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 across 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.

Initiated in 2020, the Oatly program The Silent Barista Project was officially launched to help young people with hearing loss. It was achieved through professional training for baristas, professional certification and career guidance. Over the past few years, this initiative has progressed steadily. Oatly has moved from individual funding to systematic support for people with hearing loss. The goal is to foster a healthy, safe and empowered environment for those in need, allowing more voiceless baristas to seize opportunities to thrive.

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

Silent barista in Shanghai

Oatly Barista Live Event

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 through extensive market research, insights, and practical applications. When Oatly first entered the Chinese market, there was no plant-based protein product category. The concept of oat milk was unfamiliar to consumers, which brought many challenges to our brand. After careful consideration and exploration, Oatly decided to make its market debut through boutique coffee shops.

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.

Based on this information, Oatly launched the “Three Ones” strategy:

• “One Product” focused on the Oatly Oat Drink Barista Edition, distinguishing itself from the traditional latte offered in niche boutique cafes.
• The “One City” project was launched in Shanghai, a center of international businesses and returning foreign students, and has gradually expanded nationwide.
• “One Market” targeted boutique cafes, popular spots in the city for eco-conscious fashion designers, 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 began to create 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 was also encountered on Tmall, where no suitable options were available among a long list of categories. China is a large market for plant-based products, but there is 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.

Oatly’s mission is to drive a fundamental transformation of society towards the adoption of a sustainable plant-based diet for the individual, body, mind and planet.

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

Today, Oatly has become a flagship product for oat milk and innovative plant milk among Chinese consumers. When competitors produce oat milk, they compare themselves to Oatly, and each comparison is an additional recommendation for Oatly.

The CCO of Oatly once talked about “killing the marketing department.”What 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 known as the “Oatly Department of Mind Control.” Here, creative minds work to align creativity with business goals, incorporating both an internal perspective (understanding the business’s operations) and an external perspective (capturing market trends). The focus is more on identifying opportunities to serve the consumer rather than engaging in meaningless competition. The goal is not simply to sell to the consumer but to provide real solutions to business challenges from the consumer’s perspective.

When Oatly expanded to 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 found 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 emphasizes the functionality of its products but also chooses to use them to represent a lifestyle. We discuss 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 strengths and unique 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.

New brands of plant-based milk are multiplying in China. Are you worried about competition in the market?

Oatly’s mission is to drive a fundamental transformation of society towards the adoption of a sustainable plant-based diet for the individual, body, mind and planet.

Today, food and beverages contribute to a third of global greenhouse gas emissions, more than half of which come from animal products. Increasing the consumption of plant-based foods can reduce the climate impact of diet.

Oatly has been instrumental in creating a new plant-based category in China. We are excited to see more companies joining us in driving the category forward. In the years to come, we will continue to play a pioneering role and connect with a broader 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 a major market for plant-based 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’s plant-based products, oat milk or Oatly, the Chinese market is gradually moving from a “niche” to an “everyday market”. There is an opportunity to reach a broader consumer base than we have already reached.

The market as a whole continues to grow. The challenge of moving from a “niche” to an “everyday” offering involves expanding the consumer base and its diverse needs. But it is also an opportunity for Oatly to maintain in-depth market knowledge and create research and development capabilities to meet the general public’s diverse needs for oat products.