SWEDEN – Oatly, a producer of milk substitute made from oats, has initiated an organization structure review that will enable it to have annual savings of up to US$25 million, which will take effect starting in the first quarter of 2023.
To cut costs, the plant-based milk player will institute cost-saving measures that include using co-manufacturers more extensively and instituting “an overhead and headcount reduction,” impacting up to 25% of the costs related to the group’s corporate functions and regional EMEA layers.
The oat milk brand, which went public in May 2021, has trimmed its full-year guidance following a less-than-expected quarterly revenue loss.
Oatly estimates its 2022 revenues will be between US$700 million and US$720 million, an increase of 9% to 12% compared to 2021 but well below the guidance put forward in early August of US$800-830 million, which was itself a reduction of as much as US$90 million compared to the prior forecast.
The Swedish company reported a third-quarter loss of US$107.9 million, compared with a US$41.2 million loss for the same period last year.
“Third-quarter financial results were below our expectations, largely driven by COVID-19 restrictions in Asia, production challenges in the Americas, and continued foreign exchange headwinds,” explained Toni Petersson, Oatly’s CEO.
“However, we continue to see strong velocities, year-over-year sales volume growth, and minimal price elasticity globally, demonstrating the brand’s power and resilience. We have taken decisive and strategic actions to improve our operational efficiencies in a volatile macroeconomic environment with an even more focused allocation of resources and capital.”
In EMEA, the company made a revenue of US$255.5 million, a 3.2% increase compared to US$247.6 million in the prior year period. In constant currency, EMEA revenue increased 15.6% year-over-year to US$286.2 million.
Oatly’s Americas revenue of US$159.5 million is a 28.3% increase compared to US$124.3 million in the same period last year.
In Asia, the company reported a revenue of US$112.1 million, a 31.4% increase compared to US$85.4 million in the prior year period.
Regarding the company’s outlook, Petersson said: “For fiscal 2022, we are lowering our outlook primarily to reflect COVID-19 pressures negatively impacting sales in Asia, operational challenges in the Americas which limit our ability to accelerate sales momentum, and continued foreign exchange headwinds.”
At the same time, the company believes these challenges are “transitory and that it has significant opportunities for growth as these headwinds subside.”
It expects the improved ramp-up of its production facilities in Q4 should result in improved fixed cost absorption, better sales mix,and the implementation of pricing actions will drive gross profit margin expansion.
Oatly joins other companies slashing their workforce, such as alt-protein Beyond Meat, out of looming losses they are facing.
A weakening consumer interest in the alt-meat category, a drop in margins due to product price decreases, and a challenging economic climate are heavily intensifying the money-burning rate of these companies.
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