After months of cost-cutting initiatives, Oatly is beginning to reap the benefits of its trimmed-down supply chain.
The oat milk maker slashed SKUs in Asia by 70% earlier this year, as well as halted plans for factories in the Americas and Europe, Middle East and Africa markets, all in a bid to get a handle on its declining bottom line.
Now, the company is seeing the gains. Revenue in its Americas segment was up 2% year over year last quarter, and the company has clinched more than 25% of the chilled oat milk category in the market, according to its Q4 2023 earnings presentation.
Oatly's profit margin hit 23.4% in Q4, roughly half of the company's long-term target to reach 35%-40%, COO Daniel Ordonez said on a Q4 2023 earnings call last month.
"Now that we believe a big part of the heavy lifting of recalibrating and stabilizing our business is behind us, our teams are excited to refocus their energy on growing the business and continuing to drive results," the COO said.
Within its supply chain, Oatly is seeing even greater benefits from its cost cutting when it comes to the cost of goods per liter. The company shifted 72% of the Asia market's production from a hybrid facility in Singapore to an end-to-end facility in Ma'anshan, China, closer to its distribution points, Ordonez said.
"With fewer SKUs to produce, the Ma'anshan facility is able to run longer product runs and therefore, increase efficiency," Ordonez said. "The combination of the SKUs reduction and production shifts has resulted in a reduction of our cost-of-goods per liter by over 30% since the first quarter of 2023."
Oatly also recently struck hybrid manufacturing partnerships with Ya Ya Foods and Innovation Foods, driving down its cost-of-goods per liter segment by 12% between Q1 and Q4 2023, the COO added. As part of its deal with Ya Ya Foods, Oatly sold two of its production facilities in Utah and Texas to the co-packer.
Now, the company is focused on getting Oatly in front of more customers. The company has been busy signing distribution deals with chains like Meijer and Costco, as it also launches new products like coffee creamers.
These moves are part of Oatly's plan to "rebuild the foodservice business in a disciplined way" in the months ahead, Ordonez said on the call.
"[The sales teams] have been given the direction to continue to build the business with our core channels, geographies and SKUs, so our business is strong, profitable and sustainable," the COO said. "Maintaining a high-level of channel intimacy will be important as we look to rebuild the top line and improve profitability.”
