Oatly prioritizes US production due to European interest in plant-based milk trays

Diving Brief:

  • Sweden’s Oatly will prioritize US production as the company struggles to convert new consumers from dairy to plant-based milk in Europe, CEO Toni Petersson said on a second-quarter earnings call.
  • An expansion in Landskrona, Sweden, is now planned for 2023, while a plant in Peterborough, UK, is due to open in 2024 “to align the schedule and production when we need the volumes” , Petersson said.
  • In the short term, Oatly will prioritize an expansion project at its Millville, New Jersey plant. “We have adjusted the timing of our investments to prioritize projects in regions where the need for additional capacity is most pressing,” reads an SEC filing.

Overview of the dive:

Oatly’s decision to slow expansion comes after the company announced last December that it would strive to expand global manufacturing capacity “at an unprecedented rate” to address shortages and meet growing demand. .

The company is now backing off in Europe, where it acknowledges that “the rate at which we have been able to convert new consumers from milk to plant-based milk is taking longer than we had hoped,” according to an SEC filing.

The capacity staging plan will reduce net capital spending in 2022 by $220 million to $240 million, from $400 million to $500 million, “without compromising future expansion,” Petersson said.

Chief Strategy Officer Peter Bergh stressed that the company’s updated plan was not due to weaker demand, but rather the current pace of growth in Europe, which is largely influenced by the environment. macroeconomics, including the war in Ukraine.

Oatly’s broader initiative to expand in-house manufacturing is still underway, and the company plans to add needed long-term production capacity as demand for oat milk grows dramatically in the States. -United.

Overall, Petersson said the company plans to increase volume to 1.2 billion liters by exiting 2023, up from its current operating rate of 900 million liters by the end of this year.

“We have enough cash to support global growth and expansion of our business for at least the next 12 months,” Petersson said.

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