision for a foods program that is far better for folks and the planet,” the company stated.

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Oatly’s advertising and COVID-19 may well be a hurdle to expansion. Oatly says that its heritage of “provocative and unconventional internet marketing and promotion campaigns” has gotten them into incredibly hot h2o, together with a 2014 lawsuit submitted by the Swedish dairy lobby in which the courts observed Oatly was “disparaging to dairy merchandise.”

“The final decision resulted in a ban on our even more use of a variety of expressions marketing our solutions in Sweden, beneath the penalty of liquidated damages of SEK 2 million per expression,” the prospectus explained.

The enterprise cautions that future marketing and advertising could drive other authorized motion.

A lot more a short while ago, Oatly’s Tremendous Bowl ad created headlines, but typically for provoking laughter.