Oatly’s recent strategic supply chain decisions, including SKU reduction and halting factory expansions, have led to improved market share and profit margins, signaling a positive shift in the company’s financial trajectory.
After a period of strategic supply chain optimization, Oatly is now experiencing the financial benefits of its efforts. The company, known for its oat milk products, made significant changes by reducing its stock-keeping units (SKUs) in Asia by 70% and suspending plans for new factories across several regions. These moves were aimed at addressing a downward trend in profits.
In the Americas, Oatly’s revenue increased by 2% year-over-year in the last quarter, and the company has secured over a quarter of the chilled oat milk market share, as revealed in its fourth-quarter earnings report for 2023. The company’s profit margin reached 23.4% in the same quarter, which is a step towards its long-term goal of 35%-40%, according to Daniel Ordonez, Oatly’s Chief Operating Officer.
Ordonez expressed optimism during the earnings call, noting that the company is now positioned to concentrate on growth and continue delivering strong results. The supply chain efficiencies have been particularly notable in the cost of goods per liter. By consolidating production in Ma’anshan, China, and reducing SKUs, Oatly has achieved over a 30% reduction in costs since Q1 2023.
Additionally, Oatly has entered into hybrid manufacturing partnerships with Ya Ya Foods and Innovation Foods, which has further decreased the cost-of-goods per liter by 12% from Q1 to Q4 2023. As part of its strategy, Oatly sold two production facilities to Ya Ya Foods, a co-packer.
Oatly is now expanding its customer reach, forging distribution agreements with retailers such as Meijer and Costco and introducing new products like coffee creamers. The company is also rebuilding its foodservice business with a focus on core channels, geographies, and SKUs to ensure profitability and sustainability.
