Oatly Group AB Q1 FY2025 earnings call

Key messages include progress towards structural, consistent, profitable growth. 2025 priorities are to ignite positive momentum globally (via increasing relevance, attacking conversion barriers like taste preconceptions and health misinformation, and increasing product availability), aggressively pursue cost efficiencies to generate fuel for demand-driving investments, and deliver first full year of profitable growth as a public company. In terms of product relevance, the Barista family is growing, and the brand maintains cultural edge with millennials and Gen Z. Cost efficiencies: COGS per liter reduced 15% YOY and 6% QOQ, total COGS reduced by $10M YOY; SG&A efficiencies driven by overhead reduction.

In the first quarter, volume grew 9.2% overall. Europe International segment saw accelerating volume growth and outperformed plant-based and oat milk categories. Greater China segment's foodservice business is larger than pre-strategic reset, and retail is starting to gain traction with entry into the club channel. North America faced headwinds from largest customer sourcing change and frozen business decline, but core portfolio had distribution gains. Constant-currency revenue growth was 0.7%, with Europe International and Greater China segments contributing to the growth.

Constant-currency revenue growth is expected in the range of 2% to 4%. Adjusted EBITDA is expected to be in the range of positive $5 million to $15 million. Full year CapEx is expected to be in the range of $30 million to $35 million. Full year guidance remains unchanged despite first quarter performance.

Headwinds in North America from change in sourcing strategy at largest customer and SKU rationalization on frozen items. Potential impact of tariffs and economic conditions affecting consumer behavior could influence results.

Q: What gives confidence that rolling out initiatives in the U.S. will lift the soft oat milk category?

A: The relevance of the brand and playbook is applicable, there's enormous distribution opportunity in all channels, and early signs in Europe are promising.

Q: How is gross margin expected to perform for the full year and beyond?

A: Gross margin is expected to increase from 28.7% in 2024, driven by continued optimization of production footprint, supply chain efficiency, contract negotiations, and product mix management, though key variables like sales guidance, customer mix, foreign exchange, and tariff structure could influence the exact level.

Q: What drove price mix in Europe and expectations for the rest of the year?

A: Price mix in Europe was affected by customer renegotiations early in the year, but most are behind us and not expected to have significant impact moving forward.

Q: Where are the biggest distribution opportunities in North America and how is balance between sales trends and profitability managed?

A: Opportunities are everywhere in the core drink portfolio, clubs, and food service outside the largest customer. Balancing is done by focusing on strategic portfolio, growing in core drink shelves, and adapting to category evolution.

Q: Thoughts on U.S. consumer and retail sales momentum for Oatly?

A: Velocities and shares show slight upside, and the category is pivoting with strong fundamentals of health, taste, and climate impact. The playbook deployed in Europe is being adapted in the U.S. with focus on creating new momentum.

Q: Timeline for brand investments in the U.S. to make impact?

A: Expect deployment of new playbook in North America to start more strongly in the second part of the year.

Q: Feedback from foodservice operators and opportunities there?

A: Foodservice is evolving with Gen Z driving cold beverages, small to medium foodservice customers adapting faster, and Oatly positioned to surf the trend from hot to cold beverages with its brand and service package.

Q: Sources of support for plant-based beverage category and potential endorsements?

A: Consumers are getting tired of health misinformation noise, science-based data is spreading, alliances are being built, and public education efforts are underway, with potential for third-party endorsements in the future.