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A Latte Riding On IPO For Oat Milk Leader Oatly

Beyond Meat could be viewed as a comparable public company in the event of a listing by the dairy alternative beverage firm, according to Mergermarket.

By Dayna Fields

Coffee lovers could soon have an opportunity to capitalize on their favorite milk alternative.

Oatly—the 20-year-old Swedish food research company that pioneered oat milk—is considering an IPO in the next 18 to 24 months and is working with Goldman Sachs to evaluate its options, according to Mergermarket.

Known for its blue packaging and quirky marketing messages, Oatly recently signed a deal with Starbucks to be its exclusive oat milk for non-dairy lattes at 1,300 regional stores. 

The product took the U.S. market by storm in 2018 when an oat milk shortage at brick and mortar stores led to third-party sellers hawking Oatly’s cartons on Amazon at inflated prices. 

A London listing might make sense given that its European business is by far its largest, according to one source.

But Oatly aims to be compared to Los Angeles-based  Beyond Meat, which listed in New York on the Nasdaq in July 2019 and has since attracted strong interest in plant-based foods in the U.S., said the same source. 

That comp is a lofty goal, considering Beyond Meat priced its IPO at $25 a share and saw its stock gain 163% at the end of its first trading day. The plant-based meat and burger maker was valued at $1.49 billion, according to Dealogic data.

Beyond Meat recently traded at about $115 per share, giving it a market capitalization of more than $7 billion.

The alternative dairy space is already somewhat mature with soy and almond milk, which may limit Oatly’s growth. Today, plant-based milk sales comprise 13% of the entire milk category, according to the Plant Based Foods Association. 

Comparatively, sales of plant-based meat comprise just 2% of the entire meat category—even though the segment saw sales grow 10% year over year from 2018 to 2019, according to the same report. More growth opportunity means a stronger valuation, noted one investment banker.

Oatly and Beyond Meat both have a first-mover advantage, observed another banker, who likened Oatly’s coffee shop partnerships to Beyond Meat’s alignment with Dunkin’ restaurants and Del Taco. Others noted that restaurant menus could be more lucrative than coffee beverages.

But Oatly has a global market share, while Beyond Meat was solely U.S.-focused when it went public. Oatly expects to have five factories worldwide by the end of 2021: two in the U.S. (New Jersey and Utah), two in Europe (Sweden and the Netherlands) and one in Asia (Singapore).

In terms of size, Oatly is already twice as big as Beyond Meat when it listed in 2019 with roughly $88 million in revenue. 

Oatly generated roughly $200 million in revenue in 2019 and aims to double to roughly $400 million by 2021, according to Mergermarket.   

According to one source, the management team believes it could see a successful IPO due to its more than 20 years of food science on the oat—which is more sustainable than almonds, non-genetically-modified and vastly under-researched as a sustainable food solution.

As a result, Oatly has a strong pipeline of product launches that the public market could support for years to come, he noted. 

In 2018, the company launched oat-based ice cream in the U.S. In 2019—and only internationally—it launched Oatgurt, a drinkable oat-based yogurt. 

Its long time on the market has enabled Oatly to perfect the drink’s taste, texture and technology, said the source. Indeed, many consumers say it is the closest alternative to real milk when used in coffee and cereal. 

That’s no easy feat, considering legacy brand Quaker, owned by PepsiCo, discontinued its oat beverage less than a year after it launched in early 2019. Rumors say it did not sell as expected and its taste was not ready for “prime time.” 

Oatly’s top global competitor, according to Mergermarket, is Belgian-based soy milk maker  Alpro, which is owned by France-based dairy giant Danone—which also owns U.S.-based  Silk.

Privately held U.S. competitors in the oat milk space include   New York-based   Chobani, which announced a roll-out of oat products early this year; and Massachusetts-based  HP Hood (aka  Planet Oat).

Bakersfield, California-based  Califia Farms, meanwhile, launched a line of oat milk in April 2019. Known for its curvy bottles, the domestic brand raised $225 million in capital last month, in part from international investors like Singapore-based Temasek. The round valued the business at roughly $800 million, according to Mergermarket.

A January 2019 Forbes blog by Mergermarket predicted category leader Califia Farms could be the first major exit in the vegan milk segment. 

But now, it seems Oatly could steal that honor for itself.  

Based in Los Angeles, Dayna Fields is a senior financial reporter covering the food and beverage sector for Mergermarket. She can be reached at Dayna.Fields@acuris.com

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