Oatly shares drop 20% after warning of ‘quality issue’ and delivery delay | Food and drink industry

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Milk substitute maker Otley warned that production and distribution problems affected sales by $7 million during the summer despite increased demand for its products.

Shares in the Swedish oat milk maker fell nearly 20% on Monday after it said it expected more sales losses in Europe in the coming months as it was “investigating a quality issue” that could force it to phase out some products.

Oatly said UK sales were $1 million less than expected in the third quarter to the end of September due to a lack of drivers delaying deliveries, while mechanical and technical issues at its US production plant in Utah had an impact on sales of $3 million. , plus $3 million in Covid-related shutdowns of the hospitality business in Asia.

It’s the latest work to reveal woes from widespread supply chain issues as manufacturers try to keep up with surging demand after ending coronavirus restrictions that have driven up cost amid shortages of staff and raw materials as infrastructure deliveries, from ports to delivery trucks, become crowded.

Otley added that the pace of sales growth at new and existing retailers in Europe and the Middle East was “slower than we expected” due to the effects of the pandemic.

The group’s profit margins, which attracted investment from Blackstone, Oprah Winfrey and Jay-Z last year before floating in the US stock market, have also been affected by higher transportation costs and expenses related to expanding the US manufacturing site.

Oatly’s stock price has fallen nearly 60% since its debut on the US stock market in May, amid concerns about its growth potential amid stiff competition from big-name brands such as Alpro and Danone. Oat milk is also one of the group of milk alternatives that can win or lose popularity depending on the consumer interest.

Oatly’s stock price. Photo: Refinitiv

Tony Peterson, CEO of Otley, said: “We are pleased to be able to continue to lead the growth and pace of sales for the plant-based milk category in our key markets.

“This positive momentum was partially offset by temporary headwinds as we expanded our global production capacity, particularly in Ogden, Utah, and with our management of Covid-19 Delta related restrictions and temporary food service shutdowns in Asia. In the near future, we remain very confident in our ability to meet the rapidly growing global demand for our products.”

Despite production issues, Oatly’s sales rose nearly 50% to $171 million last quarter, but pre-tax losses increased to nearly $41 million from $9.8 million in the same period a year earlier.

Amid growing demand for its beverage, Oatley said it produced 131 million liters of oat milk, 77% more than the 74 million liters produced in the same period the previous year.

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