What to watch for in Oatly's earnings

When Oatly reports its fourth-quarter results on March 15, some analysts expect the plant-based milk company to show a path toward profitability.

In the third quarter of 2022, Oatly’s revenue grew to $183 million, up 7% from the same period the previous year. But its financial results fell below expectations, thanks to covid-19 restrictions in Asia, production challenges in the Americas, and foreign exchange headwinds, according to the company.

For the past few years, Oatly has been building out its manufacturing capacity to address supply chain challenges—such as rising costs of raw materials and labor shortages—and to meet growing consumer demand. In January, the oat milk maker announced it will move production from two US facilities to a Canadian manufacturer, with the goal of streamlining. The company also recently said it has taken steps to make operations more efficient by better allocating resources and capital.

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Demand for oat milk continues to boom. From 2016 to 2021, global sales of milk alternatives grew 23%, from $14.4 billion to $17.7 billion, according to Euromonitor, a London-based market research firm.

Oat milk is popular partly thanks to its similarity to cow’s milk, including its ability to generate froth. It’s also perceived as being good for the environment. When it comes to production, plant-based milk uses much less water than its traditional counterpart.

That helps explain why the oat milk market is crowded. When Oatly, which is headquartered in Sweden, first launched in the US in 2016, the company had the market largely to itself. But its fast growth and limited supply attracted rivals. Now, a handful of other brands, including Califia Farms, Mooala, and Planet Oat, are available on grocery store shelves. Big players such as Danone, the French yogurt giant, and Blue Diamond, a US agriculture company that specializes in California almonds, are also taking a bite out of the market.

Shares of Oatly are down more than 88% since the company’s IPO in 2021.