How Oatly entered the Chinese herbal products market | Analysis

Recently, during the Food & Beverage Innovation Forum (FBIF) 2024, Campaign conducted an exclusive interview with David Zhang, President of Oatly Greater China. Zhang shared the story of Oatly’s evolution in the market and how the brand established itself as a promoter of fashion, health and sustainability.

Zhang joined Oatly in 2017. In 2021, he was honored by FBIF with the “Person of the Year” award. Oatly’s remarkable success in China also earned him the “2021 Excellent Management Award” from Harvard Business Review China.

Campaign: Oatly, as a global brand, has launched many exciting campaigns and made waves around the world. Are there any particular Oatly campaigns that you particularly like?

Zhang: Oatly has always been committed to doing business for good. This philosophy is also reflected in our campaigns, which I find very attractive. For example, at this year’s FBIF, we set up a dedicated quiet barista space and a sustainable recycling unit, hoping to convey Oatly’s sustainable values ​​to exhibitors and industry partners and enable more people to discover the charm of oat milk.

Launched in 2020, the Oatly program The Silent Barista Project was officially launched to help young people with hearing loss. This goal was achieved through professional barista training, professional certification and career guidance. Over the past few years, this initiative has seen steady progress. Oatly has moved from individual funding to systematic support for people with hearing loss. The goal is to foster a healthy, self-confident and self-sufficient environment for those who need it, enabling more voiceless baristas to seize opportunities for personal growth.

At the FBIF event, we installed a recycling device to collect paper packaging from beverage exhibitors for future recycling. We actively participate in various environmental conservation activities, including the Yellow River Sanitation Program (using used bottles collected along the Yellow River to recreate eco-friendly raincoats) and Earth Day, among others, aimed to promote an environmentally friendly lifestyle. in every way possible.

Silent Barista in Shanghai

Oatly at the coffee festival

When Oatly entered China, you invented the “Three Principles” strategy, targeting one city (Shanghai), one market (coffee) and one product (the barista). How did you come up with this plan? Can you tell us more?

The “Three I” strategy was implemented following extensive market research, knowledge and practical applications. At the time of Oatly’s initial entry into the Chinese market, there was no plant-based protein product category. The concept of oat milk was unfamiliar to consumers, which led to many challenges for our brand. After much thought and exploration, Oatly decided to debut in the market through boutique cafes.

At the time, Shanghai had many independent boutique cafes, most of whose customers were environmentally conscious and passionate about fashion and coffee. These unique customer and cafe characteristics were a perfect fit for Oatly.

Building on this knowledge, Oatly launched the “Three Ones” strategy:

• “A product” centered on the Oatly Barista Edition oat drink, distinguishing itself from the traditional latte of niche boutique cafes.
• The “One City” project was launched in Shanghai, a center of international businesses and returning foreign students, and gradually expanded nationwide.
• “One Market” targeted boutique cafes, popular spots in the city for eco-conscious and fashion-conscious trendsetters, allowing Oatly to quickly identify its target audience.

Our journey started with the top 10 boutique cafes in Shanghai, where we gradually expanded our reach. This approach allowed us to create a unique perception of oat milk through price differentiation. In our product promotion, we offer a distinct experience by telling the story of a Nordic lifestyle.

In 2018, our presence grew from a few cafes in the first month to hundreds in a few months. By the end of 2018, we had collaborated with thousands of cafes. The conversation around oat milk started 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 enough to make approximately one billion cups of oat lattes.

Looking back, what do you think are the main lessons brands should learn from entering the Chinese market?

When Oatly entered the Chinese market in 2018, there was considerable uncertainty about the appropriate placement of our products on store shelves. This issue also arose on Tmall, where there were no suitable options available among a long list of categories. China is a large market for plant-based products, but there was no separate category for plant-based or oat products, either online or offline.

From the beginning, we understood that the categories are forests, brands are trees and business is fruit. At the beginning there is a forest, then trees and finally fruit. Without a forest, the trees would be blown away by the wind. Only once a category is established can a brand truly exist.

Our mission at Oatly is to drive systemic change in society: moving people away from cow’s dairy and toward more plant-based consumption, for the good of the planet.

To fulfill our mission, it is essential to promote the broader use of oat milk so that more consumers can discover plant-based products. We have pioneered a new plant-based category in China and remain committed to its growth and evolution.

Today, Oatly has become a leading innovative oat milk and plant milk product among Chinese consumers. When competitors produce oat milk, they compare themselves to Oatly, and each comparison serves as further endorsement for Oatly.

Oatly’s CCO once talked about “killing the marketing department.” WWhat do you think sets Oatly’s in-house brand creation and marketing team apart?

Oatly believes in the power of creativity. We have a division within our brand called the “Oatly Department of Mind Control”. Here, creative minds strive to align creativity with business goals, integrating both an internal perspective (understanding business operations) and an external perspective (capturing market trends). The focus is more on identifying opportunities to serve the consumer rather than participating in meaningless competition. The goal is not just to sell to the consumer, but to provide real solutions to business challenges from the consumer’s perspective.

When Oatly expanded into China, did you have to do anything to adapt to the local market?

Understanding cultural differences, values ​​and meanings is crucial in the consumer goods industry.

We have discovered that many Nordic concepts are compatible with basic 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. We talk about the Nordic lifestyle and position environmental protection and sustainability as our distinctive attributes, as well as the importance of design and creativity as our main focus, to highlight our unique strengths and qualities.

Finally, we leverage coffee, a universally recognized medium for global culture, to introduce more consumers to the charm of oat milk. This approach has made Oatly what it is today.

Many new brands of plant-based milk are proliferating in China. Are you worried about competition in the market?

Our mission at Oatly is to drive systemic change in society: moving people away from cow’s dairy and toward more plant-based consumption, for the good of the planet.

Today, food and beverages are responsible for one-third of global greenhouse gas emissions, with animal products accounting for more than half. By increasing consumption of plant-based foods, we can reduce the climate impact of the food system.

Oatly has been instrumental in establishing a new category of plant-based products in China. We’re excited to see more companies join us to drive this category forward. In the coming years, we will continue to play a pioneering role and connect with a wider range of Chinese consumers.

The demand for oat milk in the Chinese market is constantly increasing. We are well positioned and ready to meet this growing demand.

What are the biggest challenges and opportunities for Oatly and plant-based food brands in China right now?

China is an important market for herbal products. Over the past five years, oat milk has spearheaded the emergence of a new plant-based market segment, which has now diversified in many ways. Whether it is plant-based products, oat milk or Oatly, the Chinese market is gradually moving from a “niche” to an “everyday market”. It is possible to reach a broader consumer base than we have already reached.

The overall market continues to grow. The challenge of moving from a “niche” to an “everyday” business involves increasing the consumer base and its diverse needs. At the same time, this is an opportunity for Oatly to maintain deep market knowledge and build R&D capabilities to meet the diverse needs of the general public for oat products.