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The Burgeoning Vegan Industry – Dairy Alternatives Are Making a Statement

A bunch of vegetables laid out for eating.

Believe it or not, plant-based vegan foods are all the rage. In years past, many food experts questioned whether these types of foods would ever hit mainstream. But both meat and dairy alternatives are proving that the demand for these products are growing. In recent years, meat substitutes in the food tech industry have enjoyed growing market shares. (Read more about those plant-based meat alternatives in this Bold story.) And now, dairy alternatives are doing the same. Recently, Oatly, a maker of oat milk products, launched its initial public offering with a base valuation of $10 billion.

Notably, there are several motivations for choosing plant-based vegan foods today. Some believe these foods are more nutritious in many ways, providing additional vitamins and minerals. Others prefer such foods because they avoid harming animals. But more pressing today are the effects traditional food production is having on climate change. As one of the largest producers of greenhouse gas emissions, the food industry has come under fire. This is a major driver of meat and dairy alternatives in the marketplace today.

“[The offering of meat and dairy alternatives is] a great opportunity to combine health with sustainability. It’s also a great growth opportunity.” – Stefan Palzer, Chief Technology Officer at Nestlé

Oatly’s Public Offering Highlights Popularity of Plant-Based Vegan Foods

On May 20th, Oatly debuted on NASDAQ with an initial share price of $17 based on its own $10 billion valuation. Within hours, it was traded at 30 percent higher at $22 a share. The company was originally founded in 1994 when Rickard Oste, a Swedish professor in food chemistry and nutrition, founded Oatly. They successfully created dairy alternatives that consisted of oats, water, and enzymes that mimicked real milk. While Oatly has seen sales increase since that time, its most significant growth has actually been in the last five years.

In 2016, Oatly received a major boost with venture capital support from major players. Verlinvest, an investment firm that invests for families involved in the Anheuser-Busch InBev conglomerate, got involved. At the same time, China Resources, a Chinese government-owned investment entity did the same. These two now have the majority share of stock in Oatly with the highly reputable Blackstone owning 8 percent of shares. All of this helped enhance Oatly’s appeal in its debut while giving other plant-based vegan foods a boost as well.

“I don’t see anyone else taking that leadership position the way [Oatly! is]. We are really serious and ambitious about what we’re going to do here.” –  Toni Petersson, CEO of Oatly!

The Growing Plant-Based Vegan Foods Industry

The growing sales of meat and dairy alternatives have been consistent now for some time. Several companies besides Oatly are attracting big investments from companies and celebrities alike. For Oatly specifically, Oprah, Jay-Z, Natalie Portman, and Howard Schultz have invested in the company. Other companies are also attracting big dollar investments, such as Beyond Meat, Impossible Foods, and JUST, Inc. (Take a deep dive into Impossible Foods in this Bold story.) Overall, these types of food tech companies have attracted over $18 billion in funding support. Plant-based dairy alternatives alone had revenues exceeding $640 million in 2020. Investors no longer question whether plant-based vegan foods will be around in the future. They’re now asking how much of a market share they will comprise.

Some fake burgers that make me sad
Plant-based vegan foods–once hard to find–can now be found almost everywhere.

In terms of dairy alternatives, the market for rice and oat milk is estimated to be $2.5 billion. Globally, this industry is around $9.5 billion. In the next four years, this segment of plant-based vegan foods is expected to have exponential growth. Projections for the U.S. suggest the industry will reach $3.6 billion with global markets worth over $11 billion. All of this suggests a larger segment of the population will progressively embrace plant-based vegan foods. Whether they are passionate about being vegan or not doesn’t matter.

“We thought that if [Oatly] could convince [investors] that it’s as profitable (and in the long-term even more profitable) to invest in a sustainability company like Oatly, then all the other private equity firms of the world would look, listen and start to steer their collective worth of 4 trillion U.S. dollars into green investments.” – Toni Petersson, CEO of Oatly

Market Growth Driving Competition

While the popularity of plant-based vegan foods has increased, so has the competition. Oatly is just one of many firms that offers dairy alternatives. Therefore, the challenge for Oatly going public is to convince investors that its products are unique. Certainly, having reputable venture capitalists behind the company and high-power celebrities help. But even the company appreciates the challenges it faces over time. This not only includes other small companies producing dairy alternatives but well-established ones as well. Companies like Nestle and Unilever have significantly more resources they could leverage in the plant-based food industry.

Nestle has already introduced some plant-based vegan foods in its list of offerings. One of these includes Wunda, a high-protein milk substitute made from yellow peas. Unilever is also expected to enter the market with plant-based vegan foods planned before 2027. Many believe a small company like Oatly may enjoy some advantages in versatility and speed. However, this may not be the case. For example, Nestle took less than nine months to develop, test and market Wunda. Based on this, the market involving dairy alternatives is going to be a highly competitive one. Staying on top won’t be easy for new entrants.

Expanding Dairy Alternatives for All

Before going public, Oatly noted that they had losses in 2020 despite major increases in sales. This occurred because the company invested in new factories, more extensive marketing, and more diverse products. Among their new products now offered are yogurts, ice creams, and cream cheese. With the anticipated $1.4 billion gained from the company’s IPO, Oatley plans to increase its presence in the U.S. and China. China alone is seeing a 450 percent growth in demand for plant-based vegan foods. Whether Oatley continues to excel in this evolving market is unknown. But the market itself is solid and unlikely to go anywhere but up.


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