$OTLY Oatly IPO | S1-Breakdown
After months of speculation about its imminent IPO, Oatly’s stock will be available to the public sooner than anyone anticipated, according to reports filed with the SEC. Oatly filed to go public on the NASDAQ at a potential valuation of $10 billion, as early as the beginning of May. Get ready for the oat rush.
- Oatly has filed to raise $100 million in a U.S. IPO
- The company sells oat-based dairy alternative products in numerous countries
- OTLY has grown quickly during the 2020 pandemic but is generating high and increasing operating losses
The plant-based milk pioneer filed to start the process back in February and now has started the clock ticking on a countdown to launch, by officially filing with the SEC, which means it has until mid May to make its debut.
The Swedish brand officially filed to go public under “OTLY” and though some of the details remain unknown, like stock price and the number of shares to be issued, the company had been rumored to put its value at $10 billion. Oatly’s IPO could be the largest plant-based company to date, in relative terms more than 25 times the price of Beyond when it first debuted back in May 2019. Now (May 7) Beyond’s stock is at ~$111 a share, with a total market cap of less than $6.98 billion, so Oatly’s pricing is considered aggressive by most industry standards.
- Oatly has a bold vision for a food system that’s better for people and the planet.
- Oatly believes that transforming the food industry is necessary to face humanity’s greatest challenges across climate, environment, health, and lifestyle. In parallel, change is rocking the consumer landscape, as the growing concerns for the environment and interest in health and nutrition have started to drive real, scaled behavioral changes around consumer purchase choices. Generation Z and Millennials will become the dominant global generations in the coming years, bringing to the market a new set of values and expectations. These combined factors are driving a clear rapid, accelerating growth and influx of new consumers to the plant-based dairy market.
- Oatly has become a leading, innovative force with a clear point of view on things that we believe consumers really care about — sustainability and health. Oatly is a solution that enables people to make thoughtful, informed choices in line with these values.
- Oatly believes that the company is leading the transformation of the global dairy market — which is worth approximately $600 billion in the retail channel alone as of 2020. Behind products are decades of scientific heritage, deep expertise around oats, production craftsmanship and commercially proven innovation in matters of sustainability and human health. The brand rightfully stands out on a competitive dairy shelf, bringing a unique voice to the industry. Purpose drives organization forward.
Driving the global appetite for plant-based dairy
Oatly has proven global resonance with commercial success in more than 20 markets, across multiple channels and types of retail, foodservice and e-commerce partners. As of December 31, 2020, the Company offered dozens of product lines and varieties across approximately 60,000 retail doors and 32,200 coffee shops. Products are sold through a variety of channels, from independent coffee shops to continent-wide partnerships with established franchises like Starbucks, from food retailers like Target and Tesco to premium natural grocers and corner stores, as well as through e-commerce channels, such as Alibaba’s Tmall. To enter new markets, the Company uses a foodservice-led expansion strategy that builds awareness and loyalty for the brand through the specialty coffee market and ultimately drives increased sales through retail channels. Oatly tailored this strategy in many successful international market launches, including the United Kingdom, Germany, the United States, and China.
The growth in China demonstrates the effectiveness of this expansion strategy. The Company successfully entered the Chinese market in 2018 through the specialty coffee and tea channel, which Oatly has since scaled to over 8,000 doors at the end of 2020. As a result of the consumer excitement the team built around the Oatly brand with this launch, they were able to rapidly scale our regional presence through a strategic e-commerce partnership with Alibaba and an exclusive branded partnership with Starbucks in China, with over 4,700 locations in China exclusive to us as of December 31, 2020. Within approximately two years of entering the Chinese market, they had over 9,500 food service and retail points of sale in total with a growth rate of over 450% as of December 31, 2020.
Oatly brand has excelled on a global scale, as evidenced by the following market statistics:
- In 2020, Oatly contributed the highest amount of sales growth to the dairy alternatives drinks category across each of our key markets — the United Kingdom, Germany and Sweden.
- Oatly got 53% market share of the total sales in the alternative dairy products non-milk based category as of 2020, according to Nielsen.
- In the United States, the United Kingdom, Germany, and Sweden, the highest-selling brand in the oat category by retail sales value, which is the largest category within dairy alternatives in the United Kingdom and Germany and is the fastest-growing category within the United States.
- Oatly 2020 year-over-year retail sales growth rates were 99% in the United Kingdom, according to IRI Infoscan, 199% in Germany and 182% in the United States, according to Nielsen. The Growth led the increase in demand for oat-based products. Since 2018, when Oatly launched new retail strategy in Germany, oatmilk’s market share of sales in the retail plant-based dairy category has grown from approximately 23% for the rolling four week period ended January 2018 to approximately 60% for the rolling four week period ended December 2020, according to Nielsen.
The company’s primary offerings include:
- Oat milk
- Ice cream
- Cooking creams
- On-the-go drinks
Oatly has received at least $448 million in equity investment from investors including Nativus Company, BXG Redhawk and Oste Ventures.
Selected Financial Data
Results of Operations
The firm sells its dozens of products through retail and online channels.
As of the end of 2020, it sold its products through 60,000 retail stores and 32,200 coffee shops as we through large online retailers such as Amazon.
Selling, G&A expenses as a percentage of total revenue have dropped as revenues have increased, as the figures below indicate:
The Selling, G&A efficiency rate, defined as how many dollars of additional new revenue are generated by each dollar of Selling, G&A spend, was 1.3x in the most recent reporting period.
Market & Competition
According to a 2020 market research report by Grand View Research, the global dairy product market size was an estimated $481 billion in 2019 and is forecast to reach $586 million by 2027.
- This represents a forecast CAGR of 2.5% from 2020 to 2027.
- The main drivers for this expected growth are shifting consumer demand preference for protein derived from dairy products or alternatives as opposed to from animal meat sources.
Also, improved cold supply chains and modern facilities has made the storage and transport of dairy / alternative dairy products more available for consumers.
Below is a chart showing the historical and projected future growth trajectory of the U.S. dairy products market:
Major competitive or other industry participants include:
- Fonterra HP Hood
- Arla Foods
- Blue Diamond Growers
- Califia Farms
- Ripple Foods
Oatly’s recent financial results can be summarized as follows:
- Sharply growing topline revenue
- Increased gross profit but reduced gross margin
- Growing operating and net losses
- Reduced cash used in operations
Below are relevant financial results derived from the firm’s registration statement:
As of December 31, 2020, Oatly had $105.4 million in cash and $353 million in total liabilities.
Free cash flow during the twelve months ended December 31, 2020, was negative ($138.7 million).
- Oatly intends to raise $100 million in gross proceeds from an IPO of its American Depositary Shares representing underlying ordinary shares, although the final figure may be higher.
2) No existing shareholders have indicated an interest to purchase shares at the IPO price.
3) Management says it will use the net proceeds from the IPO as follows:
We will not receive any proceeds from the sale of ADSs by the Selling Shareholders.
We intend to use the net proceeds from this offering for working capital, to fund incremental growth, including our planned expansion, and other general corporate purposes. However, we do not currently have any definitive or preliminary plans with respect to the use of proceeds for such purposes. (Source)
- Management’s presentation of the company roadshow is not available.
Listed bookrunners of the IPO are Morgan Stanley, J.P. Morgan, Credit Suisse, Barclays, Jefferies, BNP Paribas, BofA Securities, Piper Sandler, RBC Capital Markets, Rabo Securities, William Blair, Guggenheim Securities, Truist Securities, CICC, Nordea, Oppenheimer & So. and SEB.
Morgan Stanley is the lead left underwriter and IPOs led by the firm over the last 12-month period have generated an average return of 24.6% since their IPO. This is a top-tier performance for all major underwriters during the period.
The primary risk to the company’s outlook is the fragility of its supply chain, most specifically its oats and enzymes suppliers, which are relatively few in number.
About the Author
Mr. Koch — a serial entrepreneur and late-stage investor specializing in secondary shares.
Previously: Twilio, Xiaomi, iQiyi, PinDuoDuo, Tilray, Livongo, Agora, Bandwidth, Hims.
Currently: Robinhood, Enflame, Grab, Toss, Coursera, Oatly, Epic Games, Chime, and other companies.
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