Oatly Posts Second-Best Earnings Since IPO, But Misinformation & Tariff Threats Loom

Swedish oat milk leader Oatly has slashed its losses by 73% and reaffirmed its guidance to become profitable this year, although health misinformation and the trade war could complicate things.

Oatly has recorded its second-best quarter since its Summer 2021 IPO, cutting its year-over-year losses by 73% in Q1 2025, reaching $12.5M.

While the company’s revenue was down slightly by 0.8%, totalling $197.5M, a lower cost of goods and the closure of its Singapore facility meant that its gross profit (up by 16%) and gross margin (up by 4.5 percentage points) have been the highest since going public.

It has led Oatly to reaffirm its outlook of a first full year of profitable growth in 2025. Its only profitable quarter came in 2023, when it posted a profit of $44M. However, “misinformation on health” and the ongoing tariff war could throw that plan into jeopardy.

“Key variables could influence where we would exactly land. That could be our sales guidance range. That could be our customer mix. That could be potentially foreign exchange and potentially, structure development on the tariff situation as we know,” said CEO Jean-Christophe Flatin told investors in an earnings call. “So, our plan is to continue to make this progress on our path towards our long-term gross margin target of 35-40%.”

Oatly outperforms the plant-based milk sector despite American decline

In the Europe and International segment – Oatly’s largest market – revenue decreased by 2.5% to $108M, while volume rose by 4%, thanks largely to its barista oat milk lineup. However, with a 4.6% year-on-year growth in retail, Oatly still outperformed the overall oat milk (+2.8%) and plant-based milk (+3.5%) categories.

It’s unclear whether Oatly will be affected by the proposed change to the UK’s soft drinks industry levy, which will see milk drinks and plant-based alternatives with 4g or more of added sugar per 100ml get taxed. This excludes natural sugars that come from ingredients like oats, so the only Oatly products that would have been affected are its flavoured milks – though they contain 3.3% of added sugar, according to the ingredients on-pack.

As whole milk and raw milk enjoy a resurgence in the US, the firm saw an even bigger decline of 11% in North America, recording $60M in revenue in the 12-week period. This was accompanied by an 11% volume decrease too. “We’re navigating a change in sourcing strategy at our largest customer, and second, we’re going through an SKU rationalisation on certain frozen items,” explained COO Daniel Ordonez.

Here too, though, Oatly outperformed the wider category in retail, where its losses were at 4.5%, compared to 5.6% for all oat milks, and 5.5% for the overall plant-based milk sector. And when discounting non-recurring costs – also known as adjusted EBITDA – its performance in this region improved with a profit of $1.1M, compared to a loss of $400,000 12 months ago.

Meanwhile, the Greater China segment was the only region where Oatly recorded revenue growth in the first quarter of 2025, although this is the company’s smallest market by some distance. Revenues jumped by 38% to $30M, driven by sales to a new foodservice consumer and entry into the club consumer segment in retail.

One of Oatly’s ongoing priorities is to “aggressively pursue cost efficiencies”, with the business reducing its cost of goods per litre by 15% compared to Q1 2024, and 6% to the previous quarter. “Our teams have done a stellar job, leveraging our fixed assets with volume growth, finding additional efficiencies, renegotiating contracts, as well as rightsizing our network, including plant closures,” said Ordonez. “This translates into a year-on-year total cost of goods reduction of $10 million.

How Oatly plans to ‘ignite positive momentum’

Another priority for Oatly is to “ignite positive momentum” on a global scale, for which it has a three-pronged strategy. One pillar involves expanding the availability of its products, while another entails increasing its relevance to consumers by leveraging the growing momentum of its barista line in the coffee space.

“Relevance does not start and stop with the product – Oatly is a generational brand that maintains its cultural edge with millennials and Gen Z,” noted Ordonez. Over the last year, the company has struck several partnerships to drive “cultural relevance and conversion into oat milk”, including with Nespresso, Malibu, and British rapper Giggs.

The second strategy is to attack barriers to oat milk, primarily “preconceptions on taste and misinformation on health”. Ordonez said Oaty was dialling up its model of driving foodservice experiences and helping customers recreate those at home with retail purchases.

“There is a taste bonanza and a flavour bonanza going on in coffee around the world, and our teams are intimately woven into this community. So, whether in a coffee shop in Shanghai, Brussels, Mexico, Dubai or Boston, Oatly is uniquely positioned to bring the hottest emerging global taste trends to their menus,” he noted.

The company is working with its foodservice clients to revamp their menus and better cater to Gen Z and current and future trends, which would help it achieve 50% household penetration.

“Coffee is massively, drastically evolving from hot latte art a few years ago only, where millennials were driving the world of coffee, into Gen Z, who are driving beverages and cold beverages,” said Flatin, citing the “matcha phenomenon“. “Most of our very large customers are trying to evolve and catch up with that trend.”

Tackling dairy and oat milk misinformation

Oatly is going big on tackling misinformation around the health impact of oat milk, mirroring a larger issue for the plant-based sector. Nowhere is the influence of the dairy lobby more clear than the US, where influential groups have pushed educational materials presenting milk as a healthy and necessary choice for students, following years of campaigns to make it an integral part of school meals.

Dairy associations spent $7.6M on lobbying in 2024 alone, and over the years have been targeting the same demographic as Oatly: Gen Z. In 2022, Dairy Farmers of America collaborated with YouTuber Sean Evans – host of First We Feast’s Hot Ones, where guests eat spicy chicken wings – to promote milk as a safeguard for spicy foods that can “also help keep the planet from getting too hot”. Evans’ content included a sponsored video on National Farmers Day to promote pro-milk facts.

Meanwhile, Dairy Management Inc tapped social media influencer Jimmy Donaldson – better known as MrBeast – to promote the National Dairy Checkoff’s #UndeniablyDairy campaign. He was chosen for his popularity with Gen Z to portray how dairy is a “wellness solution” produced in an “environmentally friendly” way.

Oat milk specifically has received bad press in recent months, with influencers and media outlets pointing to blood glucose spikes, its low protein content, the inclusion of ultra-processed additives like emulsifiers and acidity regulators, and its purported effects on bloating.

How does Oatly plan to combat that? “Instead of creating more noise, we have been systematically engaging with registered and renowned dietitians, nutritionists and key opinion leaders, arming them with science-based facts about our category and our products, so they can be advocates for the truth,” said Ordonez, who called the science behind Oatly’s offerings “unequivocal”.

He believes people are simply getting tired of the noise about, say, how many pimples you’ll get by drinking oat milk. “We are indeed building alliances, be it in Brussels or at The Hill, be it with some thinkalike partners of ours and… public education,” he said

“While there’s plenty more to do to ensure that the public is not being misled, our tracking data shows that negative media coverage has declined very significantly compared to last year. So, we’re making progress on ensuring the discussion on our category is balanced and honest.”