Newly Public Oatly Eyes Plant-Based Cheese as the Next Frontier

The company that made oat milk a phenomenon is eyeing vegan cheese as a new frontier for expansion in the booming market for plant-based foods.

Oatly Group AB is making “good progress” on developing a faux cheese product, according to Chief Executive Officer Toni Petersson. It’s considering creating a lineup of different oat-based cheeses in the long term, with types tailored for local markets.

“That is a really interesting area as well that we’re looking into already today,” Petersson said in an interview. “Our innovation is not centered around milk only.”

Oatly is cashing in this week on the soaring consumer demand for plant-based alternatives. The Swedish company priced its initial public offering at the top of a marketed range to raise more than $1.4 billion. More than 84 million American depositary shares were sold for $17 each on Wednesday, giving it a market value of about $10 billion.

Speaking ahead of the company’s first day of trading, Petersson said the company is eager to expand its product offerings in key markets. It already sells yogurt and some frozen items in the U.S., and an imitation cream cheese spread in some European countries, but supply constraints have limited product expansion beyond its home region.

Cheese could be a new frontier for plant-based dairy alternatives in an increasingly crowded milk market. Faux cheese has yet to capture consumer attention the way plant-based dairy and meat alternatives have.

“Plant-based cheese is still only a low-single-digit proportion of total cheese consumption,” according to a recent note from RBC. “In contrast we estimate that plant-based milk now has low-teens penetration in developed markets.”

Alternative cheese products face a number of obstacles. For instance, cheese is often an indulgence that consumers won’t readily sacrifice. Also, many cheeses are already lactose-free, so people who have sensitivities don’t need to go with a nondairy version.

But the most critical hurdle might be the simplest: Most of the time, they’re just not that good.

That’s changing quickly, though. As the plant-based milk category fills with more players, brands like Miyoko’s Creamery and Kite Hill are rushing into the vegan cheese space and landing on shelves at major retailers. More startups are emerging with new technologies.

Cheese is quite complicated to make, and most vegan cheeses use starches to create the texture, Petersson said. “We believe we can do it in a different way.”

©2021 Bloomberg L.P.

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