Oat Milk Shortages Reported Following Delay in New Oatly Plant
(Bloomberg) -- Oatly AB’s popular oat milk is in short supply in the U.S. following a Covid-related delay in the construction of a production facility and a steady rise in demand.
Shortages of the product have been confirmed by partners Starbucks Corp. and FreshDirect, a New York City-based online grocer. Supermarkets are also seeing a lack of supply. On Thursday afternoon, the Oatly website showed only a single variety available, with the other three sold out.
Oatly had planned to meet rising demand with a new plant in Ogden, Utah, that was scheduled to open last year. However, this has been delayed because of pandemic-related problems. The facility is currently coming online and should be producing commercially available oat milk within the next several months, according to the company.
Starbucks expanded its sale of Oatly products across its 15,000 U.S. cafes on March 2. Now a permanent menu item, customer response has been “overwhelmingly positive,” the Seattle-based company said in an emailed statement to Bloomberg. Scarcity of the Oatly product fluctuates and is temporary in nature, Starbucks said.
“Due to high demand, some customers may experience a temporary shortage of oat milk at their store,” Starbucks said. The coffee chain apologized for the inconvenience and said the product will be available soon. It directed customers to other milk alternatives for now, such as as soy milk or almond milk.
Grocers in New York, Austin, St. Louis and other cities have also reported scarcity. Calls to 24 supermarkets around the country revealed a majority were either out of stock or facing limited inventory.
FreshDirect, a New York City-based online grocer, was one of the first U.S. retailers to bring Oatly to market, and it’s had trouble keeping it in stock ever since, according to Chief Merchandising Officer Scott Crawford.
“We have experienced frequent shortages on products and our customers have been disappointed,” he said in an email. “We have continued to work directly with Oatly and although we have seen improved fulfillment, the product demand continues to outstrip their production. We have been directed to believe they are close to solving this with additional supply and new facilities coming online in 2021.”
The Grand Food Center in Winnetka, Illinois has had supply problems for “maybe three months,” according to Andre Sayles, the store’s dairy manager. He said he ordered three cases earlier this week and only received one.
“Six come in a case,” Sayles said. “And as we put it on the shelf, a lady came in and took five.”
Oat milk, which was essentially non-existent in the U.S. before Oatly’s entrance, has seen a 151% jump in sales in dollar terms at retail outlets during the 52-week period ended March 13, according to NielsenIQ. The plant-based dairy category as a whole has risen 20% in the same period. By sales, oat milk is the second-most popular option after almond milk.
In July, Oatly secured $200 million in new capital from investors led by Blackstone. The group also included celebrities such as Orah Winfrey and Jay-Z and former Starbucks CEO Howard Schultz. The deal valued the company at roughly $2 billion.
Oatly has a history of not being able to meet growing demand, such as in the spring of 2018. The company opened a $15 million Millville, New Jersey plant in 2019 to help meet demand.
Companies are increasingly finding success with plant-based alternatives to meat and dairy products. But supply hiccups have been a frequent stumble along the road for the industry. In 2019, Impossible Foods Inc. faced shortages after bringing its eponymous soy-based burger to Burger King restaurants across the U.S. Impossible’s shortages faded, however, as the company added new production to its supply chain.
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