Oatly strikes co-packaging deal to ease supply woes in North America

By Teodora Lyubomirova

- Last updated on GMT

GettyImages/SolStock
GettyImages/SolStock

Related tags Oat plant-based Dairy Dairy alternatives Milk contract manufacturing

The Swedish alt dairy specialist has partnered with Canada’s Ya YA Foods to co-package its oatmilk product range and meet consumer demand.

The move is hoped to bring ‘more Oatly products to more people’, addressing a long-standing issue with supply that the Swedish company had been grappling with across key markets including the US.

Ya YA Foods is a contract manufacturer and one of the largest co-packers in North America. The company co-packs a range of aseptic food and beverage products, including oatmilk. “Ya YA Foods has experience with different format types that Oatly could potentially utilize for future innovation,”​ a spokesperson for the Swedish firm told us.

As part of the deal, which is expected to complete in Q1 2023, Ya YA Foods will acquire assets such as mixing and filling equipment and assume the property lease at Oatly’s Ogden, UT production facility. The co-packer will also be responsible for the lease and construction of Oatly’s Fort Worth production hub, where building work is underway and expected to complete in 2023.

Oatly meanwhile will continue to manufacture its proprietary oat base and focus on marketing and distribution. In addition, the firm will receive around US$72m plus additional credits towards the future use of shared assets at Ogden as well as the ongoing construction at Fort Worth.

Behind the asset-light supply chain

The move, described as a ‘shift towards an asset-light supply chain’, is designed to alleviate long-standing operational problems for Oatly. In 2021, the Swedish alt dairy brand reported that it was fulfilling just 70% of orders globally. The manufacturer’s Q3 2022 results were below expectations, with CEO Toni Petersson vowing to take ‘decisive and strategic actions’ to boost operational efficiencies. “These initial actions will simplify our organizational structures and the execution of our supply chain network expansion, and we expect more profitable growth going forward with a more asset-light strategy,” he said at the time.

Approached by DairyReporter, an Oatly spokesperson commented on the firm’s ambitions going forward: “We are actively pursuing, and are in discussions with, manufacturing partners to create a hybrid production network across our geographies. We believe an increased focus on our oat base technology, innovation, branding and commercial execution will better position Oatly to drive profitable growth while reducing the capital intensity of our future facilities, and ultimately, convert more consumers to plant-based.”

Foodservice expansion

In other news, Oatly has announced it was broadening its footprint across US foodservice. The company has struck an agreement with hotel chain Graduate Hotels and starting January 2023, Oatly Barista Edition and Chocolate oatmilks will be available in food and beverage outlets at more than 20 Graduate Hotel properties – including restaurants, coffee shops and grab’n’go premises.
According to College Pulse research, US college students are more likely to follow a vegetarian or vegan diet than the general public (14% vs 4%), driven by environmental concerns.
“We’re thrilled to bring Oatly to Graduate Hotels locations across the country and reach not only guests themselves, but the students that often gather at these special and truly unique properties,”​ said Mike Messersmith, president, Oatly North America. “This is an exciting step in continuing to make Oatly a part of consumers’ everyday lives, bringing them plant-based options that are both better for the planet and incredibly delicious.”

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