Oatly, the oat milk brand, have managed to expand into the Chinese market and to pioneer a new plant-based category within a span of merely five years. Oatly China has unveiled to Campaign Asia more details on Oatly’s evolution in the Chinese market, as well as how the brand built itself as an endorser of fashion, health, and sustainability.
Oatly has consistently been committed to practising business for good. This ethos is also reflected in its campaigns. Initiated in 2020, the Oatly Silent Barista project was officially introduced to assist young individuals with hearing impairments. This was achieved through vocational training for baristas, professional certification, and career guidance. Over the past few years, this initiative has made steady progress. Oatly transitioned from providing individual funding to offering systematic support for those with hearing impairments. The goal is to foster a healthy, self-assured, and self-sufficient environment for those in need, enabling more silent baristas to seize opportunities for self-fulfilment, aiming to promote an eco-friendly lifestyle in every possible way.
Oatly entered China and invented the ‘Three Ones’ strategy, targeting one city (Shanghai), one market (coffee) and one product (Barista). The ‘Three Ones’ strategy was implemented following extensive market research, insight, and practical application. At the time of Oatly’s initial entry into the Chinese market, there was no existing category for plant-based protein products. The concept of oat milk was unfamiliar to consumers, leading to numerous challenges for our brand. After careful consideration and exploration, Oatly decided to debut in the market through specialty cafes. Back then, Shanghai was home to numerous independent specialty cafes, where most customers were environmentally conscious and had a passion for fashion and coffee. These unique characteristics of the customers and cafes aligned perfectly with what Oatly was seeking. Drawing on these insights, Oatly launched the ‘Three Ones’ strategy: ‘One Product’ centred on the Oatly Oat Drink Barista Edition, distinguishing itself from traditional milk coffee in niche specialty cafes.
‘One City’ was initiated in Shanghai, a hub of international businesses and returning overseas students, and gradually expanded nationwide. ‘One Market’ targeted specialty cafes, the city’s popular spots for environmentally conscious, fashionable trendsetters, enabling Oatly to identify its target audience swiftly.
Oatly’s journey in China started with the top 10 boutique cafes in Shanghai, where we gradually extended our reach. This approach allowed us to create a unique perception of oat milk through pricing differentiation. In product promotion, Oatly offers a distinct experience by telling the story of a Nordic lifestyle. In 2018, the brand presence grew from only a few cafes in the first month to hundreds within a few months. By the end of 2018, Oatly had collaborated with thousands of cafes. The conversation around oat milk began to buzz among consumers, and various coffee chains were eager to collaborate. This marked the beginning of Oatly’s gradual expansion. From 2018 to 2023, the volume of Oatly products sold in the Chinese market was sufficient to make approximately one billion cups of oat lattes.
Upon Oatly’s entry into the Chinese market in 2018, there was considerable uncertainty about the appropriate placement of our products on store shelves. This issue was also encountered on Tmall, where no suitable option was available amidst a long list of categories. China has been a large market for plant-based products, but there was no distinct category for plant-based or oat-based products, either online or offline. From the beginning, Oatly understood that categories serve as forests, brands act as trees, and business represents the fruit. Initially, there’s a forest, followed by trees, and ultimately, fruit. Without a forest, the trees would be swept away by the wind. Only when a category is established can a brand genuinely exist. Our mission at Oatly is to drive a systemic shift in society: leading people away from cow dairy to more plant-based consumption—for the sake of the planet. In order to achieve our mission, we need to see wide-spread adoption of oat milk and make more consumers experience the charm of plant-based food. We have pioneered a new plant-based category in China and remain committed to fostering its growth and evolution. Now, Oatly has emerged as a signature product of oat milk and innovative plant-based milk among Chinese consumers. When competitors produce oat milk, they benchmark against Oatly, and each comparison serves as an additional endorsement for Oatly.
In Europe and the US, Oatly had been pitted against the milk industry as a “milk challenger”. In China, Oatly is actually positioned alongside dairy in order to cater to consumers’ positive perceptions of milk. Using the café channel as a launchpad had helped Oatly to rid itself of the image of being merely a “foreign soy milk”. However, in the retail environment, it was still unclear which product category Oatly truly belonged to, leaving Oatly unsure about where to place its products in supermarkets or on online e-commerce platforms, such as Tmall. The Oatly China team’s solution was to develop a new product category, “plant protein” and it was suggested to Tmall that this was how it should be positioned. During the 2018 annual “Singles’ Day” shopping festival on November 11, Tmall ran a promotion for this newly- added category. Oatly sold out its stock of 5,000 cartons in 11 minutes flat. In December 2020, the first “Tmall Plant Protein Alliance Summit” took place, initiated by Oatly and hosted by Tmall, with the aim of discussing “more possibilities for the future of plant-based food.”
The Oatly CCO once talked about ‘killing the marketing department’. Oatly believes in the power of creativity. We have a division within our brand known as the ‘Oatly Department of Mind Control’. Here, creative minds work to align creativity with business objectives, integrating both an internal viewpoint (understanding the company’s operations) and an external perspective (grasping market trends). The focus is more on identifying opportunities to serve the consumer rather than engaging in meaningless competition. The aim is not merely to sell to the consumer but to provide genuine solutions to business challenges from the consumer’s perspective.
To expand in the Chinese market, Oatly needed to understand cultural differences, values, and meanings is crucial in the consumer goods industry. The brand discovered that numerous Nordic concepts are compatible with fundamental human logic, such as ‘less is more’, ‘lagom'(Swedish for ‘just right’), and ‘sustainable development’. These concepts are also relevant in China. In China, Oatly not only highlights the functionality of its products but also chooses to use them to represent a lifestyle. The brand continues to discuss the Nordic way of life and position environmental protection and sustainability as its distinctive attributes, together with the importance of design and creativity as its primary focus, to showcase the unique strengths and qualities. Lastly, Oatly leverages coffee, a universally recognised medium for global culture, to introduce more consumers to experience the charm of oat milk. This approach has made Oatly what it is today.
With regards to competition in the market, Oatly has made it clear that the brand aims to drive asystemic shift in the Chinese society: leading people away from cow dairy to more plant-based consumption—for the sake of the planet. Today, food and drink account for one third of the global greenhouse gas emissions, with animal-based products accounting for more than half. By increasing the intake of plant-based food, the climate impact of the food system could be reduced.
Oatly has been instrumental in establishing a new plant-based category in China, being excited to see more companies joining to drive the category forward. In the years ahead, we will continue to play a pioneering role and connect with a broader range of Chinese consumers. The demand for oat milk in the Chinese market has been consistently rising. Oatly seems to be well-positioned and prepared to cater to this growing demand.
China is a large market for plant-based products. Over the past five years, oat milk has spearheaded the emergence of a new plant-based track, which has now diversified in numerous ways. Whether it’s plant-based products, oat milk, or Oatly, the Chinese market is gradually moving from ‘niche’ to ‘daily’. A broader consumer base can be tapped into beyond those we have already reached. The whole market continues to expand. The challenge of shifting from a ‘niche’ to ‘daily’ means increasing the consumer base and its diverse needs. Still, at the same time, it is an opportunity for Oatly to maintain keen market insights and create R&D capabilities to meet the diversified needs of the general public for oat-based products. The success of Oatly in China has entailed not just the establishment of a brand but also the creation of an entirely new product category. While there is undeniably tough competition, given China’s latest carbon neutrality targets, a consumer class that is becoming increasingly brand-conscious, and a growing recognition of the need to do “business for good,” Oatlyis well-positioned to continue to enjoy success in the Chinese market.