The Swedish company Oatly won over American baristas and launched a massive trend

When Chicago barista Dominic Rodriguez first heard about oat milk, he was skeptical. He had latte-making down to a fine art — at coffee competitions, he sculpts swan-necked turkeys and roses out of foam — and in his experience, plant-based milks didn’t foam correctly. “I’m a milk guy, I don’t need milk alternatives,” he said. But then Intelligentsia, a well-respected coffee shop he frequents, started serving oat milk, and Rodriguez thought there was no way they’d promote it if they didn’t think it was good.

He gave it a shot. It needed less steam than cow’s milk, but more heat, and frothed into a stable textured foam that was easy to pour. He examined his drink. It looked normal. He sipped it — it didn’t taste exactly like cow’s milk, but it was sweet and thick and rich, not watery like most almond milks. He liked it. But would his customers agree? Resoundingly, yes. Now, around 40% of all drinks ordered at his workplace, Metric Coffee, use oat milk; his matcha oat milk latte is a top seller.

It’s fair to say that the market for plant-based beverages has exploded; my local Safeway stocks milk made from peas, bananas, cashews, almonds, rice, quinoa, and oats. Sales of plant-based milks are up more than 61% since 2012, with around $1.6 billion made in 2018, according to the Plant Based Foods Association. Globally, the alt-milk market is expected reach $38 billion by 2024, or perhaps $19.67 billion by 2023, or even $41.06 billion by 2025, depending on the research company. The arrow’s pointing up. And, at least in terms of new entrants, oat milk’s king of the alt-milk aisle.

That’s thanks to Oatly, a Swedish brand that launched in the United States in late 2016. From 2017 to 2018, its revenue grew tenfold; up to $15 million. It’s delicious, true, but so are many of the alt-milks, and over 12 alt-milk products were launched this January alone. Just how did Oatly crack the complicated milk market? For starters, they took the Lululemon approach to adoption. When Lululemon launched, they plied yoga instructors with free leggings — here, Oatly courted boutique coffee shops.

This was necessary on many levels, says Mike Messersmith, Oatly’s U.S. general manager. “No one in America had heard of oat milk two years ago. The category didn’t exist.” That’s only half correct; Pacific Foods sold oat milk for years, but there was no mainstream adoption pre-Oatly.

Oatly’s been on the European alt-milk scene since 1993, developed as a lactose-free sustainable milk alternative. To make Oatly, oats are soaked and liquefied with a custom blend of enzymes, then enriched with vitamins. Their health benefits include soluble fiber and vitamins. But to make a dent in America, Messersmith needed a strategy. It wasn’t that people weren’t drinking milk alternatives, but that they’d never tasted oat milk. “The barrier was a quality trial,” says Messersmith, noting that today’s consumer is suspicious of advertising and “pre-conditioned to be skeptical.”

For the best experience, he wanted people to try Oatly in a realistic environment, not a sample cup in a supermarket. If he could win approval by the coffee shops — the gourmet gatekeepers of caffeine — he’d have his in. But he couldn’t just roll up and ask, as they wouldn’t trust him; they didn’t know him. He liked the challenge. As a former U.S. naval officer, he was skilled at communication and team building. “I worked in the nuclear power function on Navy warships,” he said. “That gave me the confidence to problem-solve just about anything.”

What he needed, he decided, were genuine coffee aficionados to act as ambassadors. He connected with baristas across America, and persuaded them to try Oatly’s barista edition, a 3% fat, whole milk equivalent. Then, he hired them. The former baristas biked to coffee shops, leaving cartons with the staff. “They said, play around with it, see what you think,” Messersmith says. His distributor got the calls: Can we order some more?

“There’s something very wholesome and familiar about oats for Americans.”

The first time I tried oat milk, my barista was a robot. Inside Cafe X on San Francisco’s Market Street, the robot’s arm whirred and hummed as it steamed my latte, before placing it in front of me. My first sip was a surprise. It looked frothy and creamy like milk, but it tasted distinctly different: richer and full-bodied. It felt nourishing and wholesome in a way that’s hard to describe. It’s now my go-to order, if a cafe stocks it.

Cafe X marketing and communications manager Sam Blum said that it’s the only dairy alternative they’ve ever used, and more than 50% of orders include it. “It performed the best in terms of milk foaming texture, consistency, and flavor,” he says.

There have been other hit products in the last decade that burned oh so brightly and then faded away — remember Cronuts, Juicero, and the frozen yogurt explosion? But it’s unlikely oat milk’s a fad, says Kara Nielsen, the vice president of trends and marketing at CCD Helmsman. “There’s something very wholesome and familiar about oats for Americans,” she says. “The qualities in oat milk get close to dairy milk from a texture standpoint.” From an environmental standpoint, oat milk uses significantly less water than almond milk: 1,929 gallons per pound of almonds, compared to 290 gallon per pound of oats.

Oatly’s timing helped too, she says — it entered America when alt-milk was on the upswing, a shift related to health and environmental reasons. Their branding was on point, too: fresh, modern, and a little cheeky, perfect millennial material. Their homepage greets you with, “Hello future oat milk drinker,” and their ad slogans include, “Like milk but made for humans,” and “post milk generation.” Messersmith’s strategy with barista’s primed the market for oat milk, and many of his early supporters, such as Boba Guys and Intelligentsia Coffee, have seen huge growth — in oat milk sales, and their business in general. So far, 10.6% of all Intelligentisa drinks made in 2019 were made with oat milk, compared to 4.1% with almond milk. Use of 2% fat cow’s milk in their shops is down 2% — across America, sales of cow’s milk have dipped 6%.

Today, Oatly’s stocked in approximately 3,500 cafes across America, plus numerous retail stores. “Starting in a more niche independent space with a distinguishing audience of millennials who are willing to pay more is clever,” says Nielsen, who noted the similarity with acai berry company Sambazon. Their start was stocking their frozen acai puree (imported from South America) in smoothie shops. “People got a Sambazon smoothie before they knew what acai was,” Nielsen said. “Then they got into Jamba Juice and it grew from there. Now acai’s a beverage and an ice cream and a flavoring used in shampoo, vodka…”

In a surprising twist, the demand for Oatly actually created a problem for the brand — the “Oatly shortage” went viral in December, with enterprising Amazon sellers offering it at a three times it’s usual price. The company did not have a North American plant at the time, but they’re now working on building a New Jersey plant, with another opening in Utah. But, as they’re not the only oat milk anymore — Quaker farms, Califia Farms, and Silk started selling oat milk in January 2019 — Oatly’s poor supply chain works against them. In March 2019, Starbucks started a slow rollout of oat milk in stores; they’re using Elmhurst oat milk, not Oatly. “Starbucks won’t make a deal if they can’t ensure supply,” says Nielsen.

But whether it’s Oatly, or oat milk in general, now that consumers have a taste for it, they’re not letting go. “My world is milk,” says Rodriguez. “People say, ‘You have oat milk, cool, I’ve been wanting to try it for a long time.’”

Via Medium.com