Q4 2024 Earnings Summary
- Oatly is proactively addressing category sluggishness by implementing precise, intentional marketing strategies focused on breaking down barriers to consumption, such as taste perceptions, which is expected to bring in new consumers and reignite category growth.
- Oatly continues to gain market share in the plant-based milk category, taking share from both oat milk competitors and other crops like almond and soy, demonstrating strong competitive positioning despite overall category challenges.
- Oatly is on track to achieve positive adjusted EBITDA in 2025, driven by gross margin improvements from supply chain efficiencies and SG&A recalibration, reflecting significant structural progress and a clear path to profitable growth. ,
- Oatly is facing a significant headwind of approximately 300 basis points to its total company growth due to a change in sourcing decisions at its largest U.S. customer, which accounts for over 20% of 2024 U.S. sales and 7% of total company sales. This reduction in volume could negatively impact revenues and cost absorption, posing a risk to profitability.
- The overall plant-based milk category is experiencing sluggish growth with household penetration plateauing around 20% to 30%, which may limit Oatly's ability to drive significant top-line growth. Challenges such as taste preconceptions and misinformation about nutritional value make it difficult to attract new consumers, potentially hindering market expansion.
- Oatly's path to profitability relies heavily on cost-cutting measures and efficiency gains rather than substantial revenue growth, which may not be sustainable in the long term. Factors such as sales guidance range, customer mix, and foreign exchange rates could influence gross margin improvements, adding uncertainty to achieving their profitability targets.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Constant Currency Revenue Growth | FY 2025 | no prior guidance | 2% to 4% (including an approx. 300 basis point headwind; would have been 5% to 7% without the impact) | no prior guidance |
Adjusted EBITDA | FY 2025 | no prior guidance | $5 million to $15 million | no prior guidance |
Capital Expenditures (CapEx) | FY 2025 | no prior guidance | $30 million to $35 million | no prior guidance |
Gross Margin | FY 2025 | no prior guidance | Progress toward a long-term target of 35% to 40% | no prior guidance |
Adjusted EBITDA Improvement Drivers | FY 2025 | no prior guidance | Expected improvements from efficiencies in the supply chain and SG&A | no prior guidance |
Quarterly Adjusted EBITDA Cadence | FY 2025 | no prior guidance | Improvement expected as the year progresses, with Q1 being naturally lower due to Chinese New Year | no prior guidance |
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Margin Outlook and Profitability in 2025
Q: What's driving gross margin improvement toward profitability in 2025?
A: The company expects to improve gross profit by optimizing its production footprint, maximizing global sourcing, and managing product mix. They anticipate progress toward their long-term gross margin target of 35% to 40% in 2025. Factors like sales guidance range, customer mix, and foreign exchange could influence the exact outcome. -
Supply Chain Recalibration and Efficiency
Q: How is supply chain contributing to EBITDA growth in 2025?
A: By discontinuing three new factory projects and closing the Singapore plant, the company is focusing on five existing sites, enhancing performance. This recalibration, along with a permanent quest for supply chain efficiency and an asset-light model, contributed to a full-year gross margin of 28.7%, up 9.3 percentage points from last year. This represents the bulk of the 2025 EBITDA progress. -
Largest Customer Exposure and Impact
Q: Is there risk to remaining business with the largest U.S. customer?
A: The largest U.S. customer now represents only 20% of 2024 U.S. sales and 7% of total company sales. While any volume loss affects cost absorption, the company continues to reduce exposure and saw 22% growth outside this customer in the recent quarter. Confidence remains in aggressively pursuing customers and increasing penetration. -
Confidence in 2025 EBITDA Guidance
Q: Are you confident in meeting 2025 EBITDA targets with current investments?
A: Achieving profitable growth remains the company's North Star. Significant structural progress in gross margin increase and SG&A recalibration has reshaped the P&L over the past two years. These levers will continue to drive most of the EBITDA improvement between 2024 and 2025. Investments are fully resourced, focusing on precise allocation while protecting the brand's uniqueness. -
China Market Outlook and Plant Decision
Q: Has your outlook for China changed with discontinuing the second plant?
A: The business in Greater China shows robust trends, with profitable growth reported since Q3 2024. Relationships with key customers are stable, and there's promising momentum in the Foodservice channel. The company is entering the large Chinese club retail channel in 2025 and continues to see significant opportunities in China. -
SG&A and OpEx Reduction Potential
Q: Can you achieve further OpEx reductions beyond 2025?
A: The company will always seek efficiencies and is not done improving. The turnaround mindset has evolved into a culture of efficiency obsession. Active work continues on SG&A reductions, with expectations to see leverage on the fixed portion as sales grow. -
Category Growth Challenges and Marketing Strategy
Q: How will you address category sluggishness and attract new consumers?
A: The company aims to restart category momentum by converting new consumers and overcoming barriers like taste. A significant shift in marketing approach focuses on precise resource allocation to integrated brand activations. Early examples in Germany and the U.K. have been encouraging, and internal efforts consider category growth as controllable. -
U.S. Promo Activity and Category Dynamics
Q: Is increased promotional activity in the U.S. affecting results?
A: There has been recent volatility in scanner data. The biggest growth driver is new distribution, which will arrive slightly later than last year, causing a brief blip. A drag from discontinued older innovations erodes short-term growth by 400 to 500 basis points, but this is expected to be lapped in coming months. Core products show solid velocities, and the company is registering highest-ever dollar shares in plant-based milk and oat milk. -
Capturing Existing Plant-Based Buyers
Q: Can you take share from existing plant-based beverage consumers?
A: While expanding the category remains the North Star, the company has been steadily gaining market share, taking share from oat milk competitors and other crops like almond and soy, which are in decline. By widening formats and being ubiquitous across channels and price points, they address both converting new consumers and capturing existing plant-based buyers.
Research analysts covering Oatly Group.